FOR Challenger, Gray & Christmas, Inc.
For Release At 10:00 A.M. EST February 6, 2002
'As You Sow, So Shall You Reap'
LOYALTY PAYING OFF; SHORT-TIMERS GET CUT
Employees who resisted the urge to switch jobs frequently during recent labor shortages may now be reaping the rewards of greater job security, as the number of short-tenured managers and executives falling victim to job cuts rose by 50 percent in 2001.
Baby Boomers, who have been a more stable segment of the labor force, are now experiencing dramatically lower unemployment compared to younger workers who tended to be more mobile during the period of New Economy job hopping.
Evidence that employers are targeting shorter tenured managers and executive for job cuts comes from the latest Job Market Index by Challenger, Gray & Christmas, Inc., released Wednesday, which shows that the average tenure among the discharged in 2001 plummeted to a record low of 4.8 years from 9.8 years in 1999, when the economy was still flying high.
In fact, until 2001, the average tenure of discharged managers and executives was 8.5 years. Even during the 1990-1991 recession, tenure remained at eight years, indicating that employers in 2001 initiated a major reversal from the longstanding practice of targeting higher paid, veteran employees in downsizing.
"We may be witnessing a new type of recession -- a New Economy recession -- in which productivity actually increases and competition for customers remains intense. As a result, companies that want to survive must retain their best employees, and that often means the most experienced," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, an international outplacement firm.
"This shift in corporate strategy is likely to dispropotionately affect frequent job changers, who often have the shortest tenures,"
Human resource executive Richard Mark, vice president of human resources of Drexel Heritage Furnishings Inc., confirmed that companies today are depending more on experienced workers to guide them through this downturn.
"When companies reduce their workforce, they are relying more and more on the old guard -- those who have been around for a while and know what is going on," said Mark.
"Two years ago, when labor shortages were in full swing, companies were more willing to retain recent hires for a longer period even if they turned out not to be the best fit for the position. Now, if new hires are even questionable after a few months, employers are letting them go while holding onto those with more experience," he added.
This might help explain the surge in the number of managers and executives being discharged before reaching their two-year anniversary.
On average in 2001, 26 percent of those discharged were employed fewer than 24 months. That is significantly higher than any other year tracked by the Challenger firm since 1986. It is 50 percent higher than the previous record of 17 percent in 2000. In 1999, only 13 percent of those discharged had fewer than two years with their former employer.
Challenger said the shift toward retaining more experienced employees is likely to favor older workers -- the huge population of Baby Boomers, in particular -- who demonstrated more workplace loyalty during the late 1990s, when job switching was rampant.
In 1998, at the height of labor-shortage-induced job hopping, workers 35 to 54 years-old stayed with their employers an average of 6.6 years. Workers age 20 to 34, on the other hand, were with their companies for an average of just 1.9 years.
Further evidence of higher job switching among younger workers comes from a longitudinal survey by the Department of Labor, which tracked employment among a group of 9,964 young men and women from 1979 to 1998. The survey found that between ages 18 and 34, college graduates held an average of 11.7 jobs.
This frequent job switching may now be resulting in higher unemployment. The latest employment report from the Bureau of Labor Statistics shows that the unemployment rate among 20- to 34-year-olds in January was 7.9 percent.
Meanwhile, unemployment among Baby Boomers, age 35 to 55, was 4.8 percent in January, nearly a full percentage point below the national average.
"Employers will continue to favor more experienced workers as they take a more cautious approach to hiring and expand their use of outsourcing to better adjust to fluctuations in demand.
"It will be critical that the employees who remain with the company are those who have built and maintained lasting relationships with customers. Companies cannot afford to lose any customers due to inconsistent service with recovery on the horizon," said Challenger.
The Job Market Index is based on a quarterly survey of 3,000 managers and executives from a wide variety of industries throughout the United States by Challenger, Gray & Christmas, Inc., an international outplacement firm.