Companies destroyed employee loyalty - by letting people go while paying bonuses to executives, by giving 3% raises while offering way higher salaries to new hires, by saying "we are a family here" only when they need employees to make sacrifices.
From the perspective of an engineering manager, attrition sucks. Whenever a season engineer leaves my team, I dread the next couple of weeks, because there's a chance others will follow. The hiring and onboarding is draining and often slows down the whole team for months. But whenever someone tells me they're leaving, I tell them I understand it. They need to think about their own career.
Employers destroyed the loyalty and they need to fix it.
There's a lot of incentive. The problem is HR and employers have decided to turn a blind eye to it in favor of looking at the next quarter.
Why give someone a 10% raise because the market has spoken when you might be able to retain them with a 5% raise? Even if you hire new employees at a premium, some contingent of older employees will stick around just because switching jobs is a hassle. This sort of thing drives down quarterly costs which ultimately makes you look good to shareholders who can't see the internal destruction.
Don’t forget or discount the destruction of the social contract between employer and employee. Massive layoffs, insolvent pensions, etc were just the start.
Employees used to get pensions, have reasonable work hours, a reliable schedule and could afford to have a parent stay home in their 3-4 bedroom house on an acre.
When all that goes away and I have to work harder for less than my parents got then what is the point of being loyal to psychopathic companies with excruciatingly well documented histories of treating employees like interchangeable chattel? Loyalty ain’t gonna give these monsters any pause when they put the squeeze on me and the other numbers on their screen while they fantasize about how to blow their ill gotten gains.
> Employees used to get pensions, have reasonable work hours, a reliable schedule and could afford to have a parent stay home in their 3-4 bedroom house on an acre.
Pensions are not relevant anymore. I see no reason to pay a defined benefit pension fund’s employees and expenses when I can simply buy VOO or a target date fund at one of many brokerages for basically free. And I get to avoid the risk of a corrupt employee of the employer messing with it, or to risk the employer not being around 50 years later.
The other parts of the post have so many factors that contribute that it is not related to employer employee social contracts. Birth rates, relative developed-ness of other countries, supply and demand of labor, automation, political winds, societal changes, etc.
Stated as fact without evidence. Many people are still paying into pensions and many more would like too. Think blue collar and gig workers who scrape by on a small fraction of what many outspoken people here take home.
>I see no reason to pay a defined benefit pension fund’s employees and expenses when I can simply buy VOO or a target date fund at one of many brokerages for basically free.
Because you’re highly compensated and have the buying power of X median income households. Median income households need to retire too. What’s your solution for them if not pensions.
>And I get to avoid the risk of a corrupt employee of the employer messing with it, or to risk the employer not being around 50 years later.
Pensions are supposed to legally outlast employers. Judicial failure to enforce that is evidence of a corrupt and politicized judicial branch that is actively waging class war against those with lower economic status.
>The other parts of the post have so many factors that contribute that it is not related to employer employee social contracts. Birth rates, relative developed-ness of other countries, supply and demand of labor, automation, political winds, societal changes, etc.
All of these factors you mentioned have been politicized and exploited to manufacture consent in the American public to vote against their own interests as bought and paid for politicians, judges, journalists, prosecutors, and lawyers sell out their own economic cohort to, for the sake of brevity, make the rich, richer.
I’m happy to flesh out how each factor you named has been weaponized if you’re genuinely curious.
>Median income households need to retire too. What’s your solution for them if not pensions.
The government redistributing wealth, i.e. Social Security. A federal defined benefit pension plan, if you will. And if it were up to me, I would take it even further and make it universal basic income.
> Pensions are supposed to legally outlast employers. Judicial failure to enforce that is evidence of a corrupt and politicized judicial branch that is actively waging class war against those with lower economic status.
Decades and decades of evidence indicate that the system does not work. But more importantly, automation and technology have obviated employer sponsored defined benefit pensions.
There is no value add from having employers in the middle of the wealth transfer chain. It is just extra paperwork and overhead and chances for corruption.
The pension funds invest in the same place as everyone else, the stock and real estate market. And then the government comes and bails out asset owners time and time again, so that the pension recipients get bailed out. But then why not hand the pension recipients the cash directly?
The problem is that many people aren't replacing their defined benefit pension with savings. They're replacing it with nothing.
That said, defined benefit pensions were always designed around the idea that you'd be staying in the same place for maybe decades. Federal government pensions are perhaps the most obvious example but it applied to many companies as well. And that just doesn't represent typical behavior--especially among professional workers--these days.
I would contend for any job that is not high paying, individuals cannot save enough to cover longer than expected age in retirement, but could cover the average.
The solution to that problem should not involve an employer. It might look something like legally mandated defined benefit pensions, aka Social Security in the US.
> Pensions are not relevant anymore. I see no reason to pay a defined benefit pension fund’s employees and expenses when I can simply buy VOO or a target date fund at one of many brokerages for basically free.
These are very different with respect to longevity risk. There are many people who can’t save enough individually for the longest lifespan. (Or the 80th percentile)
But could save enough for the cohort.
Pensions are far superior in this scenario. That’s part of the reason why 401ks make sense for highly compensated, but not the majority.
Taxpayer funded defined benefit pensions, aka Social Security in the US, is the solution for people not earning enough money to save.
There is no reason to have a ton of employers get involved in the wealth transfer system. It adds so much unnecessary complexity, bureaucracy, agency risk, not to mention the longevity risk of a single employer surviving for 50 more years. And on top of that, the only thing the employer’s pension fund is doing is investing it in the same market that the beneficiaries can invest in themselves without having to pay overhead.
>not to mention the longevity risk of a single employer surviving for 50 more years
There are various protections in place. I'll be collecting a pension from a long gone employer.
I'm not really going to argue for defined benefit pensions. There's a certain paternalistic attitude to them that your employer is at least partly responsible for looking after your retirement savings. And you're on the hook for being a loyal long-term employee to get that benefit.
Still, it will be nice to collect a decent payout from a benefit I probably didn't ever really think about at the time. I even know people who completely forgot that they even had a pension.
The only protection is the PBGC, which is woefully underfunded, and could not even handle the recent multi employer pension fund failures. They just got bailed out again Mar 2021 in the American Rescue Plan legislation:
The real bailout is the backstop the federal government provides on asset prices at the expense of purchasing power of the currency.
I understand that you are not arguing for DB pensions. I am just trying to make it clear that US society has moved past DB pensions because we now have an explicit promise of bailouts at the expense of the dollar, and if we are going to do that, then cut out all the actuary and investment fund fees, and just drop it in social security or target date funds.
They are binding until the money is not there decades in the future, and you do not have enough political power to get a full bailout, and end up having to take a haircut.
I would take a defined benefit pension from the federal government (or any other entity that can print money), but any other payout promised decades in the future is just as, if not more, risky as investing in an index fund, because you give up control of the money.
When I left my company, after 27 years, I chose to take my pension in a lump sum. I had plenty of money in other investments, so I wasn't too worried about it.
I used the money to fund one of my companies, and tossed the rest into an index fund.
I made back the money I used to fund the company in a couple of years; just from the portion in the index fund (it's been crazy).
Earlier this year, my ex-employees told me that the company is shutting down their pension plan. I don't think that they are siphoning off the money, Jimmy Hoffa-style, but I think that I'm glad I took the cashout.
You made the smart choice. In a political environment where purchasing power is constantly being eroded, the only option is to stay ahead or on top of the wave by keeping assets invested and investing in new cash flow producing ventures.
A non COLA adjusted defined benefit just means you will continuously lose purchasing power, and even the COLA adjustments are subject to understatement due to political influences. Even Social Security is not immune, because at the end of the day, a smaller proportion of labor suppliers to labor buyers means less supply of labor per buyer, which means it has to get rationed somehow (for whatever amount does not get offset by automation/immigration).
Companies destroyed employee loyalty - by letting people go while paying bonuses to executives, by giving 3% raises while offering way higher salaries to new hires, by saying "we are a family here" only when they need employees to make sacrifices.
From the perspective of an engineering manager, attrition sucks. Whenever a season engineer leaves my team, I dread the next couple of weeks, because there's a chance others will follow. The hiring and onboarding is draining and often slows down the whole team for months. But whenever someone tells me they're leaving, I tell them I understand it. They need to think about their own career.
Employers destroyed the loyalty and they need to fix it.