The document discusses several challenges facing human resources professionals, including rising economic insecurity among employees due to factors like unemployment, medical expenses, and stagnant wages. It notes that long-term unemployment remains at historically high levels, with over 8 million jobs lost in the last recession and uncertainty about whether those jobs will return. This widespread insecurity and lack of opportunities is taking a toll on employee engagement, productivity, and commitment to their employers. The role of human resources is questioned in adapting to this new environment with diminished expectations and incentives among American workers.

1. Coming Challenges for
Human Resources
Reynolds Atkins
November 2012

2. Themes
• Economic Security Index (ESI)
– Developed by political scientist Jacob Hacker and colleagues at
the Rockefeller Foundation

3. Themes
• ESI
– Measures major loss of income (> 25%) due to either decline
in income or significant out-of-pocket medical expenses
• Hacker’s chart shows in excess of 20% of Americans were in this
category in late 2009, higher than in previous recessions
– ESI linked most prominently to rate of unemployment, but at
all levels of unemployment economic insecurity has risen
dramatically since 1985
– A Spring 2009 survey of US households showed just under half
would experience economic hardship in two months or less
following a major interruption in income

4. Themes
• Implications
– Loss of income resulting from unemployment and disability
routinely top list of Americans’ leading economic concerns
• Our employees bring these insecurities with them to the workplace
• Uncertainty about long-term employment prospects a significant
source of discontent in even the healthiest companies
– Rockefeller Foundation American Worker Survey, February 2007
“Compared to 10 years ago, do you think Americans today have…”
Less economic security 65%
More economic security 19%
About the same economic security 16%
• Suspect percentage of “Less” would be substantially higher in 2012

5. Themes
• Implications
– Whether one is employed or unemployed, chronic economic
insecurity is corrosive
• Its effects can be felt in:
– Lowered productivity
– Increased medical claims for everything from mental health services to
gastrointestinal disorders
– Excessive absenteeism
– “Presenteeism”
– Increased incidence of workplace fraud
– Performance problems

6. Themes
• Implications
– A distracted, uneasy, risk-averse workforce hardly the platform
on which to build a robust economic revival
• Few companies seem to be engaging in an open dialogue with their
employees about what the academic and author Richard Florida has
referred to as “The Great Reset”
• Employees no longer expect reassurances that their positions are
secure – such reassurances are increasingly empty -- but they do want
reliable information – financial, market, long-term growth prospects --
on their companies
– Even if such information is incomplete or unsettling, it can help dissipate
some of the uncertainty

7. Themes
• Implications
– What is the role of Human Resources in an age of diminished
expectations among employees?
• Creativity and employee engagement likely casualties of lengthy salary
freezes and benefit reductions
– What happens when traditional incentives disappear?
• Will companies invest in training and developing their employees as
they seek to compete more aggressively internationally?
• Will the long-expected departures of Baby Boomers from the
workforce actually materialize, at least in the large numbers predicted
early last decade?
– Recent studies of Boomer retirement patterns suggests upwards of 65%
expect to work well into their 60s

8. Themes
• Implications
– Role of Human Resources
• Social networking, by its nature anti-hierarchical, poses challenge to
command-and-control management structures and the centralizing
tendencies of many traditional human resources programs
• Do human resources departments properly appreciate the diversity of
talent available today and how a decreasing percentage of it is “home-
grown”?
– According to College Board, the percentage of US college graduates
(associates’ degree and higher) in the 25 to 34-year-old bracket has over
the past decade fallen from 1st in the world to 12th
• Employee commitment in an age of diminished institutional trust

9. Themes
• Employee Commitment
– Deloitte’s 2011 Human Capital Trends report asked this
question of employees included in its annual survey of
employment satisfaction:
Are you staying or going?
Employees expecting to stay with their current employer
35%
Employees who have been, plan to, or are currently seeking new employment
65%

10. Themes
• Employee Commitment
– Whether or not the desire to leave one’s current employer is
wishful thinking – employee mobility and the rate of voluntary
quits are greatly reduced from pre-recession levels – a
substantial segment of the workforce seems disengaged
Despite a challenging job market, employers surveyed by Deloitte predict
moderate to severe shortages in the years ahead in R&D, management,
sales, strategy and planning, HR, procurement, operations, finance and IT
talent

11. Themes
• Implications
– As complicated as these “macro” issues are – inter-
generational cooperation, stagnant wages and incentives,
retirements and succession planning, growing mismatches
between skills required and skills available -- how much of the
traditional Human Resources “tool-kit” continues to work:
• Performance management programs when performance standards are
constantly shifting and incentives have been sharply reduced?
• Career management (and what is a “career” these days) and rotation
programs?
• One-size-fits-all total reward programs?
• Investment in employees – training and development, tuition
reimbursement, seminars and executive education programs?

12. Themes
• Unemployment
– What happens to a formerly healthy economy when it loses 8
million jobs in a little over eighteen months, many of which
have not returned?
New jobs will open in the U.S. But many will have different skill requirements than the old
ones. “In a sense” says Gary Burtless, a labor economist at the Brookings Institution, “every
time someone is laid off now, they need to start all over. They don’t even know what industry
they’ll be in next.” And as a spell of unemployment lengthens, skills erode and behavior tends
to change, leaving some people unqualified even for the work they once did well.
from “How a New Jobless Era Will Transform America”
Atlantic Magazine, March 2010
– Predictions like this will do little to allay workforce insecurities

13. Themes
• The Collapse of Jobs (Source: S. Winship/Brookings)

14. Themes
• Unemployment
– To return to the 5% level of unemployment that existed prior
to the recession will require the creation of 10 million jobs
• That is 1.5 million new jobs each year just to keep up with new
entrants into the labor market
• Economic Policy Institute expects unemployment to stand at roughly
8% through 2014
“We haven’t seen anything like this before: a really deep recession combined
with an extended period, maybe as much as eight years all told, of highly
elevated unemployment,” *Heidi+ Shierholtz told me. “We’re about to see a
big national experiment on stress.”
- Atlantic Magazine, March 2010

15. Themes
• Unemployment
– Ignoring for the moment the waste of human capital and the
thousands of individual and family tragedies these numbers
represent, they pose a particular challenge to Human
Resources departments:
• Companies and organizations where new jobs are being created are
seeing an large number of candidates who have been out of work for
two or more years
– Skills and capabilities atrophy if not used, requiring in many cases
extensive retraining for those fortunate enough to find employment
• Research into long-term unemployment found that young adults
experience lasting changes in behavior and mental health, e.g.,
depression, excessive drinking

16. Themes
• Unemployment
• To the extent that more qualified candidates (and even those with
jobs) can choose to relocate , less desirable regions and cities will find
the quality of their labor pool compromised making it difficult to
attract new businesses
• Institutional memory has been diminished in even our more stable
enterprises leaving new employees to largely struggle on their own to
adapt to often chaotic workplace cultures
• The sheer crush of unqualified applicants for virtually any job
advertised

17. Themes
• Unemployment
– Long-term unemployment remains the most significant social,
economic, and political challenge facing this country

18. Themes
• Unemployment
• Growing awareness among our political elites – witness the
continuing extension of unemployment benefits – that
unemployment (and the threat of unemployment) and the
attendant financial insecurity it brings continue to
undermine the still-nascent recovery
– A protracted period of high unemployment will change the
expectations, behavior and character of a generation of young
adults
– Negative effects already evident among many “blue-collar” men

19. Themes
• Unemployment

20. Themes
• Unemployment
– Previous chart from Bureau of Labor Statistics and referenced
in recent report by the Federal Reserve Bank of Atlanta
• Chart shows an increase in job openings even as unemployment
remains high
• Suggests employers having difficulty finding workers with the right
skills
In a survey last year of 779 industrial companies by the National Association of
Manufacturers, the Manufacturing Institute and Deloitte, the accounting and consulting
firm, 32 percent of companies reported “moderate to serious” skills shortages. Sixty-
three percent of life science companies, and 45 percent of energy firms cited such
shortages.
- from The New York Times, July 1, 2010