Shedding Human Capital Costs



LAKE MACBRIDE— By the time I returned from military service and finished my master’s degree in 1981, American businesses were well into shedding the costs of human capital. I have pointed to the Reagan administration as a driver of this phenomenon, and will continue to refer to the post-Reagan era, but it began much earlier than that.

When I was ready to start a career, there were no local and viable opportunities for a job that offered what I expected in a benefits package, a pension or substantial retirement plan. The government job I took did not offer health insurance, or a retirement plan. If I thought about retirement at all as a 30-something, I relied on Social Security and Medicare to keep me out of poverty in old age. I still do.

The private company I picked when I left government had a marginal retirement plan, based on profit sharing. They developed a 401k plan when the 1978 IRS change began to be spread throughout private industry in the mid to late 1980s. 401k plans served to limit a company’s pension liabilities. Businesses then began to reduce the cost of health insurance and other payroll benefits.

Today, businesses continue to seek ways to shed the cost of human resources through outsourcing, off shoring, the use of temporary workers, and subcontractors. They also hire consulting firms that specialize in compensation programs, making sure that employee wages are kept consistent with the marketplace, namely lower than what a company might develop organically. To think pay and benefits offerings would return to the 1960s, when good-paying union jobs were available, would be to deny the reality that is today’s work environment.

A friend posted a link to an article titled, “Forever Temp?” that discusses manufacturing’s movement toward temporary workers. It is worth reading. The benefit of temporary workers is substantial for businesses. The cost of training, worker’s compensation, absenteeism, recruiting, personnel and existing employer-employee contracts can be avoided. This practice is so common that moral outrage over the loss of union jobs with good benefits is worn out. Temp workers are the new normal.

Perhaps the expectation that a person could enter a career and work in it until retirement is misguided. There are some cases where it is possible, but not for the vast majority of Americans. What matters now, is whether a job will persist, whether a paycheck is accurate and paid on time, and that there is a commitment to safety in the workplace. All of these things workers in the recent past used to take for granted, but now rely upon government intervention, rule making and enforcement.

Truth be told, I’d rather deal with the uncertainties of the current economic environment than become wrapped in the cocoon of the work-a-day world for low pay. I’d rather be prepared to make it on my own.

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