You've Got No Job!

By: Adam Taggart | Fri, Feb 7, 2014
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Today, the pundits are a-buzz making sense of the latest lackluster jobs report. Expect much hand-wringing over the impact of the 'polar vortex' and that Punxsutawney Phil saw his shadow.

But most of us care more about the state of one particular job: our own. How relevant is this latest bit of data to that? Not very.

So, to better understand the trends in the work environment most likely impact our own paychecks, it will help to look at another bellwether similar to our fuzzy groundhog friend: AOL.

AOL, a once-important pioneer in the transition to the 'digital economy', is once again showing us where the future of work is headed.

Unfortunately, like the health of AOL's business over the past decade, it's not a pretty picture.


The Expendable Employee

As we've transitioned to an economy in which corporate profitability -- and thereby, stock prices -- is THE metric for success, the employer-employee relationship has become much more superficial than in past generations.

No longer do workers expect (or in many cases, aspire) to work for a single company for their entire careers. And with the cost efficiencies offered by automation, outsourcing, temporary workers, and related trends -- companies are much more inclined to view their workers as expendable and/or easily replaceable, especially when facing a business downturn.

We've seen this dynamic play out in spades since the arrival of the 2008 credit crisis. Companies immediately shed workers in droves as the economy slowed down. But as things stabilized by 2010 and then the "recovery" of 2012-2013 sent corporate profits soaring, the pace of hiring those displaced workers back has been nothing short of anemic:


http://www.calculatedriskblog.com/

And of the jobs that have been added over the past five years, the majority have been temporary jobs. Read that as "Low Pay/No Benefits" jobs:


source

It turns out that companies used the 2008-2009 layoff wave as an opportunity to reduce their dependence on human capital (at least, US-based). A vigorous debate can (and should) be waged on whether that happened for good reasons or not, but the fact remains that the employment market remains frail over 5 years later.

More cynical critics will note that lower hiring budgets are NOT a result of companies investing more heavily in productivity-boosting capital expenditures. In fact, since 2008, CAPEX has remained depressed by over 20% compared to historic averages. Rather, it seems companies have been fattening profits by focusing on cutting costs, with the main intent of boosting stock prices. Profits of companies within the S&P 500 are at all-time highs right now. It's clear they're being artificially inflated, and most likely by means that can't be long sustained.

Many companies have doubled-down on this approach, spending corporate profits on stock buyback programs. This has only served to send shares higher (as I type this, a headline just announced that Apple bought back $14 billion of its stock over the past two weeks). Is it any surprise this is going on when company executives have fantastically-sized compensation packages that are based on increases in.....oh, that's right... the price of their company's stock?


"You've Got No Job!"

Enter AOL, which incidentally bought back $600 million worth of its shares last August, along with a $1.1 billion special dividend to line its investors' pockets.

Since its ill-fated merger with Time Warner 14 years ago, AOL has been a train wreck by most business metrics. It received a dose of much-needed hope when former Google executive Tim Armstrong signed on as CEO in 2009, who was hired to turn things around.

I'll leave it other writers to opine on Armstrong's degree of success since then, but not surprisingly during his tenure, he's made a lot of cuts. AOL has had a steady parade of layoffs over the years (including six months after Armstrong's hiring, announcing it would cut 1/3 of its workforce).

And its the relentless drumbeat of its mass firings, and more notably, the anti-septic manner in which they've been handled, that I think is emblematic of the new era of the disposable worker.

Here's a powerful example. One of Tim Armstrong's first strategic deals after taking the reigns at AOL was to buy a company he had earlier founded called Patch. There was a boatload of drama around the Patch saga at AOL, but in order to avoid getting too diverted, let it suffice to say that Patch proved a massive distraction for the company. Armstrong was very personally invested in its performance and made many promises to both its employees and Wall Street that ultimately didn't materialize.

Last summer, Armstrong rallied the Patch team, calling on them to "fully commit" to the company's plans for the future, which he promised he was hell-bent on supporting. Then, jarringly, in mid-sentence during this pep talk, he was momentarily distracted by an employee whom he then fired on the spot, in front of an audience of 1,000 (you can listen to this drive-by canning here). This incident was reported at wildfire speed among the tech blogs, sparking a debate about the treatment of employees in the modern workplace - and questioning the wisdom of randomly firing people during an event intended to boost morale.

But even more soulless is the latest sad development at Patch. Despite proclaiming his "full" commitment as recently as August, Armstrong sold the controlling stake in Patch last month to investment firm Hale Global. Not surprisingly, soon after this deal was announced, the hatchet soon swung.

I want you to listen here, as hundreds of Patch employees, many of whom stuck with the struggling company for years at Armstrong's urging, learn that they are losing their jobs, effective immediately:

"Thank you again. And best of luck". Oh, and you need to be out of the building by 5pm.


Don't Remain Vulnerable

Was AOL too cruel here? Or is this simply the healthy Darwinian nature of capitalism in action?

I'm going to leave that for others to debate; because that's not the point of this article.

The point is: If you're an employee (which most folks reading this are), recognize that the trend here is not your friend. For a variety of reasons, some defensible, some not, corporations are increasingly less motivated to train, compensate, develop and retain workers than in the past.

The question I want you to ask yourself is this: How impacted would my life be if I unexpectedly received a pink slip tomorrow?

For most people, the answer is: Substantially. For too many: Devastating.

Bills, debts, family obligations, etc keep most people soldiering on in their current jobs. Fears of lost income or the weak hiring market prevent folks from taking career risks. Most just keep their heads down and hope the axe doesn't fall on them. Of course, many of those who just celebrated 99 months collecting unemployment once felt that way, too...

The unhappy truth here is that it's an increasingly vulnerable time to be in the rank-and-file. And by 'rank-and-file', I mean pretty much anyone not senior enough in their company to have a voice in headcount decisions.

If that definition applies to you, don't give in to denial or despair. Neither will help you. And even if it may not feel like it at the moment, you have much more agency in your career destiny than you likely realize.

There are defined steps you can take and investments you can make that will dramatically reduce your vulnerability to the fickle hand of a company layoff or a bad economy. A lot of the foundational work is described in depth in my 2013 book on career transition Finding Your Way To Your Authentic Career, and much more can (and will) be written on the subject at PeakProsperity.com. The following are *not* quick fixes; they take a lot of inner work, dedication, perseverance and time to complete. But these steps are indeed achievable, and will make your chances for career success and security a heck of a lot higher than if you don't do them. The basics include:

This list is just a starting-off point, as entire books have been written on each of the steps above. But if you fall in the 100% vulnerable-to-a-pink-slip category, you should start thinking now about which one makes the most sense to tackle first.

As help for those at the beginning of this process, Peak Prosperity is offering its first-ever Countdown Deal for the Kindle version of Finding Your Way To Your Authentic Career. The promotion starts on Saturday, Feb 7, runs for a week, and depending on the day, will offer the e-book for as low as $0.99 (earlier buyers get the deepest discounts)


And The Hits Keep Coming

Even those who feel 'safe' in their jobs are seeing erosion of their 'purchasing power' as employees. Let's look at AOL again.

Like most other companies in the US, AOL will incur costs in complying with the Affordable Care Act. Its compliance expenses will be in the $millions, annually. So today, Tim Armstrong announced that AOL was cutting 401k benefits for its workers:

AOL Blames Obamacare for Plan to Reduce Retirement Benefits (Bloomberg)

AOL Inc. (AOL) blamed President Barack Obama's health-care law for its plan to reduce spending on contributions to employees' 401(k) retirement plans.

AOL, owner of websites such as the Huffington Post, will still match employee contributions to retirement plans up to 3 percent of their paychecks, Chief Executive Officer Tim Armstrong said. Under the new policy, it will make the matching payments in a lump sum at the end of the year, forcing employees who leave before then to forfeit the benefit, he said in an interview today on CNBC.

"Obamacare is an additional $7.1 million expense for us as a company," Armstrong said. "We have to decide whether to pass that expense to employees or cut other benefits."

The White House is defending the law from criticism that it causes consumers more economic harm than good. Republicans have seized on a report this week by the Congressional Budget Office, which said Obamacare will reduce the hours Americans work by the equivalent of 2 million full-time jobs in 2017.

Armstrong didn't specify how the health-care law had increased costs for New York-based AOL. The CEO told employees today that the health-care expenses of two employees in 2012 played a role in his decision on which benefits to cut, Capital New York reported. The two workers had "distressed babies that were born," costing AOL $1 million each, he said, indicating that he'd rather prioritize health care over retirement among the company's benefits.

So, even the 'safe' salaried professionals are more vulnerable than they realize. Do you think they have any alternative other than "take it or leave it" to this news?


Parting Shot

If this article hasn't already driven home the point that employers are increasingly motivated to find ways to cut employee costs -- and employees themselves -- out of the picture, perhaps this simple example will do the trick.

In the past, those finding themselves between jobs could often rely on unskilled, but unpleasant, work to provide temporary subsistence income. Well, more and more of those jobs are going away, largely due to performance advancements and cost declines in automation.

Ever see a sign spinner on a street corner and think "I guess if I couldn't find work elsewhere, I could always do that?". Not anymore. The robots are taking over:

Not only does the encroachment of automation remove income options for those temporarily out of work, but it's increasingly limiting the options for the large pool of unskilled labor with few other alternatives. Of course, this opens up a whole spectrum of economic, social, technological and policy-related questions, which will have to wait for another day...

But the takeaway is: Don't be 100% vulnerable. If you're employed, but at risk, use the time and income you have now to reduce the upheaval a pink slip could wreak on your life.

Even a 10-20% reduction in your vulnerability will mean a world of difference if you find yourself suddenly out of work. Your future self will be extremely grateful of the steps you take today.

 


 

Adam Taggart

Author: Adam Taggart

Adam Taggart
Peak Prosperity

Adam Taggart

Adam is the President and Co-Founder of Peak Prosperity. Basically, his job is to handle the business side of things so that Chris is free to think & write.

Adam is an experienced Silicon Valley internet executive and Stanford MBA. Prior to partnering with Chris (Adam was General Manager of the earlier site, ChrisMartenson.com), Adam was a Vice President at Yahoo!, a company he served for nine years. Before that he did the 'startup thing' (mySimon.com, sold to CNET in 2001). As a fresh-faced college graduate, he got a first-hand look at all that was broken with Wall Street as an investment banking analyst. Most important, he's a devoted husband and dad.

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