What do I mean by a "freelance economy?" I mean, yes, the president is correct: The economy is creating lots of new jobs.
But fewer and fewer of them are full-time jobs with defined-benefit pensions, fully paid healthcare coverage, paid vacation, and the like. Our economy is shifting more and more toward freelance, hourly, and benefit-devoid employment. In a sense, it must. How else can American companies compete with the average wage in China and India? No wonder American consumers are bummed.
Take a look at the Bureau of Labor Statistics' own web site. When it counts the number of employed Americans, it defines "employed" as follows: "People are considered employed if they did any work at all for pay or profit during the survey week. This includes all part-time and temporary work, as well as regular full-time year-round employment."
What it does not count, then, is certainly as important as, or more important than, what it does count. Counting as employed anyone who does any work at all for pay means the "employed" figure includes plenty of people who may be working but who aren't making a living. Fewer jobs today offer benefits that allow workers a comfortable existence.
The "global human capital and financial management consulting" firm, Watson Wyatt issued an analysis last week of retirement plans at Fortune 100 companies showing a tsunami-strength decline in the number of jobs that come with good corporate pensions. Only 37 percent of those companies offered traditional (defined-benefit) pension plans to new hires last year, compared with 42 percent in 2004 and 50 percent three years ago. The shift is marked and scary.
Says Watson Wyatt, "In 1985, nearly nine out of 10 Fortune 100 companies offered a traditional defined-benefit plan. Meanwhile, the percentage of companies offering workers only a 401(k) or other type of defined-contribution plan increased from 25 percent in 2004 to 36 percent in 2005."
Why? Defined-contribution plans are a lot cheaper for employers than defined-benefit plans. They also offer employees a much less robust retirement stipend.
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