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No Going Back: Employers' Cuts Hit Workers' Spirit

Monday, June 20, 2011   (0 Comments)
Posted by: Rhette Baughman
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No Going Back: Employers' Cuts Hit Workers' Spirit
by Russ Wiles
June 19, 2011
The Arizona Republic

In a hypercompetitive environment marked by rapid change and acute economic uncertainty, most employers can't - or won't - make the promises they once could.

It used to be implicit that workers could expect reasonably steady employment along with a pension, health care and other benefits - and perhaps a gold watch at retirement.

But many of those incentives had been eroding even before things got worse in the Great Recession.

"I don't think companies are trying to alienate workers," said Jeff Luth, who left a vice-president position at Chandler-based Amkor Technology several years ago to start his own strategic-marketing business. "But the competitive landscape has changed dramatically."

Many factors have caused a weakening of the employer-employee bond. Here are some key trends, with some forecasts on how things might shake out down the road.

- Management caution, priorities.

Business always has been competitive, but fierce crosswinds have made it even more unsettling today. These include heightened global competition, rapid technology changes and shifting regulatory concerns, such as the new health-care legislation. More than anything, the recession and weak recovery have given rise to caution in boardrooms.

At any rate, corporate executives aren't entrusted with boosting employment. In fact, they're often motivated to do the opposite.

"Companies can't provide that same level of security and safety," said Raoul Encinas, a technology-strategy consultant and board member of the Southwest Job Network. "We're not going back to the point where someone, or the system, takes care of you."

The top priority for executives is to maximize returns for shareholders and ensure the company's viability. They're also motivated to boost their own compensation - executive pay for CEOs at Arizona companies jumped 48 percent over the past year, according to an Arizona Republic study. Nationally, the executive-worker pay gap has been widening for decades.

Many U.S. businesses, especially large ones, are faring well. Big companies hold an estimated $2 billion in cash. Because of doubts over the economy, they've been reluctant to invest in new workers. Instead, companies have sat on the cash or returned some of it to stockholders through dividends or share buybacks.

Even small companies, while not as cash-rich, voice many of the same concerns.

"For the most part, we're still hearing about weak sales," said Donna Davis, CEO of the Arizona Small Business Association. "Erosion in business confidence has been led by weak consumer spending."

Forecast: Corporate executives will maintain a fortress mentality as long as the economy remains listless, and that's likely to persist at least into next year.

- Shifting retirement responsibility.

One of the most significant ways that employers have become less paternalistic has been in transferring retirement responsibility to their employees. A generation ago, company retirement plans mainly were traditional pensions, but today 401(k)-style programs dominate.

This has shifted responsibility for retirement planning from companies to their often-ill-prepared workers. With a traditional pension, employers oversee the investment decisions and assume responsibility for managing things so that workers are assured of receiving a monthly check in retirement.

But with 401(k) plans, workers make the critical decisions such as whether to participate, how much to contribute, how to invest and whether to cash out when they ultimately leave the company.

So far, based on retirement-confidence surveys and other signs, plenty of workers aren't up to the task of managing their nest eggs well, raising the likelihood that millions of people could slip out of the middle class later in life.

Forecast: This shift in retirement responsibility will continue. The Vanguard Group predicts more firms will terminate traditional pensions starting in 2012 because of regulatory changes that will make it cheaper for them to distribute pension assets to workers by offering lump-sum payouts or buying annuities for them.

- Other benefit cuts.

Corporate America has been scaling back workplace benefits in other ways, too. For example, job-based health coverage has been falling, exacerbated by the recession.

In fact, 2009 marked the sharpest one-year drop in employment-based health coverage and the first time in decades when the proportion of covered workers fell below 60 percent, reported the Employee Benefits Research Institute earlier this year.

Part of the reduction reflects tighter corporate budgets, along with the fact that layoffs make fewer former employees eligible for benefits.

"When the employment rate falls, health coverage also falls as jobs, and the health benefits that come with them, are lost," noted the institute.

But other factors also are at work, such as fewer full-time jobs and rising health-care premiums that workers must face, discouraging some people from even signing up for coverage.

Forecast: Many companies have the cash to offer better benefits, but on balance, they're moving in the opposite direction. Meanwhile, the unemployment rate is expected to stay high for a while, and that means fewer Americans will have access to health coverage through work.

- Productivity and education.

Not all economic indicators have been slumping. Productivity has been rising at a brisk clip lately as companies get more work done with the same or less labor. Computerization and other labor-saving devices explain part of this. In addition, companies are asking employees to work harder.

"When people are laid off, it often just means the work is reallocated among the remaining staff," said Michael Hayes, owner of Momentum Specialized Staffing, a Phoenix employment-services firm. "There's more work and pressure for many employees, often for less money."

It's not surprising that productivity and unemployment both should be high at the same time. When jobs are tight, employers can choose those people perceived to be the most productive and bypass others, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

But limits eventually are reached, and he thinks now might be one of those times. As such, there's a good chance hiring could pick up ahead, Ablin said.

But any such improvements could be limited, too.

Technological advances and the shift to "knowledge jobs" mean many companies have highly skilled positions that they're having trouble filling.

"The U.S. workforce is ill-equipped to handle the needs of the private sector, and that's one reason unemployment is high," he said.

Forecast: To the extent Americans can raise their educational attainments, that would bode well for long-term employment. Meanwhile, companies will continue to find ways to operate more efficiently.

- Changing worker expectations.

While employment is tight and most current workers are probably happy to be drawing a paycheck, this doesn't mean everyone desires to stay at his or her job for much longer.

The past four years have taken a toll. Having endured furloughs, pay freezes and benefit reductions - and possibly juggling more work - many workers undoubtedly dream of greener pastures.

"As soon as competition (with other employers) and wages heat up, the best people will scramble," Hayes said. "Many employers will be out of luck at the worst possible time."

But there's more to it than just switching scenery. Younger workers in particular don't seem to want lifetime jobs and might lead a trend toward increased mobility.

"There are four generations in the workplace today, and they view work and concepts like the work-life balance differently," Encinas said.

A study last year by marketing firms Intrepid and Mr. Youth noted a restlessness among young adults when it comes to employment. When asked the reason why they sought out their most-recent job, 37 percent of U.S. respondents said they "just needed a change." That was the top response, exceeding desires for higher pay, more-appealing or senior positions, or better benefits.

Forecast: The weak job market will keep a lid on employee turnover for a while, but the notion of lifetime employment at one company is dated. Look for increased mobility ahead that will further undermine employer-employee ties.

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