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Workforce Cuts Create Long-term Costs
By Heidi | February 14, 2007
The effects of cuts in the permanent workforce are starting to show.
The Bureau of Labor Statistics report on Continent and Alternative Employment Arrangements has documented that in 2005 more than 10 million workers – about 7.4 of the employed – were independent contractors (an increase from 6.4 in 2001). An increasing number of workers are doing on-call work (2.5 million workers), working for temp agencies (more than 800,000), or working part-time (11% of men in wage and salary jobs and 25%).
In the fourth quarter of 2006, there were 1,444 mass layoff events that resulted in the separation of 255,886 workers from their jobs for at least 31 days, according to preliminary figures released by the U.S. Department of Labor’s Bureau of Labor Statistics.Both the total number of layoff events and the number of separations were higher than during the October-December 2005 time period.
Some talented people who are laid off start their own businesses, and some of them find new jobs right away.
However, the modest job gains in some industries may mask that many workers who lose their jobs through downsizing or reorganization layoffs may be more likely to have to settle for temporary positions, positions that do not pay as well, or other stop-gap work.
A manager who loses a full-time position, and is forced to take an hourly part-time position to pay the bills doesn’t show up in the unemployment figures. Unemployment figures count heads, not hours. Someone who is willing to work 40 hours a week, but is only offered 20, is still counted as “employed” rather than something like “half-employed.”
Semi-permanent, part-time, outsourcing, and temporary jobs have left as much as 25% of the workforce without traditional benefits such as health care, pensions, or even unemployment insurance eligibility.
Remember too that numerous studies show that the population of skilled workers in America is shrinking.
A Pew Research Center poll last fall found that
...most Americans are well aware that the social contract associated with work in America is going through a period of profound change – with the industrial-era model of secure jobs with good wages and benefits that predominated until roughly a generation ago giving way to a more cost-conscious and globally-competitive workplace marked by stagnant real wages, cutbacks to health benefits and retirement plans, and growing threats of having jobs outsourced abroad. When asked whether each of eight different aspects of work life have gotten better, worse or remained the same for the typical American worker over the past 20 or 30 years, a majority or plurality of respondents in the Pew survey answered worse to all eight questions.
Qualified, talented leaders and workers will factor into their career decisions the history of how a company treats its most valuable resource – its people.
There are better ways to cut costs. Call us.
Prediction from Dr. Heidi: Organizations who show by their actions that they value their people will be more likely to attract and retain the talented leaders and workers that they will need in order to be competitive.
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