Covid has created all kinds of weird effects across the spectrum of American life. My particular fasciation is how it has laid bare the disconnect between companies and their employees, specifically the willingness of employees to quit (and we’re seeing that in droves) and the employers inability to understand what their employees want from a job.
This disconnect has been evolving for decades, but as with everything else, Covid seems to have accelerated the trend. Looking back, consider all of the changes to the relationship between workers and their employers over the last 40 years.
We’ve seen the shift from companies offering pension programs as part of a compensation package to the now ubiquitous 401k plan. This started in the 1980s and while the 401k has offered significant benefits to both companies (allowed small businesses to offer a more competitive compensation package while reducing costs) and employees (allowed them to have some say in their retirement investing and how their compensation package was allocated) it also removed some stickiness and allowed employees to change companies more easily. There was no reason for an employee to stick around and wait for their pension to vest. They could take the next offer and comfortably move their 401k along with them.
This has gone hand in glove with the emphasis on shareholder returns. As more of the American populous has become investors in the stock market (mostly through 401k investments) companies have emphasized shareholder return as the ultimate benchmark of success. Being viewed as invested in the community, having the biggest market share, or a great place to work are no longer valuable benchmarks. Stock price and shareholder returns are the gold standard. This is true of privately held companies as well, as private equity investment has exploded and the associated focus on return to investors.
The latest disruption was passing the Affordable Care Act. It had the effect of disconnecting employees healthcare benefits from their employer sponsored plans. There is no more fear about losing coverage due to a pre-existing condition or leaving a job and being exposed without coverage until you find another opportunity. While it might be an expensive option, the Affordable Care Act allows people to get health insurance whether they are employed or an independent contractor.
All of the ties that have traditionally kept companies and workers connected have now been cut. While this could be some sort of platonic ideal of capitalism, there are all sorts of ancillary effects that are lost. I’ll explore some of what we’ve gained and what we’ve lost in another post. (which hopefully won’t take me another 18 months.)