The head of the American internet company AOL managed to say something really stupid a few weeks ago, and to sound callous at the same time. It’s a shame Tim Armstrong came off so badly, because he was trying to deal with a serious topic.
Armstrong was trying to justify the company’s decision, since reversed, to trim its employees’ retirement benefits. He started out at a disadvantage, because the chosen cutback was sneaky. A change that sounds innocuous, moving from monthly to annual employer payments into employee pension savings accounts, is actually a way to eliminate payments to employees who leave before the end of the year. It’s hard to look honest and upfront when explaining that.
But the former Google bigwig turned a disadvantage into a public relations disaster by bringing up the high costs of caring for two employees’ premature babies. The implied complaint about these million-dollar infants sounded heartless and invasive. In more humane hands, though, the Armstrong discussion could have been a fruitful one. The challenges that AOL faces are built into the way Americans arrange their employee welfare programs.
For most workers, their total remuneration combines payments that are supposed to be determined by what their labor produces and payments that are determined by some measure of their personal needs.
The pre-tax salary is totally in the first category, while healthcare benefits are almost entirely in the second. Pensions are usually somewhere in between. Defined contribution plans are more like salaries while defined benefits are calibrated by the presumed needs of a former employee who used to earn a certain amount.