Man Page Writing: Life/Times of Man Page Writer

As promised, I offer here my reasons why a flex-wage plan, linked to a back-end severance package, would not work.

To make my proposal work, a firm would have to make raise the ante--either increase the duration or amount of the severance or, perhaps, increase the upside bonus in good years--to the degree that the overall compensation package would give that firm a competitive advantage in hiring. At this point, the risk to the firm of overall package would be too high. E.g., a downturn of sufficient gravity to compel large-scale layoffs might be catastrophic. (Keep in mind that a company that hires judiciously and is consistently profitable would fare as well under my proposal as it would operating without implementing my plan.)

Surprisingly to me, most workers I talk to don't cotton to my proposal. Most of the objections cite an unwillingness to take a pay cut, even with the "carrot" of a generous severance. I'm inclined to speculate that some of these individuals overrate their marketability. No matter. They believe they can do better under the current system.

As an aside, I'd assert that if we moved into a recession, worker sentiment toward a plan such as mine would change. On the employer side, a firm's offering could be lower than what it would have to be today and still be attractive.

While most workers seem to acquiesce in the current system, the "current system" is not what it used to be. In fact, firms are implementing flex wages, without the back-end severance. An article "Winners and losers in salary game," on CBS Marketwatch (which I'll not link to because the link won't last) by Andrea Coombes notes that:

Base salaries are expected to increase about 3.9% on average in 2008, matching the average pay increase in 2007, according to a new Towers Perrin survey of about 4,000 companies worldwide. Those results match a number of other salary-expectation surveys.

It's not much when you consider inflation in October rose at a 3.5% annual rate [now 4.3% since Nov. 2006]. But more employers now supplement salaries with one-time bonuses and rewards, with more than 90% of employers offering such "variable pay" this year, up from 80% in 2006, according to an annual survey of about 1,000 large U.S. employers by Lincolnshire, Ill.-based Hewitt Associates, the human-resources consulting firm.

So the flex wages, as implemented, are merely a different way of giving raises. High flyers will match or beat inflation; ordinary performers will fall behind. The wisdom of such a system is fodder for another article, but the key point here is that firms are not "flexing" to a degree that would cushion the blow of a downturn and thereby, possibly, preserve employment.

I think our current system of compensation and unemployment creates waves that are too destablilizing, both for an individual and for the economy as a whole. In large part, this is because US workers rely to the extent they do on their employers for various insurances. Single-payer health insurance would go a long way to shorten the length and duration of the down wave for an unemployed worker. In fact, this might be enough for macroeconomic purposes.

In the absence of health insurance reform, a proposal such as mine, with a generous severance on a declining scale, would dampen the downturn, without (I hope) killing firms' incentive to hire. In the current economic conditions, employees prefer a higher but less certain income over a possibly lower but more certain income. In terms of power and politics, employers have pretty complete flexibility to hire and fire and have no incentive to improve severance arrangements for the rank-and-file. In such an environment, it's every man for himself.