The price of cheap and free

This trend toward cheap and free goods and services is only going to grow, and the effect on the job market is only going to get worse.

When I was in my fourth year at university (1981), I remember my science professor discussing the likelihood of us finding a job in our field. The requirements were simple: we had to be breathing.

For today’s graduates, finding a job in their field is proving to be an extremely challenging proposition.

There are numerous demographic and technological reasons for this change, but it seems to me that it’s getting tougher and tougher by the day.

One of the reasons is the trend toward getting goods and services for cheaper prices, or even for free.

The first time this phenomenon crossed my radar screen was when I read Thomas L. Friedman’s book The World Is Flat, which came out in 2007. In the book he interviews Bill Gates, founder of Microsoft, and asks him how he feels about a software suite called OpenOffice, which was competing with Microsoft Office.

OpenOffice was, and still is, available as a free download for either Mac or PC and it includes word processor, spreadsheet, presentation, graphics and database software. Gates had a good response. He asked why anyone would hire thousands of employees and spend hundreds of millions of dollars to develop a software suite as good as Microsoft Office, when a competitor is going to come along and give an equivalent product away for free.

From an end-consumer point of view, such developments are great news. Remember years ago buying a new PC for $1,500 only to add $500 to buy Microsoft Office Pro?

But the impact on new businesses, and therefore jobs, is obviously going to be negative.

Think about other examples of the trend toward cheap or free.

Music: in the past the only way to get your favourite artist’s music was to pay $20 for all 15 songs on a CD. Steve Jobs and Apple did away with this need by offering digital copies of individual songs for 99¢ on iTunes. This smashed the money-making CD machine because you no longer had to pay for all of the songs. But the next generation doesn’t even pay 99¢ for a song. Because they are technically savvy, they know how to download songs for free, or they simply listen to them on YouTube for free. The result is that artists no longer earn what they deserve. That is why many of the older ones are forced to go out on the road again to perform.

Cable TV: are you frustrated by having to pay $100-plus a month for the cable channels and PVRs you need to watch TV? The next generation won’t be because they get their TV viewing online for free. They know that it is quite easy to find free streaming of even the most popular TV shows within minutes of the show ending. As a result, HBO’s Game of Thrones is one of the most pirated TV shows ever.

Movies: just as with TV, many people are viewing movies for free using illegal “torrent” sharing downloading technology. But the latest trend is to simply search for a site where you can stream movies online for free without having to download them. Many people won’t even pay a company such as Netflix $8 a month for unlimited viewing of its collection of movies and TV shows.

Newspapers: the younger generation gets its news for free on the web. It won’t pay to have the local paper delivered to the door. And it won’t pay $25 a month to have online access. This trend is already emerging. The Toronto Star just announced that it is giving up on its paywall and making all content free.

Home phone: boomers are probably the last generation to have a home phone. Why pay for one when you have a cellphone? In fact, many people have already cut this cord.

This trend toward cheap and free is only going to grow, and the effect on the job market in these industries is only going to get worse.

Still, there is hope.

No matter how technologically gifted the next generation is, and no matter how little money it has to spend, it still needs food, clothing, education (many will continue after university as they won’t find a job in their field), personal grooming, cars, housing (rentals as most won’t have the money to buy), live entertainment (sports), cellphones, Wi-Fi access and, yes, accountants. So if you’re looking for a job or a company to invest in consider areas whose goods and services can’t be obtained for free.

About the Author

David Trahair


David Trahair, CPA, CA, is a personal finance author and speaker (www.trahair.com). His latest book is The Procrastinator’s Guide to Retirement.

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