The Employee Point of View: The Economic Downturn
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The Employee Point of View: The Economic Downturn

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This new SHRM Research white paper takes a close look at how employees are responding to the economic recession and anticipates likely workforce trends during the recovery.

This new SHRM Research white paper takes a close look at how employees are responding to the economic recession and anticipates likely workforce trends during the recovery.

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  • 1. SHRM SuRvey BRief The Employee Point of View: The Economic Downturn Data Highlights As the current economic downturn worsens, Are Employees Too Optimistic? employers are scrambling to trim discretionary Despite discouraging figures for national ♦ Although one-half of workers spending and, increasingly, to reduce payroll. unemployment, currently employed workers are felt that their jobs were not Layoffs are on the rise in the U.S. workforce, optimistic about their job security at this time. currently at risk, only about with 651,000 jobs cut in February 2009 for However, concern about job loss and uncer- one-third felt that their a total of about 4.4 million jobs lost since tainty about employment prospects increased jobs would not be at risk December 2007.1 The overall national unem- when workers were asked to look into the short- if the economy continued ployment rate was at 8.1% in February 2009, term future. One-half of workers reported that to decline over the next six the highest monthly unemployment figure since their jobs were not currently at risk, but only months. 1983.2 Even currently employed individuals are about one-third felt that their jobs would not feeling the effects of the weakened job market be at risk if the economy continued to decline ♦ Nearly one-third of workers and cost-cutting measures—both within their over the next six months. The percentage of are likely to begin a job organizations and on a personal level. The employees who felt that their jobs would be search or intensify their job Society for Human Resource Management significantly at risk six more months into the search when the economy (SHRM) conducted a poll in January 2009 to economic downturn was 11%, compared with and job market improve. gauge workers’ perceptions of the job market 5% of those who felt their jobs were currently ♦ The most frequently reported and the impact of the economic downturn significantly at risk. These data are shown in action employees have taken on employer benefits and personal financial Figure 1. in response to the downturn behavior.3 in the economy was decreasing the use of credit cards and/or cancelling credit card accounts. figure 1 The extent to Which Their Job is at Risk, as Perceived by employees 50% 35% 35% 32% 19% 13% 11% 5% Not at risk Slightly at risk Moderately at risk Significantly at risk Currently (n = 604) In six months (n = 604) Note: Excludes respondents who answered “not sure” or did not answer the question. Percentages may not total 100% due to rounding. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009) A Publication of the Society for Human Resource Management
  • 2. 2 SHRM Survey Brief 47% of companies implemented figure 2 extent to Which the Current Downturn in the u.S. economy Has Made it Difficult to find a Job layoffs in the last six months. SHRM Poll 52% March 20, 2009 Voluntary Job Searching Decreases in a Weak Labor Market 29% At the time that SHRM conducted its 2006 U.S. Job Retention Poll, nearly three-quarters of workers were engaged in either active or passive job searches.4 The recent softening of the job market has resulted in low levels of employment mobility among those who are presently employed, 10% 10% as people opt to hold on to the jobs that they have now. Most workers (78%) who had jobs at the time this poll was conducted reported that they were not engaged in job searching at all, and another 19% reported passively job searching. Among the 3% of currently employed workers No extent Slight extent Moderate extent Significant who were actively job searching, four out of five reported moderate to extent significant difficulty in finding a job due to the current downturn in the U.S. economy. Regardless of their present job search status, about Note: Includes only respondents who indicated that they were actively job searching. one-third of workers (31%) overall reported that they were likely (“very Excludes respondents who answered “not sure” or did not answer the question. Overall, 21 employees answered this question. Percentages may not total 100% due to rounding. likely” or “somewhat likely”) to start a job search or intensify an ongoing Source: The Employee Point of View: The Economic Downturn (SHRM, 2009) job search when the economy and job market improve. In comparison, 76% of employees in 2006 said they were likely to begin or increase a job search as the job market and economy improved. These data are depicted in Figures 2 and 3. figure 3 Likelihood of Beginning a Job Search or increasing the intensity of an Ongoing Job Search When the economy and Job Market improve 50% 44% 32% 19% 19% 13% 12% 10% Very unlikely Somewhat unlikely Somewhat likely Very likely 2009 2006 Note: Excludes respondents who answered “not sure” or did not answer the question. Overall, 602 employees answered this question in 2009, compared with 348 employees who answered a similar question in the 2006 SHRM U.S. Job Retention Poll. Percentages may not total 100% due to rounding. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009)
  • 3. The Employee Point of View: The economic Downturn 3 employees was made by the reduction of health care benefits (47%), Only 17% of companies have followed by suspension of retirement plan contributions (45%). The reduced employee benefits degree of impact of reduction or elimination of each of the selected employee benefits varied by employee level, organization staff size, offerings as a result of the current industry and organization sector. For example, middle-management financial challenges to the U.S. and and nonmanagement employees reported greater average nega- tive impact of elimination of health care benefits completely and global economy. reduction in retirement plan contributions than did executive-level employees. Nonmanagement workers also reported greater average SHRM Poll negative impact of suspending retirement plan contributions, March 20, 2009 compared with executive-level employees. When the data were analyzed by organization sector, workers who were employed in The Effect of Reduction of Employee Benefits the government sector reported greater average negative impact In a recent SHRM poll, 27% of HR professionals indicated that of reducing health care benefits, eliminating health care benefits cuts in HR discretionary spending had a negative impact on their completely, reducing retirement plan contributions and suspending organizations’ ability to stave off cuts to salaries, health benefits or retirement plan contributions, compared with workers employed by retirement benefits.5 The current study asked workers about the privately owned for-profit organizations. For more of this study’s effect of losing—or having already lost—selected employee benefits. findings regarding differential impact of reduction or elimination of As illustrated in Figure 4, the complete elimination of employee employee benefits by various worker demographics, please see “The health benefits had the most significant negative impact, as reported Economic Downturn: The Employees’ Perspective.”6 by 71% of respondents. The next greatest negative impact on figure 4 impact of Reduction or elimination of employee Benefits Eliminated your health care benefits completely 15% 5% 9% 71% (n = 413) Reduced your health care benefits 15% 12% 26% 47% (n = 418) Suspended retirement plan contributions 16% 15% 24% 45% (n = 390) Reduced retirement plan contributions 18% 15% 31% 26% (n = 388) Reduced/eliminated flexible work arrangements such as telecommuting, 43% 19% 17% 21% flextime, compressed workweeks (n = 303) Reduced/eliminated payment for professional development and/or 45% 30% 14% 10% membeship in professional associations (n = 328) Reduced/eliminated wellness programs 64% 17% 11% 8% (n = 307) No negative impact A slightly negative impact A moderately negative impact A significant negative impact Note: Data sorted in descending order by percentage who responded “a significant negative impact.” Excludes respondents who answered “not sure” or did not answer the question. Percentages may not total 100% due to rounding. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009)
  • 4. 4 SHRM Survey Brief Help From HR In light of widespread economic challenges, many organizations Consumer costs are among the have trimmed expenses by decreasing spending on HR products and services.7 Despite this, the majority of workers feel that the most important health response of the HR department in their organizations during the economic downturn has helped preserve benefits and staffing care coverage issues for workers. levels and promote communication. More than two-thirds of The top three priorities workers (69%) reported that their organization’s HR department had been helpful (“helpful” or “somewhat helpful”) in preserving for employees were: the overall benefits package for employees. More than one-half of #1: Low premiums and employees reported that their HR department had been helpful in reducing the likelihood of layoffs (59%), facilitating communica- coverage for their spouse/ tion between management and employees (57%) and fostering partner and children. confidence in the financial stability of the company (56%). Workers in medium-staff-sized organizations were more likely #2: Low co-pays. than workers in small- or large-staff-sized organizations to report #3: Prescription drug coverage. that their organizations’ HR department was helpful in reducing the likelihood of layoffs and preserving employees’ overall benefits package. figure 5 Helpfulness of HR Department in various Capacities Related to the economic Downturn Preserving the overall benefits package for employees (n = 294) 20% 11% 42% 27% Helping to reduce the likelihood of 26% 15% 37% 22% layoffs (n = 276) Facilitating communication between management and 27% 16% 35% 22% employees (n = 308) Fostering confidence in the financial 30% 15% 38% 18% stability of the company (n = 287) Boosting employee morale (n = 319) 39% 15% 31% 15% Unhelpful Somewhat unhelpful Somewhat helpful Helpful Note: Sorted in descending order by percentage who responded “helpful.” Excludes respondents who answered “not sure” or did not answer the question. Percentages may not total 100% due to rounding. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009)
  • 5. The Employee Point of View: The economic Downturn 5 By contrast, less than one-half of workers (46%) felt that their benefits they would like to see their organizations offer to offset organization’s HR department had been helpful in boosting the cost of gas, the top three responses were offering employees employee morale. This may be related to reduction of discre- cost-of-living raises as a direct result of gas prices (39%), tionary HR funding: according to a recent SHRM poll, 51% of rewarding employees with gas cards (34%) and offering flexible organizations had experienced budget cuts in funds for morale work benefits such as telecommuting, flextime, compressed work- and team-building activities in the past six months, and 26% week, etc. (25%). In a recent SHRM poll of HR professionals, the anticipated that budget cuts in this area would be very likely over largest percentage of organizations reported that they currently the next six months.8 offer mileage reimbursement at the IRS cap (74%), flexible work schedules such as compressed work schedule, flextime, etc. (58%) Gas Prices Have Improved, But Are and telecommuting (40%) as a way to help employees deal with Employees Still Looking for Relief? high gas prices.9 These data are depicted in Table 1. In the recent past, workers were also challenged by substantial increases in gasoline prices. While gas prices have been decreasing What Are Workers Doing in Response to the of late and may not currently represent the largest financial Economic Downturn? challenge, many workers are still seeking to control or offset these In another recent SHRM poll, 71% of employers reported budget costs due to the generally weak economy. When asked which cuts across the entire organization within the past six months due employees’ interest in employer-Sponsored Benefits to Offset increases in Gas Prices Compared With Prevalence of Organizations Table 1 Already Offering Benefits employee interest Organizations Already in Benefit Offering Benefit Offer employees cost-of-living raises as a direct result of gas prices 39% 5% Reward employees with gas cards 34% 28% Offer flexible work arrangements benefits (e.g., telecommuting, flextime, compressed 25% 58%/40%a workweek, etc.) Offer a one-time stimulus check as a direct result of gas prices 22% n/a Allow more employees to take advantage of flexible work arrangements benefits (e.g., 16% n/a telecommuting, flextime, compressed workweek, etc.) Offer monetary incentive to employees to buy hybrid or electric cars 12% 2% Raise mileage reimbursement to IRS cap 12% 74% Offer public transportation discounts 11% 24% Offer IRS Section 132 transportation accounts – pretax transportation reimbursement 9% 17% accounts Offer commuter stipend for commutes to the office 9% 6% Organize carpools 8% 29% Offer priority parking to employees who carpool 3% 16% Provide information on alternative ways to get to the office (e.g., information on bus routes, 3% 31% finding shorter paths to the office, etc.) Offer to help new nonexecutive hires find housing closer to the office 2% 4% Offer to help new executive hires find housing closer to the office 1% 6% Other 8% n/a (n = 568) a Overall, 58% of HR professionals reported that their organizations offered flexible work schedules (e.g., compressed work schedule, flextime, etc.) and 40% reported that their organizations offered telecommuting. ‘n/a’ indicates no data were collected. Note: Percentages do not total 100% as multiple response options were allowed. Data for organizations offering various benefits are based on a recent poll (SHRM Poll: Assistance Organizations Offered to Help Employees Deal With High Gas Prices, September 24, 2008) of 448 HR professionals. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009)
  • 6. 6 SHRM Survey Brief Table 2 Actions Taken By employees in the Past Six Months in Response to economic Downturn Decreased use of credit cards/cancelled credit card accounts 49% Increased use of credit cards/opened credit card accounts 21% Actively searched for higher-paying job 14% Reduced my contribution to my employer-sponsored retirement savings plan 11% Had to change mode of transportation 9% Reduced my health care benefits 8% Took out a loan from my bank, employer and/or a family member 8% Dropped my contribution to my employer-sponsored retirement savings plan completely 7% Took a loan from my employer-sponsored retirement savings plan 6% Started taking classes or went back to school to improve skills 6% Controlled discretionary spending and/or reduced expenditures 5% Dropped my flexible spending account enrollment 4% Used other health and wellness benefits through my employer 4% Took an unscheduled absence from work 4% Increased use of flexible work arrangements 4% Dropped my health care benefits completely 3% Dropped my life insurance 3% Had to sell home or relocate 3% Used my employer’s employee assistance program (EAP) benefits 1% Other 6% (n = 317) Note: Percentages do not total 100% as multiple response options were allowed. The response category “Controlled discretionary spending and/or reduced expenditures” was recoded from write-in responses in the “other” response category. A total of 288 employees, 48% overall, responded “N/A, have not taken any actions in the past six months,” and these responses are not included in this analysis. Source: The Employee Point of View: The Economic Downturn (SHRM, 2009) to the economy, and 43% of employers said budget cuts were Further Findings very likely in the next six months if the economy continued to Additional data from this survey, including analyses by demo- decline.10 Many workers (52%) have taken measures to increase graphics such as employee level, organization staff size, industry their financial solvency and professional agility to offset the effects and sector, are available in the PowerPoint presentation titled of possible job loss or other financial crises. The top three actions “The Economic Downturn: The Employees’ Perspective,” available workers have taken in response to the downturn in the economy at www.shrm.org/surveys. are decreasing the use of credit cards and/or cancelling credit card accounts (49%), increasing the use of credit cards and/or opening credit card accounts (21%) and actively searching for a higher-paying job (14%).
  • 7. The Employee Point of View: The economic Downturn 7 Endnotes Related SHRM Resources on the economy 1 Bureau of Labor Statistics. (2009, February). Employment situation summary [News release]. Retrieved March 6, 2009, from www.bls.gov/news.release/empsit.nr0.htm. 2 Bureau of Labor Statistics. (2009, March 6). Labor force statistics from the current n The Economic Downturn: The Employees’ Perspective population survey. Retrieved March 6, 2009, from http://data.bls.gov/PDQ/servlet /SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000. n Leading Indicators of National Employment® (LINE®) 3 The SHRM 2009 Omnibus Employee Survey instrument is available upon request by contacting the SHRM Survey Program at surveys@shrm.org or by phone at n Labor Market Outlook Report: Q1 2009 703-535-6301. 4 Frincke, J. (2006). SHRM 2006 U.S. job retention poll. Retrieved from www.shrm.org n SHRM Poll: Financial challenges to the U.S. & global /surveys. 5 Society for Human Resource Management. (2008, October 21). SHRM poll: Which economy and their impact on organizations (March 20, 2009) discretionary HR expenses are companies cutting during economically challenging times? Retrieved from www.shrm.org/Research/SurveyFindings/Articles/Pages/Which n SHRM Poll: Which discretionary HR expenses are DiscretionaryHRExpensesAreCompaniesCuttingDuringEconomicallyChallengingTimes. aspx. companies cutting during economically challenging times? 6 Society for Human Resource Management. (2009). The economic downturn: The (October 21, 2008) employees’ perspective [PowerPoint presentation]. Retrieved from www.shrm.org /Research/SurveyFindings/Articles/Pages/TheEconomicDownturnemployeesperspective. aspx. n SHRM Poll: Investments in HR during economically challenging 7 Society for Human Resource Management. (2008, October 14). SHRM poll: Invest- times (October 14, 2008) ments in HR during economically challenging times. Retrieved from www.shrm.org /Research/SurveyFindings/Articles/Pages/InvestmentsinHRduringEconomically n SHRM Poll: Changes organizations have made in light of 2008 ChallengingTimes.aspx. 8 Society for Human Resource Management. (2009, March 20). SHRM poll: Financial financial challenges to the U.S. economy (October 1, 2008) challenges to the U.S. & global economy and their impact on organizations. Retrieved from www.shrm.org/SurveyFindings/Articles/Pages/Financialchallengespoll.aspx. For more SHRM research about the labor market, economy and 9 Society for Human Resource Management. (2008, September 24). SHRM poll: Assistance organizations offered to help employees deal with high gas prices. Retrieved employee benefits, please visit www.shrm.org/Research/ from www.shrm.org/Research/SurveyFindings/Articles/Pages/Assistance OrganizationsOfferedtoHelpEmployeesDealWithHighGasPrices.aspx. MonthlyEmploymentIndices and www.shrm.org/surveys. 10 Society for Human Resource Management. (2009, March 20). SHRM poll: Financial challenges to the U.S. & global economy and their impact on organizations. Retrieved from www.shrm.org/SurveyFindings/Articles/Pages/Financialchallengespoll.aspx. Methodology In January 2009, the Society for Human Resource Management (SHRM) conducted an online survey with currently employed individuals about workplace-related issues. This survey brief provides the overall results from the economy-related questions in the survey. The sample of employees was randomly selected by an outside survey research organization’s web-enabled employee panel, which was based on a random sample of the entire U.S. telephone popula- tion. All panelist households that do not already have Internet access are provided with a custom-designed web device so that they can complete surveys online. Out of 1,260 employees, 605 indi- viduals completed the online Omnibus Employee Survey, yielding a response rate of 54% with an incidence rate of 89%. The survey was accessible for two weeks. All respondents were employed, either full time or part time.
  • 8. 8 SHRM Survey Brief About SHRM The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human resource management. Representing more than 250,000 members in over 140 countries, the Society serves the needs of HR professionals and advances the interests of the HR profession. Founded in 1948, SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China and India. Visit SHRM Online at www.shrm.org. Media Contact Project Team Julie Malveaux julie.malveaux@shrm.org +1-703-535-6273 Project leader: Amanda Benedict, survey research analyst uSA Project contributors: Evren Esen, manager, Survey Research Center SHRM Steve Williams, Ph.D., SPHR, director, Research 1800 Duke Street Alexandria, VA 22314 editor: Katya Scanlan, copy editor Phone: +1-800-283-7476 E-mail: shrm@shrm.org Design: Blair Wright, senior graphic designer China Beijing Representative Office SHRM Corporation 5/F, South Block, Tower C Raycom Info Tech Park No.2, Kexueyuan South Road Zhongguancun, Haidian District About SHRM Research Beijing, 100190 SHRM Research, as part of the Knowledge Development Division supporting SHRM, China produces high-quality, leading-edge research and provides expertise on human resource Tel: +86 10 59822093 / 59822146 and business issues. It acts as an advisor to SHRM for the purpose of advancing the HR Fax: +86 10 59822588 profession and generates and publishes cutting-edge research used by human resource professionals to develop their knowledge and to provide strategic direction to their india organizations. As leading experts in the field of HR, SHRM Research works closely with SHRM India leading academics, policy makers and business leaders. 702, 7th Floor Raheja Towers This report is published by the Society for Human Resource Management (SHRM). Plot C- 62, G Block All content is for informational purposes only and is not to be construed as a guaranteed Bandra Kurla Complex, Bandra (E) outcome. The Society for Human Resource Management cannot accept responsibility Mumbai 400051 for any errors or omissions or any liability resulting from the use or misuse of any such Maharashtra India information. Tel: +91-22-42472000 © April 2009 Society for Human Resource Management. All rights reserved. This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Society for Human Resource Management. SHRM Online: www.shrm.org SHRM Research: www.shrm.org/research SHRM Survey Findings: www.shrm.org/surveys 09-0247