Tripod Home | New | TriTeca | Work/Money | Politics/Community | Living/Travel | Planet T | Daily ScoopWORK & MONEY
Shawn Tully
interviewed by Emma Taylor on October 10, 1995
"People are not moving upward with the same kind of relentless progression that they were 20 years ago."
Shawn Tully is an editor of "Fortune Magazine".
Tripod: By comparing executive salaries in the '70s and '90s, you came up with the theory that unless you are paid four times your age in thousands, you are probably not paid enough. What would you say to the recent college grad trying to survive in New York City on $20,000?
ST: Well, I'm talking about people who have very high overheads -- for example, two children, a suburban house, enormous responsibilities to save for college for their kids, and a mortgage. Because of the huge run-up in the 70s and mid-80s, property taxes have exploded, and you also have the growth of state income tax ... when you put all those things together, people who have a couple of kids, and make $120,000 are not nearly as well off as they would have been making their age at 40 in 1975, which would have been the equivalent of -- adjusted for inflation -- $20,000 or $30,000 today.
Tripod: What about college grads who start on salaries of $60,000, in investment banking or consulting, for example. Do they get used to too much money too early?
ST: Well there's a real difference in definition here ... Those people typically have low overheads, they've got an apartment in New York, and they've only got themselves to spend money on. They're in a very different situation from a homeowner saving for college ... and I can't over-emphasize the importance of college savings ...
Tripod: So should a 22-year-old start investing now?
ST: I don't think they should necessarily be investing now for [their children's] college, but I think that maybe their lifestyle peak may come a lot earlier than it would have in the past. College expenses are so much higher than they were before. The difference is that you have a lot more working couples, and that has alleviated some of the problems to a certain extent. Although many times women drop out of the workforce during some of their most productive years, when their kids are very small.
Tripod: So it's people's assumptions that are being challenged as much as their bank accounts? One always assumes that wealth will increase with age. But that is no longer always the case?
ST: Yes, I think that's right. I think that people are not moving upward with the same kind of relentless progression that they were 20 years ago, because in the past, raises were very predictable and job security was much higher. You got inflation plus a nice chunk every year, and you could always count on that. Now companies don't want to give you much more than inflation, which only keeps you even. After that, you have to re-earn a bonus every year. It's a lot more variable, and to do it you have to join teams, you have to make sales quotas, you've got to bring in clients, you've got to do a fabulous job, you've got to generate more returns to your business, more growth -- whatever it is that has to happen, you've got to do it every year. December 31st you get your 15 percent bonus, and you wipe your brow and think, my God, now the clock's ticking again, I've got to do it next year. If you don't do it, you just get inflation ... You don't want to increase your lifestyle in expectation of that bonus, because you may not get it every year. That's the way the new job market is working. It's a very very brutal place now ... The market has disappointed a lot of people.
Tripod: You make a controversial assertion by claiming that a six-figure salary is no longer enough. What kind of reaction have you been getting?
ST: Most of the reaction was negative. I think I understand why, and I can sympathize with the people who reacted that way. I think that they felt that these were a bunch of preppies who were whining about a six-figure income and that they were just spoiled brats.
Tripod: What's your response to that?
ST: Well, I think that people who make $120,000 a year are very productive and work extremely hard and they don't have a lot of savings. They only have the ambition of giving their children what their parents gave them, which is a good private college education and a nice safe house. They just don't have much money left over. A lot of people come up to me and say, "I thought it was only me who was making $120,000 and not putting anything away -- I'm spending all my money." ... Whether you like it or you hate it, it's a fact. These people are not particularly extravagant, they're not taking expensive vacations, they're not driving a Mercedes, they're not living in million dollar houses. They're making $135,000 a year, and when you do the math ... it's not a formula for a big, extravagant lifestyle. It sounds like it should be, but it's not. I really have a lot of admiration for people who can make $60,000 a year and can live well. It's terrific management of money. They probably send their kids to public schools, public colleges, they can do it. People who make $120,000 have much higher expectations, especially with education. They are stretched, although they are often embarrassed to admit it ...
Tripod: Is this what Clinton would call being in a funk?
ST: [laughs] I don't think so, I don't think there enough people in this category to bother Clinton. It's the category that he despises.
You can check out Fortune Magazine's homepage at http://www.pathfinder.com/@@kFgv@dE0dQMAQHA9/fortune/
Or, if Richard Tully's words have got you down, invest in your future and check out Tripod's Guide to Mutual Funds at http://www.tripod.com/money2/lightbulb/mutual_funds/
Map | Search | Help | Send Us Comments
