Health care helps retain top talent but harder for employers to afford
Dec 2009
After nearly two years of layoffs and pay cuts, and telling employees to do more with less, some employers are beginning to worry about keeping valued employees should business pick up in 2010.
Workplace experts say many workers have grown frustrated during the recession and might consider leaving as the labor market improves.
According to a survey last winter by the staffing firm Spherion, employees cited pay and benefits as their two primary reasons for either staying or leaving an employer.
History suggests many workers will look elsewhere as the economy improves. So far this year, fewer workers have quit jobs than at any time since the U.S. Labor Department began tracking the data in 2000. But the number of workers quitting jobs jumped 34% between July 2003 and December 2006, during the expansion that followed the prior recession.
That could be a problem for many employers, who kept strong performers while laying off others during the recession.
“Big pay increases are not in the cards any time soon,” said John Sarno, president of the Employers Association of New Jersey. However, ensuring access to health care “is becoming incredibly important to retain talent. It’s a way to help ensure that your top talent is healthy enough to withstand the pressures over the long haul,” he says.
Key employees have been doing more with less for the past two years, Sarno said, and employers can meet them halfway. “It’s about caring for people so they don’t burn out. A lot of these people are 30-somethings, they have families and they are working very hard.”
But health care costs in New Jersey have increased steadily, particularly for small business. According to the N.J. Business and Industry Association health insurance survey, the average cost per employee in 2008 was $7,861, nearly double the cost in 2002. The cost of health care premiums in New Jersey rose nearly five times faster than wages this decade, according to Families USA, a Washington-based nonprofit group. Their report issued in 2008, found premiums in New Jersey rose 71 percent while earnings increased just 15 percent between 2000 and 2007.
Sarno studied the possibility of creating an insurance pool to cover small employers in New Jersey but determined that it would not be feasible. “With the amount of small business churn in the state, you could easily go bankrupt. Basically, employers in New Jersey are on their own when it comes to affording health care to employees.”
In a Rutgers University study, New Jersey employers stated that the primary reason they offer health care coverage is to attract and retain qualified workers. But because of escalating costs, Sarno is seeing a two-tiered economy. “For small knowledge-intensive firms, where talent is scarce, health care benefits will continue to be a big attraction. But for many small employers, the skills of the workforce are basic. Weighed against the increasing costs of health care, those employees will increasingly need to fend for themselves.”
The Obama administration says it wants to help small business afford the costs of providing health care benefits to employees. Small business will be allowed to enroll in an exchange, where insurance companies will be required to compete for business on price and quality. But the Rutgers study also suggests that for employers that do not currently offer health care benefits, even a 30% reduction in premiums would cause only about 15% of them to offer coverage.
“Even if comprehensive reform is not enacted, the trajectory of health care inflation in New Jersey will continue to be a drag on the state’s economy for the indefinite future,” says Sarno. “When business picks up, the usual churn in the job market will start. In the past, workers with widely employable skills moved for the money. But health care is increasingly being given high priority.”
