Unemployment rates have risen rapidly in North America. And yet consumer spending and confidence haven't plummetted as far as one might otherwise expect. My surmise is that the height of the social safety net is keeping many people from scaling back their spending and expectations considerably.
One person I know was a well-paid employee at a high-tech firm. He lost his job and was quite confident that he would find something else paying at least in the neighbourhood of what he had been earning in the past. He drew EI (employment insurance, the current term in Canada) for nearly a year and finally had to accept a much worse-paying job. He still hopes and expects to find another job like the one he lost.
A second person I know lost a job in the auto sector. He looked around and realized he wasn't going to find another job like that one right away and so, drawing on EI and other programmes, has returned to school to train for another trade in a different industry.
A third person I know who has been out of work in the construction industry for several months says there is work out there, but not within 50 miles of where he lives and so for now, because he can draw EI, he isn't willing to commute to jobs that far away.
The reason for the title of this posting: what happens when the EI entitlements are gone? How many people are using the time as the second person did, to retrain and move on? How many will be forced to re-assess their expectations as the first one did? How many will drift, waiting for something to turn up, and be shocked into serious belt-tightening?
If a lot of people who have lost their jobs are drifting along, what will happen when their EI runs out? Will jobs at Tim Horton's and McDonald's suddenly not sound so bad after all? How much of a realignment will people have to make in their own plans?