Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution, a list of earlier revolutions and the author, Entry #1.

Periodically I write a “sense check” to assess whether in the next few years, a revolution in the US is still possible or whether the entire exercise is based on a statistical aberration — i.e., a roughly 50-year cycle between major upheavals in the US.  Most recent sense check, Entry #365.  

Some of the entries are part of a series.  Several series are available as easy-to-read booklets for download:

Prelude: I’ve concluded Trump is a lunatic and the administration filled with lapdogs save a couple of people at CDC.  Instead of wasting time commenting on actions by Trump, I thought it more productive to begin discussing what happens in the US once the coronavirus is more under control.  #378 began the series. At this point not sure how many entries.  Comments and suggestions welcome.

ENTRY #382 CONTINUES ENTRY #381Technology Tsunami Impact. Efforts to address the coronavirus accelerated the implementation of technology in a wide variety of occupations. Going forward many US workers will be affected by what some of us have labeled the “technology tsunami.”

The negative effect on income over the next few years could be much greater than previously anticipated. During COVID-19 “stay-at-home” mandates, organizations realized certain workers were not necessary and other work could be completed using artificial intelligence-based software/hardware. As a result, even as the economy begins to recover, more blue-collar and white-collar workers of all ages are going to be faced with possibly accepting a lower-paying job or no job.

Will workers of different age cohorts be affected differently by the technology tsunami[1]? How will religious institutions be affected? Workers currently age 50+, even though they should have more financial resources, may be hit harder by the technology tsunami since many are less familiar with advanced technology and they have fewer years before retirement to try and recoup lost earnings.

Double-Whammy Tsunami. Another tsunami headed toward US shores is the retirement tsunami. What we as a society don’t talk about and certainly what has not been addressed at the Federal level is how unprepared white and blue-collar workers are for retirement.

The retirement tsunami has been caused in large part by employers eliminating employer-funded defined-benefit retirement programs and transferring to workers the responsibility for accumulating adequate savings for retirement. The potential impact of the tsunami has been made worse by erosion of personal income from the accelerating cost of housing, medical and college tuition. Workers have far less left over to save for retirement.

In a recent poll by Center for Retirement Research at Boston College, 75%, or 3 out of 4 people age 50-62 had jobs that fell into a “non-traditional” category — meaning, those without employer-provided retirement plans and health insurance. According to the report, workers in non-traditional jobs can expect their retirement income to be as much as 26% lower than that of people who spent their 50’s and early 60’s in positions with full benefit packages, according to the center’s findings.

The lower available income will likely affect consideration for contributions to religious institutions. (An article in the NYT 05/03/2020 described how some underfunded retirees are moving in with their children.)

What about the impact of the technology and retirement tsunamis on the finances of younger workers? Don’t they have 30-35 years to recoup lost earnings from a coronavirus economic slowdown? Unfortunately, a greater percentage of younger age cohorts are likely to be even less prepared for retirement than those currently age 50-62.

If costs for housing, medical, education and retirement continue to exceed gains in income, the cumulative effect will erode discretionary income further. Unless there is a fundamental change in funding of health care costs, retirement programs and advanced education, more and more people will be underfunded for retirement. Thus, younger cohorts, already less committed to religious institutions than previous generations at the same age, are also facing even more pressures on discretionary income.

What will make a bad situation worse is a prolonged economic slump associated with the coronavirus shutdowns. The rate at which people have been furloughed is unprecedented – in just two months, 36,000,000 filed new claims for unemployment, and more claims are likely in the next few weeks. In early May 2020 the “official” unemployment rate was 14.7%. However, the unemployment rate does not count those who are not actively looking for work.

The unprecedented increase in the number of people formerly employed has caused many to become so discouraged as to not look for work. These “discouraged” were excluded from the unemployment calculation. Had people who were recently employed but now discouraged been included, the rate would have been 21-22%, approximating the same as the height of the Great Depression in the 1930’s.

Despite proclamations from Trump, few people in business, few economists and few in the general public expect the economy to bounce back once more restrictions associated with the coronavirus are lifted. Even if employment in the manufacturing sector increases over the next 24-30 months as companies begin bringing jobs back to the US, overall economic growth will be very slow and unemployment is likely to remain at >10%.

Some portions of the service sector employment seem likely to experience a permanent loss of jobs. After “stay-at-home” restrictions are lifted, how many consumers will immediately return to restaurants, attend sporting events, go to shopping centers, travel by plane? How many members of religious institutions will be willing to risk infection by attending services, especially crowded during holidays?

Like the general public, members of religious institutions are likely to remain cautious until an effective vaccine has become widely available – on the optimistic side 18-24 months based on analysis of experienced doctors and researchers. Even with the vaccine will the public’s behavior be changed permanently?

During that 18-24 months and maybe forever, how many members of religious institutions will have their economic circumstances negatively affected? Many formerly employed in the service sector will not have employer-funded health insurance and even fewer will have an employer-funded retirement program. Where do these former employees turn for help? Their jobs are gone, or at least not coming back for some time. Finding another job will be extremely difficult since the economy will be growing slowly at best.

While many congregants will remain emotionally committed to their specific religious institution, how many will be faced with lower discretionary income? How many will be able to continue supporting their church, synagogue or mosque?

Eyeballs vs Butts in Seats – Post Coronavirus Behavior. The “stay-at-home” mandate associated with the coronavirus forced organizations to accelerate electronic communications using Zoom, Skype, FaceTime, etc. For religious institutions many people attending services in person pre-COVID-19 are now live-streaming. But what happens post-COVID-19? How many people will forego physically attending services and choose to continue live-streaming?

How many will ask, “Why go through the hassle of getting dressed, fighting traffic, when I can relax at home?” Further, how many will ask, “If I’m going to live stream, is there a service at another location that I would rather attend? I used to live in New Jersey, what about watching the service where I used to go?”

An issue for religious institutions is how to make live-streaming a reason to remain linked to a particular congregation. Live-stream services are somewhat like a media event. The target for live-streaming is capturing as many eyeballs as possible.   The trend toward live-streaming is likely to continue. Think about the difference between generations in comfort level with certain media venues.

While the risk is relatively small now, a concern with live-streaming is whether a religious institution’s service can be “competitive” with larger, more high-profile congregations. For a specific institution, if clergy and/or the Board of Directors has not done so, they should watch services from “higher-profile” congregations, especially those in major metro areas.

Religious Institutions Expense Pressure. Are religious institutions turning into under-utilized big-box stores? If fewer people attend services, whether weekly or during holidays, then do religious institutions need their current facility? Some congregations have expanded main buildings and/or other facilities based on the assumption membership would continue to grow. Part of the rationale has been that a more attractive and functional facility would help attract new members.

The downside of a larger facility is a higher burn rate for overhead, including staff. The larger facility also requires additional non-recurring expense for replacement of equipment and other critical maintenance.

A strategy sometimes employed when expenses exceed revenue is to defer maintenance expense and/or defer setting aside adequate funds for future maintenance and equipment replacement. While such a strategy might work for a year or two, kicking maintenance costs down the road increases the financial burden on future congregants, many of whom may be less prone to support the institution.

Are many religious institutions facing the same fate as many big-box stores? Unfortunately, all indications suggest the answer seems to be “yes.” Big-box stores and department stores, even high-end ones are facing severe financial pressure. The impact of actions taken to slow COVID-19 have merely hastened a trend toward fewer stores and, in many cases, bankruptcy. Well-known department stores J.C. Penny and Neiman-Marcus being a recent examples.

Possible Solutions. Some organizations – for-profit and not-for-profit – have survived major challenges by rethinking how to operate. Religious institutions face the choice – either rethink how to operate or likely disappear.

Survival for many religious institutions seems possible only by starting with a clean sheet of paper. Rethinking how to operate means more than cutting staff. Cutting staff is an incremental change and not a fundamental change. Clergy and the Board of these institutions should remember the adage, “No organization ever saved its way into prosperity.”

An organization needs to consider ideas that many congregants might view as radical. For example, holding talks with another congregation about: (i) a single back-office support staff: (ii) using one of the two buildings for weekly services. The services would be at separate times but use the same building. Holiday services could be at different times and use part of the other building, if necessary; (iii) lease out part of one of the buildings; (iv) plus other ideas.

The radical thinking should include a cash-flow forecast that incorporates such variables as:

  1. Number of existing members by age cohort
  2. Number of members by age cohort over time (some data likely exist)
  3. Distribution of contributions by age cohort – currently and ideally over time. Individual members would be assigned a random number so impossible to link contribution to a specific member
  4. Projected membership scenarios through 2030 and ideally 2050 by age cohort – would include new members and members who leave
  5. Projected revenue scenarios through 2030 and ideally 2050 by age cohort. Scenarios would reflect different attitudes by cohort toward religion and use of electronic communication. Revenue projections would include different approaches – “traditional’ approach to contributions, pay to watch live-streaming or some type of subscription model.
  6. Impact on revenue of different operating scenarios – stand-alone entity, combined facility, use of part of one facility for other purposes, etc.
  7. Expense forecast by year for:
    1. Staff and other recurring expenses as stand-alone entity and combined back-office staffs
    2. Unusual maintenance and equipment replacement – current and joint-use facility
    3. Expenses under the different operating scenarios

Constructing an Excel-type model (and the supporting math) for the financial projections is not particularly difficult.   Often the most difficult barrier is getting the “key executives” and/or committee members involved with the issue to: (i) acknowledge and appreciate the importance of getting ahead of the curve; (ii) begin to truly think innovatively; (iii) put aside excuses and biases and commit to considering practical solutions.

As with most strategic difficult issues, waiting until the problem becomes obvious is waiting too long and makes any kind of turnaround exceedingly difficult and problematic. A high-profile example is the Trump administration’s handling of COVID-19, starting with denial of early warning signs and then refusing to accept opinions of people with experience in key areas.

Over the next 24-36 months – and maybe longer – many religious institutions will face severe cash-flow shortfalls. Waiting until the cash-flow train wreck becomes obvious will result in even more dire consequences. While no guarantee, starting to discuss issues outlined herein and completing a study to assess potential consequences carries no risk. There is no downside to a study. Waiting until the problem becomes obvious has significant risk.

[1] For a more detailed discussion about the coming technology tsunami and possible solutions, download booklet I wrote titled “Technology Tsunami.”