One of the reasons Americans are saving more of their salaries and wages is that in 2008 and 2009, employers stopped doing the things they have historically done to make their employees feel confident about spending—contributing to 401(k)s, paying for benefits, raising salaries in line with inflation. Corporate America's productivity and efficiency gains since the onset of the Great Recession have been impressive and an important contributor to the recovery. Businesses cut costs aggressively largely by cutting jobs, salaries, benefits, and perks.So corporations gave themselves a lifeline during the panic and crash of 2008 by taking away from their employees. Foolishly you would expect that they would return what they took along with a note of gratitude to the workers who funded the rescue. But no... This reminds me of the airlines in the 1980s that demanded and got wage rollbacks from employees (and a 2 tier pay system where new hires got wages way below the old pay scale) in order to weather tough economic years. But the airlines didn't thank their employees or restore the "good old times". This is why unions are very leery of taking pay cuts to help "save" corporations. It is a one way street. What you give up pretty well never comes back to you. You end up being a sucker.
Companies made these cutbacks out of desperation. The problem is that today, a year after the economy began to expand, and after several quarters of profit growth—Bloomberg reported that "profits among S&P 500 companies will rise 35 percent in 2010, the fastest pace in 22 years"—companies aren't restoring any of those cuts.
The Wall Street Journal on Tuesday reported that many of the hundreds of companies that cut or stopped 401(k) contributions during the crisis, and that had pledged to resume contributions once conditions improved, have yet to do so. ... "All told, almost one in five U.S. companies with at least 1,000 workers have reduced or suspended their matching contributions since September 2008. Roughly half have yet to restore those benefits, though many are considering reinstating at least a portion of the match within the next 12 months, according to a survey this spring by employee-benefits consulting firm Towers Watson." And, the Journal reports, there's more where that came from. "One in 10 employers as of February planned to reduce or eliminate matches within the next 12 months, according to a survey by the Society for Human Resource Management released in late June."
Friday, August 6, 2010
One Hand Giveth, the Other Taketh Away
There is a good article by Daniel Gross in Slate magazine looking at "The 401(k) Travesty":