Hard as it may be to believe, there are actually some people who do not believe that they have been affected by the recession, and that they will remain untouched. I have heard the expression “recession-proof industry” countless times, including by my own employer. Sadly, his company closed earlier this year, due to several issues, including cash-flow problems. So, was he wrong, or is there a greater error present? Is there actually such a thing as a recession-proof industry? No, not really.
In the short run, many industries were unaffected by the collapse of the economy. People still needed accountants, doctors, medicine, groceries, and rides to work. These businesses enjoyed some job security in an insecure economic environment, and some even thrived. As fewer people could or would invest in a vehicle, buses and trains experienced an upsurge in business. People went out to restaurants less frequently, so patronage at grocery stores increased. At this point, several industries proclaimed themselves as recession-proof. They continued to spend as usual, issue raises, and hire workers, while the rest of the world tightened its collective belt. Had the economic downturn merely lasted a couple of months, most would have been correct in assuming they were safe. However, a recession lasts for longer than that.
As businesses suffered, people lost their jobs. This meant fewer commuters, so the buses and trains experienced a drop in patronage. Restaurants moved from frequent pleasures to occasional luxuries. People trimmed their budgets more and more each month, reducing every possible expense. Grocery budgets suffered, too. Baked hams were replaced by tuna fish sandwiches, and fresh produce took a backseat to canned goods. The profit margin on discount foods is razor thin, so this shift in purchases took its toll on the grocery stores. These new budgets led to further job losses, as the bus drivers, conductors, waiters, and grocery store employees joined the ranks of the unemployed. As more lost their jobs, sales dropped, and additional layoffs occurred.
When people lost their jobs, they often had to choose between paying extremely high COBRA premiums and going without insurance. Sadly, when confronted with the choice of mortgage or insurance, most people had little choice, and hoped they would stay healthy until they found employment. When prescription medications became too expensive, they reduced or discontinued usage, often without consulting their physicians. They could not afford doctors bills, so they avoided making appointments. They only saw a doctor if they were critically ill, and even then, they went to the hospital instead of their regular physician, because they knew the hospital had to treat them, even if they could not pay.
Some people still went to their regular physicians for check-ups, and had their accountants file their taxes. When it was time to pay, however, they could not. These professionals showed substantial accounts receivable balances, but did not receive sufficient cash to pay their bills. Sadly, the phone company will not accept accounts receivables as payment, but tends to demand cash. These were the industries who were most convinced they were recession-proof, but after a year of economic decline, they had joined the rest of the country as victims of the recession.
The old reasoning was that businesses that people could not do without would be safe, regardless of what happens to the rest of the world. Perhaps this was true at one time, but in this modern, highly-connected world, the old reasoning no longer holds true. We all are affected by the economic decline, and there is no such thing as a recession-proof industry.