The departure of Ichiro for the Yankees is a symptom of the shift in employer-employee relationships.
MY brother, Brian, has been a Mariners fan since 1983, when he was just 13 years old. Brian called me on Monday night with the news. “Can you believe they traded Ichiro after 11 years with the Mariners?” His voice then stopped. After a long pause he said, “I’ve had it. I’ve had it with this team.” It’s an empty threat, but my brother is hurting, and his comments are understandable.
Separation is never easy, and it shouldn’t be. Unfortunately, it is now ingrained in our culture. Don’t like your spouse? Get a divorce. Don’t like your job? Quit. That also means that if your spouse doesn’t like you, you’re out of luck, and if your employer doesn’t like how you’re performing, you’re fired. And, sadly, if you’re an aging baseball player, you’re traded (or you ask to be traded). Ichiro went to the Yankees.
All I can offer my brother and other die-hard Mariners fans is some insight as an economist.
It’s worth asking: How did we get to this point? Our short-term-relationship mentality extends beyond sports to the employer-employee relationship in general.
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At least part of the answer lies in the 30-year decline of traditional pensions, also known as defined-benefit plans, toward 401(k) plans, also known as defined-contribution plans. Under traditional pension plans, you receive a regular monthly check when you retire until you die, with the amount typically based on some measure of final average salary and tenure. Under a 401(k), it’s a do-it-yourself approach. Individuals contribute their own dollars, manage their own investments, and assume all of the investment risk.
In a traditional pension system, you and your employer have an understanding that, in exchange for committing to your employer long term, your employer will provide for you. This benefit makes you think twice before quitting. What will happen to my pension benefits if I do? It creates a bond between employer and employee. That’s a good thing.
The downside of traditional pensions is that they are very expensive for employers. A typical American at age 65 can expect to live another 19 years, according to the U.S. Department of Health and Human Services. Supporting nearly 20 years of leisure is costly.
Enter 401(k)s. We were sold on these plans by being told they were more suitable for a mobile workforce — you don’t suffer huge losses in pension benefits if you separate from your employer. Less obvious is that the switch to 401(k)s was a pay cut in disguise. Once the expectation was set, employers far and wide switched from offering traditional pensions to 401(k)s.
The result? Lots of uncertainty about retirement, for sure. But also, we lost something much deeper — loyalty. We no longer feel committed or obligated to our employers, perhaps because they have signaled, by switching from pensions to 401(k) plans, that they are no longer committed to us.
In the past, many young workers would start a job and be told that they would be taken care of, that if they stick it out, they can expect a financially secure retirement, provided by their employer. Nowadays, young workers enter a job and are told they are an “at-will” employee, subject to termination at any point for any reason (barring discrimination).
The employer-employee relationship has a different meaning today. Deep down, I think we don’t like it. That’s why we are so shocked and angered by Ichiro’s trade.
The problem is that we are also tempted by the rewards of cutting and running. I’m a Red Sox fan and my response to my brother was: “Brian, I understand. Remember when the Sox traded Nomar?”
What happened after the (painful) Nomar trade, though? The Red Sox won their first World Series in 86 years.
Kevin E. Cahill is a managing director at ECONorthwest, a Northwest-based economic consulting firm, and a research economist at the Sloan Center on Aging and Work at Boston College. The views expressed here are his own.