RECESSIONS are never pleasant to go through, especially for the less educated and low-wage earners. We will soon witness job losses and their impact on families and, in turn, on communities and other businesses.
During a recession, consumer spending will dip and any business that relies on it will find it tough going. We need to examine how to minimise the pain of the common people who are hardest hit and how to leverage on this unprecedented challenge to prepare for the future.
First, we should not talk people down to a deeper level of recession than necessary. Self-employed and low-skilled workers are most likely to be affected by the situation. However, urging everyone to tighten their belts as if economic mayhem is approaching will make even those who do not feel a lot of pain, act as if they do. Many will skimp on their regular budget - refrain from dining out, reduce shopping to bare necessities and forgo taxis trips. These social behaviours will have an immediate and dire impact on the many workers employed in these sectors.
The message in this recession should therefore be: 'Avoid profligacy and exercise prudence in spending.'
Second, in a recession, the first instinct of a company is to cut down on training and development of employees. Such a strategy is shortsighted because the need for talent has never been greater. This recession will inevitably end and the stiff competition for talent will be a business challenge for the foreseeable future. Companies should not cut back too drastically on talent management practices or they may find themselves woefully unprepared for the future.
Third, don't stuff your money under your pillow and be afraid to invest. This crisis is one of confidence that scaled the tipping point, resulting in a herd-instinct reaction - fear and panic. Scientists have indicated that humans have a neutral network in the brain that generates the human tendency towards optimism. The future is open to interpretation. We have an inherent tendency to distance ourselves from past negative events and move closer to positive ones. So if you have spare resources you do not require in the next few years, this is the ideal time to invest prudently. We are no Warren Buffetts but in order not to fall flat, simply remember three words - diversify, diversify, diversify.
Dr Edmund Lam