NukeHavoc wrote:Yep, they could do that. And lose their employees, since medical benefits are just another form of compensation, who would promptly move on to companies that did not do something so foolish.
While I do believe that this sort of change would cause many people to seek different jobs, the modern practice of 'market adjustment' is actually counter to the theory of competition.
When I was at Ford I talked to a lot of the branch management and a few corporate executives (I was only beginning to become angry at that point, so I was much more personable, and they let me talk to everyone.
). Several times during the three years I worked there, our benefits were reduced. Each time, the managers explained it as a move to 'stay competetive'.
What happens today is that large corporations, say company A, hires a consulting company who is able to provide Company A with a survey of what other companies in their 'direct competetor' list in their area are paying in salary and benefits, and even details what's covered under those benefits and costs associated. And most importantly, the consulting company provides an average of salary and benefits for an industry and a geographic location.
Then Company A looks at the list and says, "hmm. The average salary/benefit is X. We're paying X+5%. So we can reduce benefits by 5% in order to 'stay competetive'."
Now why doesn't the company that's paying X
minus 5% increase their salary and benefits? Two main reasons.
First, the reason they're paying lower is because they found people who will accept that rate, and then the company built their cost and profit structures around it. Simply giving everyone a 5% raise would completely throw off profit margins and product pricing. You can't just pass on the huge cost increase to the consumer if your direct competetor is already priced about the same as you are.
Second, management knows that the largest operating cost is employee salary and benefits, not just for their company but for EVERY company. So the managers of all of their direct competitors (who went to the same schools and got the same MBAs) are always looking for ways to cut operating costs in order to increase profitability.
So if Company A is paying 5% less in salary/benefits than Company B and their product price is the same, Company B is going to be feeling internal and external pressure to reduce costs, and looking to emulate Company A's model; ie. Company B is going to come to the conclusion that their direct competitor, Company A, spends less money on salary/benefits and charges the same for a similar product. Therefore Company A is the 'stronger' company. Competition dictates that Company B will try to reduce their own operating costs, most likely salary/benefits, in order to match Company A's profit margin.
If Company B does NOT reduce operating costs in order to 'stay competetive', Company A will eventually make much more $ than Company B and Company B may go out of business.
This is not speculation or accusation on my part. This is how the mid-level executives of a Fortune 500 company explained their operating model to me.
What that means though, is that instead of companies competing to attract or keep 'line employees', they quasi-collude to keep salary and benefits down. Where they actually compete for employees is more at the executive level, although some similar cost balancing must occur at all orgainizational levels.
What this means to the general 'bottom of the totem pole' employees is that most of the employers in their field pay roughly the same, with very similar benefits.
So the prospect of 'go get a different job' is more of an option on paper than in the real world.
