The New Compact for Workers: No Compact at All

The Wall Street Journal has a good page-one look at big-picture changes in the workforce—ones that have been going on for some time, but have been worsened by the deep recession.

Specifically, companies have long been shifting the risk of retirement onto their workers through 401(k)s and the like, while still contributing to and often matching what employees put aside. But in some instances in this recession, even the company match has gone by the wayside.

As the Journal explains, this trend is more like a reversion to the historical norm, as in the way it was sixty-five years ago.

Large employers began shouldering retirement and health care after World War II, partly to retain talent in an era of ample opportunity. Corporate giants in industries like steel and autos led the way, and could pass the costs on to customers, says Mr. Lewin at UCLA. In the 1970s and 1980s, amid rising foreign competition and recessions, the same companies took the lead in paring this system.

And it is not optimistic that it’s a recession-only thing:

Since the downturn began, thousands of employers have cut pay, increased workers’ share of health-care costs or reduced the employer contribution to retirement plans.

Two-thirds of big companies that cut health-care benefits don’t plan to restore them to pre-recession levels, they recently told consulting firm Watson Wyatt. When the firm asked companies that have trimmed retirement benefits when they expect to restore them, fewer than half said they would do so within a year, and 8% said they didn’t expect to ever.

As a symbol of the old world and the new, you probably can’t get any better than Detroit. and the Journal looks at Ford specifically, noting that it ended its pension plan in 2003, though that’s relatively late, and has slashed health-care and retirement benefits in the last couple of years.

The Journal is also good to get into the effects that this recession has had on sticky wages—the tendency for companies to not cut pay during hard times, even as they’re laying people off. It reports that “16% of big companies have taken the previously rare step of reducing pay, for at least some, according to the Watson Wyatt survey; 61% have frozen pay” and points to software-firm Autodesk and nearly half the state governments, which have furloughed workers while laying others off. Others, for example, newspaper companies, have outright cut wages.

And then there’s the biggie: Health care. plans at employers, finding that many have been gutted during the downturn. Just about 60 percent of employers now offer health-care benefits, down nearly ten percentage points from the beginning of the decade. The paper reports a fifth of big companies plan to drop theirs in the next few years.

But even that’s better than contract employees, which have increased relative to full-time employees. Their safety net is even less.

Nice job by the Journal to step back and look at these critical changes.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.