The National Employment Law Project (NELP)this past week released the results of its analysis of employmenttrends in the United States. The analysis examined employmentacross three main categories: low-wage, mid-wage, and high-wage.The results illustrate the dramatic shift in income pools that istaking place in the United States and as a result, what this trendmeans to the financial services industry over the course of thenext decade.
In this report, NELP points out the following:
• Lower-wage occupations were 21% of recessionlosses, but 58% of recovery growth.
• Mid-wage occupations were 60% of recession losses, but only 22%of recovery growth.
• Higher-wage occupations were 19% of recession job losses, and 20%of recovery growth.
Viewed another way, this means that to date, we have lost 32% ofmid-wage occupations and gained 37% of lower-wage occupationsversus a gain of only 1% of higher-wage occupations. While thebooks are not closed on the recovery, it is a slow and stilluncertain climb out. In addition, the lessons learned by consumersand businesses over the course of the past four years that includecautious spending, even more cautious borrowing, and risk-averseexpansion strategies, are become engrained in our collectivepsyche.
For the U.S. financial services market, these trends point towarda dramatic shift in account profitability pools taking place in thecontext of shifting priorities for consumers and small businessesthat are more focused on budget management, enhanced spendinginformation, and gaining better visibility and control overpayments-related accounts. Thus, competing just for high-net worthcustomers will become a race to the bottom, as this segment expectsto have access to more services for less money. And providingnothing more than everyday spending accounts on a basis of reducedinterchange income and shrinking receivables in a zero interestrate environment will continue to drive banks and credit unions outof existence.
Our analysis of the consumer financial services market tells usthat the decline of traditional checking account services has begunand the modern financial institution will instead be organizedaround convenient and accessible money payment and managementservices delivered in a multi-channel environment with digitalservices as a centralizing force. More consumers will pay forfinancial services in this new paradigm, and we are already seeingthat U.S. consumers are shifting towards accepting (not alwaysgraciously) the inevitability of new fee structures. It is up tofinancial institutions to draw a connection between fees andservices that are rationalized to a value-conscious market andjustifiable to vigilant regulators.