I was reading the results of the recent Making Smart Benefit Choices survey of workers by Mercer and was struck by the confluence of societal issues that are impacting the choices workers are making today. The key insights from the survey results are these:
- Workers desire benefits with a decidedly short-term benefit over those with longer-term value
- Employers need to ramp up their workforce education efforts regarding balancing short- and long-term benefit choices
Employers are not Marie Antoinette. “Let them eat cake” cannot be an appropriate response when surveys show that cake would be a more popular benefit than, say, fruit or broccoli. (Mayor Bloomberg’s foray into the regulation of food options notwithstanding.)
So in the age of disappearing and underfunded defined pension plans and the very real specter of a bankrupt Social Security system in the US (and similar situations in most developed nations), what are the responsibilities of employers to their employees when considering changes in benefit plans? How much should employers take into account their employees’ preferences for short-term gain over long-term value?
It’s interesting to note this survey’s results. In part, respondents were asked about their preferences in a trade-off (conjoint) analysis that allowed Mercer to rank 13 core benefits. A salary increase of $500 was used as the benchmark variable against which to measure how benefits are valued by workers. Here is the chart with the results:
I’m fascinated that after a $500 salary increase, the next choice is one week of paid time off. This certainly synchs with the data that SHRM and the Families and Work Institute are publishing that more flexibility over time is becoming a cultural imperative – and the financial value of a week off is greater than $500 if you’re making more than $26,000 per year.
But given the state of retirement benefits, Social Security, and the general lack of preparedness of the workforce for retirement, the short term focus of the respondents is arresting.
But then again, we live in a business world that measures organization success quarter by quarter, rather than year by year or through business cycles. We live in a political world that brings the economy to “fiscal cliffs” with some regularity. We live in a society that appears to value now in ways that leave us unprepared for tomorrow.
So I guess it really shouldn’t surprise us that workers focus on now rather than tomorrow even though an additional $500 402(k) increase would have much greater value over time. What’s an employer to do in all good conscience? Give more paid time off or ensure a little more retirement stability? Give more paid time off or reduce employees’ share of health care costs?
This is a tough one with which HR and Benefits leaders in organizations of all sizes are wrestling. Employers surely want benefits packages that attract and retain their best and brightest talent. Employers surely want their employees to be better prepared for an uncertain financial future. It seems as if these may be in conflict, based on this survey’s results. So how to decide?
“Let them eat cake” is one way to go: continue the focus on now and leave the future to the business and policy and political leaders of the future.
I think I’d rather use some of today’s resources to educate my workforce so that they’re making truly educated choices. I think I’d rather use some of today’s influence to begin to leave behind the now focus for a future focus that might ensure a little more sustainability all around.
While I love cake – especially the chocolate kind – I think that employers have a responsibility to the economy and to the future as well as to the workforce. What about you? Are you a cake or a broccoli professional?
5 responses to “If They Want Cake…”
I see you don’t monetize your page, don’t waste your traffic,
you can earn extra cash every month because you’ve got hi quality content.
If you want to know how to make extra $$$, search for: best adsense alternative Wrastain’s tools
One thing this doesn’t take into account is our bias toward rewards today versus rewards tomorrow. As humans we fall victim to something called “temporal discounting” (http://en.wikipedia.org/wiki/Temporal_discounting) which basically means we value things more when they are closer in time to our present. The cash in our next paycheck is more “valuable” than the cash in the 401K because I can use it now – or at a minimum sooner. We aren’t rational in our thinking when value and time are considered. In fact – there is evidence that the value of something today can be 10 times the value of something not to far into the future (in other words – we discount the value at an increasing rate – not linearly.)
If you changed the choice from $500 in a raise to $5,000 in a 401K you’d get a different answer – only because we have to increase the value of the offer in the future in order to make it as attractive as the $500 is today. I know it doesn’t make logical sense – but it is a factor.
You’re about the smartest guy I know. This is a great point. In the survey, they tried to make the options of similar value — right at the $500 value point — except that for most people a week’s worth of salary is more than $500. Thanks. Interesting.
Interesting data and great analysis China! Thanks for sharing. It would be really interesting to see a survey like this go a step further and investigate actual behavior. What do people actually do with that extra $500? Do they spend it? Do they use it to pay off bills? Do they put it in a separate savings account because they are unsatisfied with the 401K offerings available? If they are in debt, it may actually make sense to pay that down before putting it into a 401K. I think we need some demographics to know who this data is representative of. Healthy financial habits is such a big challenge and it’s really hard to say what the role of an employer is in guiding employees. Whether we know best is questionable, but even for cases in which we undoubtedly do, we have to balance all those tradeoffs you brought up. Great discussion topic.
Thanks for the comment. The report goes in to a great amount of detail as to the demographics of the survey participants, but is silent on the questions you ask. Would be interesting to know though. Thanks.