Business Week's "New" Work Force

A colleague described the recent BusinessWeek cover to me over coffee this weekend.

The details portray the average employee as a contract worker with no health care, pension nor vacation.

You know what? This is what 75 years of government intervention has wrought.

Think about it.

Unionism fought for recognition in the '20s and '30s, culminating in FDR's liberal Democrat administration and the then-Democrat controlled Congress passing legislation to enshrine unions in our nation's workforce.

Neither the corporate behavior toward employees at the time, nor permanent legislation favoring unions, were effective solutions.

But since the 1930s, government and the unions it has, thanks to a long run of Democrat-controlled Congresses, supported, have cemented into the US economy the notion that employees are entitled to health care, pensions, and vacations, all provided by the companies for whom the employees work.

Within the cocoon of that system, it all seems to make sense, doesn't it? Fair, compassionate minimum standards and lifestyle provisions which, otherwise, workers would never receive?

Here's an alternative view.

For every non-cash benefit, workers receive less cash compensation. Mandatory vacation days means that companies implicitly adjust cash wages and their increase to the number of actual hours worked by employees. More vacation days means less in terms of wage increases.

It's the same thing with employer-paid insurance and pensions.

As my colleague put it so well, they are all simply another variant of the old-style 'defined benefit' compensation system. And every non-cash mandate or demand by unions or government decreases cash compensation to workers.

One of my very first blog posts concerned the culpability of union chiefs in recommending to their workers to take promises of future pension and health care benefits, rather than cash upfront.

That has turned out to be a huge mistake.

Companies don't live forever. Business dynamics change. Promises made 40 years ago may become unaffordable, and simply unpayable.

Imagine if unions had stopped at demanding safe working conditions and a maximum number of hours in a 'regular' workweek?

Then better workers would make more money. In cash. Those who wanted a pension would save for it. Those who desired health care could buy it. Those who did not, would enjoy greater disposable incomes.

Those who wished to work longer hours for more money could negotiate that, too.

Typifying the modern worker as BusinessWeek does actually tells us something very important.

Seventy-five or so years after New Deal-backed initiatives to force companies to obey a truckload of mandates regarding employees, company managements have finally come full circle to simply defining workers as not belonging to their companies.

If they don't have permanent employees, then they don't have to comply with an overgrown thicket of employee regulations.

In truth, the business world is always in flux. There are no free lunches. There is no static business world in which a promise today has a guarantee of fulfillment 30 years from now.

That would be fantasyland.

The trend to portable IRAs is a good one. So, too, would a simple tax-treatment change to allow everyone to purchase health insurance on the same tax-preferenced basis, but as individuals.

In the long run, it's actually better for workers to control the way they spend, or save, higher cash wages, than to have mediocre managements and union leaders promise to look after their medical insurance and pensions, while paying employees less in cash today.

I'm sure that's not what the BusinessWeek cover and article intends to contend. But that's the perspective I have on it.

It may have taken three generations of business management and radical transformation of the US economy, but it ought to be clear to everyone now that relying on promises of future payments by any company, or the government, is foolish.

Better to function like a private contractor of your own talents, demand more cash with no strings attach, and make your own lifestyle choices for health care and future income from invested savings.