Sunday, June 17, 2007

Staying Employed After 50

It used to be that a person would graduate college, find a job with a company and work there for 40 years and retire from there with a full pension. Someone who moved to another job had almost a black mark on their career. People wondered why - was he fired? What did he do wrong? Why did he have to go looking for another job?

Then came a time when people started voluntarily moving from company to company every 10 years or so. Sometimes they were laid off during a recession or the company took a bad turn and downsized, or sometimes it was just the ambition of the man to move up quicker, and that was a way to do that.

Then it changed so that companies were hiring only a core set of people as permanent employees, and then another group of people as contractors. The rate per hour was more expensive, but they were temporary, and they paid no benefits such as healthcare insurance, etc. And they could let their contracts lapse when they didn't need them anymore. That way, the number of staff could fluctuate with the peaks and valleys of demand based on the projects that needed to be done at any given point.

Now, some companies hire employees as if they are contractors, but they don't pay the contractor rates. They hire them just to staff a specific project, with the intention of laying them off again in a year or so when the project is over. And when they do lay them off, the settlements are so low - just a week or two of pay and that's it - if they get anything at all. Some, like my old company, give a week for each year of service, but then the average length of service is only 2 or 3 years, so the severance pay is not enough to see you through to getting your next job, especially considering some people in IT now have to look for a year or two to find their next job.

There is no security anymore. You are your own security. It used to be that if a man sacrificed his own dream of owning and running his own business, then he was at least trading that for the security of a decent career job in a decent company. But that is no longer. You cannot rely on a company to provide a secure job. Your personal skill set is the only security you have, and so you have to keep it from becoming obsolete. It has to be current, and it has to be skills that are in demand.

Now age is becoming a problem in remaining employed. This is for everyone who is middle-aged. Unless they work for the government. The problem specifically is with the new implications of the extraordinarily high cost of healthcare insurance. Companies are being forced to pay a high premium for having an employee population with a higher average age.

Last year, Continental Airlines lost $400 million, and when they did the analysis to see why, they found out that they could have saved $800 million dollars on their healthcare insurance if they simply had a younger average age for their employee base. Now, real estate is not the biggest expense a company has anymore. Nor is IT infrastructure. Many times, it's the cost of healthcare insurance for their employees. And when they can save close to a billion dollars in costs just by shifting their workforce to a younger average age, then that provides a huge incentive to replace the older staff with younger staff, doesn't it? In their case, it meant the different between losing $400 million dollars and MAKING $400 million dollars. And that affects their stock price, obviously, because investors only want to invest in companies that make money, not lose money.

So Continental Airlines made a bid to the SEC to allow them to report their earnings in two ways from now on. Once, to show the actual earnings as they do today, and again, to show what the earnings WOULD be if they had a younger workforce. Many other companies are also petitioning the SEC for the same right, since this affects all companies across the country, and this puts them on equal footing. The SEC is considering the request.

Think about what this means. Once this becomes known and public and obviously visible, then no major company will ever want to hire anyone in their 50's anymore because it skews their average age and makes their insurance too high. For a small company with under 100 people, even just one person with claims for some chronic health problem can skew the premiums for the whole group upwards.

I have a feeling that this will all lead to a situation where it will become very difficult to find a job for all of us 50 and older. Even people in their 40's will be at a huge disadvantage. The other thing is that technology and systems change so often now that a person who has experience from 30 years ago doesn't really provide the extra value that they used to anymore. Experience of things more than 10 years ago may be considered obsolete by today's standards. So only the last 10 years counts at all, and of that, only the last 3 to 5 years is really relevant. So a young person of 25 can be just as valuable to a company as a person of 55. The extra experience might mean nothing to them anymore if the job is technology-based. I hate to think that is really true, but that is becoming the attitude of some managers now.

So what is next? Well, I guess since most companies will no longer want to hire people over 50, but people over 50 still have to eat and support themselves for another 30 years or more, this means that they will be forced to become contractors. If they cannot be employed as an employee, then they will probably try to be employed as independent contractors. That means that it makes sense to cultivate relationships and a network of contacts to try to leverage to get work as we try to find the next contract when the current one expires. It means hopping from one contract to the next looking for work constantly. It also means that we have to concentrate on building marketable skill sets that are always current and mainstream and have a market. I guess this is the future for most of us. We become self-employed whether we want to be or not.

For some people, government work might look pretty good right about now.


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