PAID NOT TO WORK
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James Joyner | Sunday, January 11, 2004 |
Apropos the recent discussions about people dropping out of the workforce, I wonder how prevalent this trend is?
Incentives Lure Many to Quit, Even With a Lean Job Market
[L]ike thousands of others in recent months, Mr. Hutchison jumped at the opportunity to leave a good job and take his chances searching for work at a time when few jobs are being created. What little hiring there had been in recent months came to a halt in December, the Labor Department reported on Friday. Only 1,000 jobs were added last month, far short of the 150,000 forecasters had expected.Fortified with big pension payouts and promises of health benefits, these early retirees are gambling on the devil they don’t know rather than sticking with the devil they do.
Until a year or two ago, exit packages drew fewer takers. Now they are more carefully aimed at employees in operations that are shrinking. Although no national statistics are kept, companies that offer these packages say that the response is greater than they had anticipated.
“What people are doing more than in the past is laying themselves off if they get what amounts to a big enough package,” said Deborah Hart, a principal at Towers Perrin, a consulting firm that designs exit packages for corporate clients.
At FedEx, 3,600 workers took an incentive package to leave in October, out of 14,000 who were eligible. Even more striking were the numbers at Verizon Communications a month later: 21,600 workers left their jobs, or 10 percent of the company’s work force. Both companies said the responses achieved their goals.
Similar packages have been heavily subscribed recently at, among others, the State Street Corporation, a financial services company in Boston, and the Entergy Corporation, a network of utility operations with headquarters in New Orleans.
“We cannot underestimate the changing mind-set,” Ms. Hart said. “People are not viewing retirement incentives as an end to work.”
Employers are mindful that shrinking head counts with early retirement packages is more palatable, inside and outside the company, than layoffs. And they know that years of job insecurity have conditioned workers to fear the worst, thus raising the odds that workers will leave if the incentive is rich enough–typically 40 to 50 percent of annual preretirement wages.
I saw a lot of this in the early 1990s, when both the military and public colleges and universities were offering big incentive packages for people to voluntarily take early retirement. Given overall insecurity in an industry, the lure of sure money now is often very powerful when weighed against the very real risk of nothing down the road.
About the Author: James Joyner is the publisher of Outside the Beltway and the managing editor of the Atlantic Council. He's a former Army officer, Desert Storm vet, and college professor with a PhD in political science from The University of Alabama. He lives just outside the Beltway in Alexandria, Virginia.
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Of course, a lot of people could also be gambling that the job market will pick up soon, and figure they'll be better off looking openly, vs. having to job-hunt by stealth while holding down their existing position.
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