There’s no doubt the economy has been on a roller coaster these past few years, and it looks like that sinking-stomach feeling is here to stay for a while. While the very rich are unlikely to feel the effects in their personal lives, the rest of us have had to change our opinions about socioeconomic status and our expectations about living the American Dream. Common expectations, such as children being better off than their parents, real estate and college being good investments, and every family owning a home are being re-examined as the global economic outlook changes. This shifting and redefining will have an impact on the self-perception of the workforce for years to come.
Socioeconomic Status and Economic Expectations
Although America is known for being flexible in its definition of social class and willingness to allow people to migrate through them, there still exists a “status” structure. Socioeconomic status consists of several factors among them income, education, and occupation. A commonly used class stratification is upper class (very rich), upper middle class, middle class, working class, and lower class (poor's). The upper middle and middle classes may be seen as close to each other, the differentiator being the middle class is more likely to need two income earners to make ends meet in the same manner as the upper middle class.
Spending patterns on social goods is the most visible measurement of class. An upper middle-class income allows workers to purchase the trappings representative of success in today’s society such as the latest in technology, cars, designer clothing, etc. It also allows them purchase a house, put money aside in retirement plans, and expect a comfortable retirement by age 65. While these items are owned by the lower classes also, their income is such that many are relying heavily on credit for purchases and may be financially over-extended. As incomes decrease due to unemployment and under-employment, access to credit and the ability to maintain expected living standards and social status will also decrease.
Education has been a mainstay of the American dream; families have sacrificed financially so children can further their education, and students themselves have incurred massive amounts of debt. As the availability of jobs decreases, so is the likelihood new graduates finding lucrative employment. This is impacting their ability to pay back loans, obtain credit, live independently, and establish their own household.
Occupation is another common determinant of class. Members of the upper lower class might make more money than members of the lower middle class (e.g., a well-salaried factory worker vs. a secretarial worker), but the class difference is based on the type of work they perform. The types of jobs typically connected with a higher class tend to have more autonomy, work in a more comfortable environment, and are seen as more desirable. Today’s uncertain employment outlook is causing downward pressure on the social classes as more highly skilled, educated, and experienced workers are accepting positions below their current socioeconomic level. This not only puts less skilled workers out of the job market, but it also impacts the former middle class workers’ morale and self-esteem as they find their lifestyles becoming harder to maintain.
Unfortunately, it’s common for people to deny the seriousness of their situations and make poor economic choices because they are overly optimistic about the future. When the economy slipped in the early 2000’s, people were encouraged to increase spending. This created poor financial habits of overspending and under-saving, which has left people less likely to recover if they lost their job or had a major financial crisis. This also created a greater reluctance for employees in stable positions to take a chance by changing jobs, thus creating a workforce that may be unhappy but unwilling to do anything about it.
Opportunities for Employers
As these new socioeconomic patterns become more widespread, they will provide employers with opportunities and challenges. The upside for employers is they will be able to find talented workers available at lower salaries. Recruiters are usually leery of hiring workers below their skill level because conventional wisdom says those workers will leave as soon as they find something better. With the prospect of “something better” being more remote than usual, chances are the employee will stay longer. Structuring the salary program to create a pay-for-performance or bonus system based on the company’s profitability will give employees the ability to earn more without creating a negative impact on the bottom line.
Another opportunity is the potential to create a loyal workforce because collectively, they have pulled through the tough times together. As companies have instituted austerity measures, stories have come out about management teams who have forgone bonuses so staff could have raises, employees who have voluntarily given up necessities to assure company survival, and businesses that have sacrificed profits to give back to employees. Not only does this create the short-term benefit of overcoming a financial crisis, but if handled correctly, the positive memories that come out of these experiences will be repeated as stories for years to come. Employees feel a sense of ownership and engagement when they know they have been an integral part of their organization’s success.
In the early 2000’s, a collective complaint was the lack of qualified applicants for open positions. Companies were forced to pay higher wages for the less skilled. Nowadays though, the tables have turned and recruiters are receiving large numbers of resumes for posted positions. The advantage here is the smart recruiter can identify applicants who have transferrable skills and be able to include these people in the selection pool, thus creating a larger group of candidates who can share new ideas and perspectives. Greater innovation can occur as new employees provide input based on previous experiences that might never have been considered in the new industry before. This leads to a competitive advantage, especially among companies whose products and services are considered a commodity. As Congress develops hiring incentives, such as the tax credit for hiring the longterm unemployed being proposed in the American Jobs Act, hiring options will expand.
Challenges for Employers
While there are many benefits, the emotional impact of the changing economy and world standards will provide employers with the big challenge of maintaining worker confidence and esteem.
With employees feeling stuck in jobs they don’t like and newer employees coming in at lower than anticipated positions and wages, morale will take a hit. Managers will have to turn their attention to developing and maintaining a motivated workplace based on engagement principles that focus on factors other than pay. While money and prestige are definitely important aspects in creating satisfied workers, other factors have been found to play as important a role. The Gallup Organization, for example, has 12 survey questions, which can demonstrate a positive correlation to increased productivity, profitability, customer satisfaction, and employee retention.
As the economy continues to waver, many employees will start to feel the financial strain related to increased costs of living, stagnant wages, and other issues such as out-of-work spouses. The Palm Beach Post recently pointed out about 24% of Florida home loans are in foreclosure or delinquent payment status. As salaries fall behind the cost of living, the stigma that surrounds the working poor is affecting greater numbers of people who are working but still require government aid, such as food stamps, housing assistance, or dependent medical health care. According to the 2010 US Census, the 2010 poverty line for a family of four was $22,314, equating to $10.73 per hour. During that time, 16% of Florida’s residents were living below that poverty line. To help employees with financial concerns, organizations can provide financial advisors and credit counseling as employee benefits; many of these services can be offered at no cost to the employer through credit unions and other financial institutions.
The increasing tensions created by the widening class gap will also have an effect in the workplace if there is a significant difference between management and staff compensation and managers are not sensitive to that difference. The current Occupy Movement is a reflection of this as people around the world come together to protest the excesses of the wealthy. The effectiveness of any solution depends upon the integrity of the organization and its commitment to surviving the difficult financial times as a cohesive team, from the highest executive to the most entry-level worker.
Talented and Engaged Employees are a Competitive Advantage
There is no guarantee when – or even if – the economy will rally and people will be restored to their accustomed standard of living. One thing is certain though, businesses and employees will come out of these times with different perceptions of the future, self-worth, self-esteem, and what is required to survive and thrive. Talented and engaged employees provide a competitive advantage to any business. It is crucial managers understand the challenges being faced by these employees in today’s uncertain financial times, and they work carefully to ensure they are recruiting, retaining and motivating for long-term success.
Liz Aperauch is the owner and founder of Boost HR,
a firm helping businesses create strong, positive relationships with their employees.