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Health Care Coalitions Help Churches Maintain Coverage

When leaders at the Pension Boards of the United Church of Christ talk about a “good news story,” they are referring not to the teachings of Jesus, but to the saving powers of affordable health care.


    Like other stories with roots in religion, this one begins with a covenant: The denomination’s 2,000 congregations across the United States are obliged to purchase health care for their employees through the Pension Boards, the denomination’s benefits administrator, if the cost of insurance is within 15 percent of a competitor.


    But if the board’s health insurance exceeds the cost of the covenant, the informal agreement can be broken in favor of using a local health insurance provider. When health premiums climbed by 25 percent one year in the late 1990s, the plan’s attrition floodgates opened.


    By the end of the millennium, the Pension Boards had lost 1,100 households, dropping to 6,000. Its member pool had shrunk and its costs continued to climb.


    “When people bail out, the cost goes up for everybody that is left,” says Scott Patterson, senior minister at Dover Congregational United Church of Christ in Westlake, Ohio, a suburb of Cleveland. His church is part of the health plan because he thinks the church “has a commitment to the denomination.”


    As is the case for employers in the for-profit sphere, the rising cost of health care has made it increasingly difficult for churches and nonprofit organizations to offer health care benefits. In a 2004 survey of nonprofit organizations in the realm of services to children, the elderly, community development and the arts, the Johns Hopkins Center for Civil Society Studies found that they were shifting more of the cost of health care onto their employees, who already make less than private-sector workers. More than 60 percent of the organizations reported increasing their employees’ share of health costs. Still others eliminated raises or reduced other employee benefits in response to rising health benefits costs.


    In the case of Patterson’s church, the health care covenant was honored, but only after some internal discussion.


    “We don’t have very many churches that have spare money lying around,” Patterson says. “Health care is a place where some of the business people feel we could cut costs. But that, I don’t think, would be of great benefit to the clergy. I think it would hurt us in the long run.”


    Though some churches have introduced co-pays for drugs and doctor visits, congregations pay health care premiums. That arrangement is sacred ground. Having clergy themselves pay premiums would cut into their already low salaries. Average clergy salaries at the United Church of Christ are about $46,000 for men and $41,000 for women, amounts that have not kept up with other nonprofit professions, says Michael Downs, president of the Pension Boards of the United Church of Christ based in Cleveland. (Catholic priests have no family to support and take a vow of poverty.) Stagnant salaries have also been coupled with a drop in the social standing of clergy.


    “There was a time a generation or two ago that those who made a choice to become clergy were the cream of the crop,” says Kenneth Ulmer, director of health plans for the Pension Boards. “They had respect and a high position. On the social side, that has deteriorated dramatically.”


    The result has been that new ministers come into the fold when they are older, many as midlife career changers. In the Episcopal Church in the United States, the average age at ordination is 44, says Matthew Price, director of research for the Church Pension Group. Thirty years ago, three out of every four Episcopal priests were under 35.


    That group has aged and not been replaced. Now only one in four priests are under 35.


    “As a result, we are only getting people who are in that part of their life when they are significant users of health care,” Price says.


Different faiths, different needs
   Unlike the private sector, where the young and healthy offset the costs of older workers who typically spend more on health care, a majority of church clergy and lay workers are older than 45. The average age at the United Church of Christ is 57, Downs says.


    Catholic clergy and lay workers are even older, with an average age of 65, he says. In the Episcopal Church, the average age is in the low 50s, Price says.


    These trends span church denominations and are a source of common consternation for members of the Church Benefits Association, a group representing more than 50 church denominations that was founded in 1915. At one time the members considered forming a common health plan design for the entire group in order to lower costs. That idea never got off the ground.


    “Although we work very well together, the idea of getting a common plan design was not effective,” says James Sanft, chairman of the association’s health benefits committee and an actuary for the Lutheran Church-Missouri Synod. “We all had different business models.”


    Congregations in the United Church of Christ pay a flat fee toward their benefits regardless of congregation size or how old its members are. Thus the covenant: The more people in the plan, the cheaper it is.


    The Evangelical Lutheran Church of America, on the other hand, has six rate classes for health plans based on geographic differences in costs. A congregation’s contribution rate is a function of a pastor’s compensation, says Brad Joern, director for health products at the ELCA Board of Pensions.


    Given the plan differences, the benefits association focused on drug expenditures. In 2001, the group formed a coalition to purchase prescription drugs from a pharmacy benefit manager.


    Today, there are two coalitions: Eighteen denominations contract with Medco, and seven buy through Express Scripts.


    “The more lives we bring into the coalition, the better our deal gets,” Sanft says. By bringing a large volume of consumers together—168,000 households in the Medco coalition alone—administrative savings enjoyed by the PBMs get passed on to the church groups, as do rebates and discounts on wholesale prices. Using two PBMs keeps prices competitive.


    During a 36-month period from 2001 to 2004, the Medco coalition saved $30 million on pharmaceutical spending, Sanft says. Modeled after the success of the drug coalitions, the association began to purchase medical insurance and mental health services collectively.


    Savings from these programs have been modest, but there have been other benefits. Meeting with insurance companies and medical providers has helped those companies understand the special needs of clergy and church bodies, Sanft says.


    “Professional church workers often feel they live in glass houses,” Sanft says. “They’re always being watched. They are expected to have no issues, but they have normal pressures like anyone else. Everybody knows their business. It may be a big risk for them to step out because they are supposed to be the caregiver; it might be different for them to step out and say, ‘I need help.’ “


    Purchasing coalitions also exist in the private sector, but the church health care coalitions differ in an important respect: Each denomination shares information about their demographics and plan designs that private-sector companies usually hide because competitive benefits packages are a powerful recruitment and retention tool.


    Lutherans have lower per-person health care costs because their large network of parochial schools includes a younger population and more women, as opposed to the mostly male makeup of other church groups. Frank discussions about each member group’s costs help each understand why those costs vary among the denominations.


    “We are so open about sharing information because at the core, we are about the same thing, which is the mission of the church,” Sanft says.


Some miss out on savings
   Not all churches have benefited from the coalitions. The Presbyterian Church in America, which has 5,000 church employees and is concentrated in the Southeast and Midwest, dropped its health plan in February because of escalating costs and low enrollment, says Chet Lilly, the denomination’s business manager. The church, with only 800 people enrolled when its health plan closed, could not make enough money in fees to support its administrative costs.


    “The cost way exceeded what we could bring in with that particular plan,” Lilly says.


    For others, the savings from purchasing coalitions are not enough to offset the expense of maintaining old buildings and the cost of other forms of insurance.


    At the Episcopal Diocese of New York, which includes 200 congregations in 10 counties, parishes are required to pay clergy a minimum salary—for someone with 15 years of ordained experience that equals $42,000 a year—plus housing and benefits. Though the benefits are managed by the Church Pension Group, the parishes are responsible for the cost.


    “There are a number of parishes that used to afford a full-time clergyperson and now are looking for a part-time clergy,” says Gerald Keucher, comptroller for the diocese. “It’s the continuing pressure on budgets, as so much of what churches have to buy increases so much faster than the general rate of inflation.”


    At one such parish 75 miles north of New York City, the minister accepted less than the minimum pay and received health insurance through his wife’s employer in order to serve the community he called home. Upon his retirement, the parish of about 60 congregants realized it could not afford a new priest. A call for a part-time priest was eventually answered by a doctor who was making a midcareer switch and was willing to work part time at a local hospital.


    The church warden, who asked that neither he nor his church be identified for fear of upsetting other struggling congregations in the area, called the part-time clergyman a “gift from God.”


    “He’s ministering to the body and now he’s ministering to the soul,” the warden says.


    Still, the savings for members of the various coalitions have stemmed the upward spike in health care costs and funneled money back into the churches. The Episcopal Church has saved about $10 million since joining the pharmacy benefits coalition in 2001. Its plan has gained about 1,500 households, says Tim Vanover, the administrator of the Church Pension Group’s medical trust, which has 15,000 households totaling 22,000 people.


    Downs, of the United Church of Christ, says cost growth for his plan is now below the national average. The plan’s attrition has subsided. Part of the savings, Downs says, has increased good will among denominations.


    “The ecumenical church is coming together,” Downs says. “We may have different points of view on a number of things that are theological, but we have come together to leverage the purchasing power of the church to get better health care outcomes.”

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You’ve Been Deleted Firing by E-mail

No matter where you work today, take comfort in the fact that you aren’t working for Radio­Shack.


    What’s that? You say you DO work for Radio­Shack? Well, then you have my deepest condolences, because I can hardly imagine a worse fate than working for a company where senior management thinks it is acceptable and proper to lay off 400 people by e-mail.


    Worse yet is the response to the not-unexpected public outrage from RadioShack’s corporate PR weasels. They claim that since employees knew layoffs were coming, and, since they knew that they would first be notified electronically of the layoffs, that doing it this way was actually a marked improvement over the traditional method.


    “We wanted to treat our employees with as much dignity and respect as possible,” a Radio­Shack spokesweasel told The Dallas Morning News last month. “It’s a difficult thing to do, and everyone will have a different opinion on how to do it. To be open and have constant communication, whether you’re impacted or not, was the right thing to do.”


    The only thing that makes any sense in that statement is that “it’s a difficult thing to do.” That’s an understatement of monumental proportions. As someone who has sat on both sides of the table in this process, I can tell you with certainty that it is probably the single most difficult thing a manager ever has to do in their working life.


    And, I don’t buy for one second the notion that notifying employees electronically of job cutbacks is some huge management breakthrough. Taking away a person’s job—their livelihood—is one of the worst things you can do to another human being. People deserve, if nothing else, as much dignity and honesty as you can give them in the process. You only get that by doing it in person.


    It should also be handled that way because management should be forced to personally confront the consequences of its actions. Mass layoffs done impersonally are like carpet bombing from 35,000 feet. You avoid seeing the impact it has on real people.


    I once had an arrogant boss who bragged that he had never fired anyone. Over time, I found out that’s because he always wimped out and made somebody else do his dirty work instead. In the real world, however, managers have to do tough things from time to time. Sometimes, that means letting someone go. No one likes this part of the job, but for a manager, it comes with the territory.


    Letting people go is easy to do when you don’t have to deal personally with the people getting canned. It’s a lot harder when you have to actually give the news to some poor soul who breaks down in front of you because he has some other personal crisis going on in his life, a crisis that just increased tenfold because you took his job away.


    When you have to handle layoffs in person, you find that you are a lot less willing to consider doing it in the abstract. And that’s why doing it by e-mail is the ultimate management cop-out. It further dehumanizes a process that is pretty inhuman to begin with.


    RadioShack is a company with a lot of problems. Last winter, the company’s CEO was forced to resign after it was discovered he had lied about his education, claiming he had two degrees he never earned. The new chief executive started his tenure this summer by canceling all conference calls with financial analysts, a curious move for a company that has closed some 500 stores and would probably benefit from being more open and transparent with shareholders and the public.


    From that perspective, informing workers of layoffs by e-mail is just another in a long line of wrongheaded, coldhearted and dumb actions by a company that can’t seem to figure out which way is up. There’s a great management lesson to be learned here. Unfortunately for those working at RadioShack, they’re learning it the hard way.


Workforce Management, September 11, 2006, p. 42 — Subscribe Now!


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Timing Is Everything Learning to Say “Good Job”

Sometimes, the joy of giving isn’t all that joyful.


    Too often, managers get stumped by the logistics of recognition programs, says David Sturt, executive vice president of marketing and business development at O.C. Tanner, a Salt Lake City-based recognition company. What should they give a valued employee? How best to present the award? Should they gather the entire team or sit down for a one-on-one?


    Several days pass and managers realize that they’ve lost an opportunity for recognizing work well done, Sturt says.


    “They have this guilt complex. They know they should be doing it more,” he says. “They just don’t know how to do it.”


    Companies are taking steps to boost confidence. After years of fielding employer requests for recognition training, the National Association for Employee Recognition this year started offering a certification program, says Christi Gibson, the association’s executive director.


    The first class was so crowded with midlevel and senior managers that they had to turn people away, Gibson says. (For more details on the certification program, visit www.recognition.org.) Other companies provide internal training.


    Insurance provider Aflac offers an orientation class that also discusses employee recognition to employees who have recently been promoted into management, says Audrey Boone Tillman, the company’s senior vice president and director of human resources.


    Some managers are naturals, while others must learn to schedule kudos on their to-do list, says Paula Godar, director of performance strategy at recognition company Maritz.


    “You may have to make it somewhat mechanical for someone who is not very good at it, until they catch on,” she says.


    Ken Siegel, a Los Angeles-based management psychologist, sympathizes with today’s frontline managers, saying they aren’t always given the best resources and support. Layers of corporate approval can be required to purchase awards, he says. Plus, it’s difficult to break the cost-conscious mind-set.


    “Managers are under increasing pressure to do more with less,” Siegel says. “The discretionary spending power for managers has been clearly neutered. I do think the level of consciousness about (awards) is much higher. But that consciousness needs to match the level of authority that managers are given.”


    For managers committed to recognizing more employees, Siegel and others offer suggestions about some key elements of reward programs:


  • Timing: Immediate feedback is key, O.C. Tanner’s Sturt says. Ideally, managers should approach employees within a day or two. “If it’s been a week, it’s already awkward,” he says. Siegel agrees: “The closer the reward occurs to the behavior, the more meaningful it is.”


  • Selection: When choosing a reward, walk for a moment in your employees’ shoes, Siegel recommends. “Employers give out awards that they would like to get rather than awards that employees would like,” he says. “They forget that a reward is only a reward if the person receiving it considers it such.”


  • Emotional impact: Specify what employee accomplishments are being recognized, Sturt says. Don’t use generalized praise, like “good job” or “hard work.” At Aflac, Tillman takes the time to forward complimentary e-mails she receives from customers both to the employee involved and the employee’s boss. “I have found out that people print those out and keep those,” she says. “What took me five seconds of time is invaluable.”


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Survey Finds Incentive Travel Budgets Stable

A 2006 incentive travel user survey by Incentive, an industry trade publication, provides a snapshot of current practices and trends. The publication last surveyed its readers on these elements three years ago. Its most noteworthy finding, in light of the new scrutiny of incentive travel expenditures, is that 63.2 percent of the 171 respondents expect that procurement or purchasing departments will have an impact on incentive travel decisions and budgets beginning in 2007. Here are other results:
 

Travel Profile

Number of employees

Average

 1,128
Less than 100 49%
100-499 20.9%
500-999 6.5%
1,000-4,999 10.6%
>5,000 13%
 
Annual incentive travel expenditures
Average $392,825
<%50,000 28.9%
$50,000-$99,999 13.3%
$100,000-$249,999 15.8%
$250,000-$499,999 9%
$500,000-$999,999 9.2%
$1 million-plus 23.8%
 
Budget change since last year
No change 45.2%
Up 5%-15% 31%
Up 16%-25% 7.6%
Up 26-50% 2.8%
Up >50% 0.7%
Down 5%-15% 8.1%
Down 16%-25% 2.6%
Down 26%-50% 1.1%
Down >50% 0.9%
 
Budget projections for 2007
Anticipate budget increase 48.4%
Anticipate no change 43.1%
Anticipate budget decrease 8.6%
 
Types of incentive travel used
Both group and individual 56.6%
Group only 28.1%
Individual only 15.3%
 
Typical group size
Average 88
<25 27.2%
25-49 19.3%
50-99 18.6%
100-199 19.3%
>200 15.6%
 
Trip winners
Internal salespeople 65.9%
Non-sales employees 39.5%
Dealers/distributors 39.5%
Note: Some respondents indicated more than one group is included in their programs.
 
Program objectives
Increase sales 69.6%
Build morale 55.1%
Improve employee loyalty 44.9%
Build customer loyalty 42.6%
Foster teamwork 41.9%
Increase market share 41.3%
Improve customer service 37.3%
Sell new accounts 32.9%
 
International destinations
Caribbean, not including Bermuda 41.3%
Mexico 40.4%
Western Europe 29.1%
Bermuda 19.5%
Eastern Europe 15.9%
Australia/New Zealand/Pacific Islands 14.7%
Asia 10.6%
Africa 8.2%
Note: Many respondents indicated multiple destinations are used each year during the course of their programs.
Source: Incentive, Travel Buyer’s Handbook Survey 2006


Workforce Management Online, September 2006 — Register Now!


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Top Five Employer Mistakes Under the FLSA

Ever since the Fair Labor Standards Act’s revised regulations became effective August 23, 2004, overtime has become a hot-button topic for employers and employees alike. Worse, it has also become a prime target area for plaintiffs’ attorneys, because even with the revisions the FLSA is an extraordinarily difficult statute to comprehend and comply with.


    Fortunately, some of the most common mistakes made by employers are easily identified and remedied. Whether you have five or five thousand employees, here are five mistakes you should try to avoid:


1. Believing salaried employees are automatically exempt from overtime
    Just because you are paying an employee a salary, no matter how large, does not mean that he or she is exempt from overtime. Each individual employee must qualify for one of the specific exemptions provided by the statute. Other less common exemptions include the executive exemption, administrative exemption, professional exemption, computer-employee exemption and outside sales exemption.


    Each exemption has specific tests, and each employee to whom you pay a salary must be evaluated to see whether the exemption applies. Don’t forget that job titles and job descriptions aren’t the determining factor any more than paying a salary is—just because you call someone a manager or an assistant manager and pay them a salary does not mean they qualify for the exemption. The courts and Department of Labor construe all of the exemptions narrowly, and the burden of proof always remains with the employer.


2. Misclassifying assistant managers
    Many businesses pay a salary to their assistant-manager-level employees without paying them overtime and without considering whether they truly qualify for the executive exemption. In order to qualify for the executive exemption, an assistant manager must be paid on a salary basis at a rate of at least $455 per week. In addition, the employee must meet each of the following three tests: 1) primary duty is management of the enterprise or of a customarily recognized department or subdivision; 2) customarily and regularly direct the work of two or more other full-time employees or the equivalent; and 3) have the authority to hire or fire, or make suggestions and recommendations as to hiring, firing, advancing, promotions or other status changes that are given particular weight.


    For example, if you have a store that regularly has a manager, assistant manager and a few hourly employees on duty, it is unlikely that both the manager and assistant manager will qualify for the exemption. With respect to hiring and firing decisions or recommendations, if assistant managers have that authority it should be included in their job descriptions in an effort to prevent later disputes over the exemption. Although many assistant managers will qualify for the exemption, many others will not, and each employee must be reviewed on an individual basis.


3. Automatic deductions for meal breaks
    Many employers automatically dock their hourly employees for a 30- or 60-minute meal break each day. Although this is not illegal, it is a frequent subject of litigation and liability. If you are sued by an employee or audited by the Department of Labor, it is your burden to prove the hours actually worked by your hourly employees. If employees later claim that they worked through lunch most days, it will be extremely difficult for you to prove that each of your employees actually took a full lunch break each and every day for which an automatic meal break deduction is made. These automatic deduction cases usually become collective actions and can become very expensive for employers who have such a policy.


    Fortunately, there is an easy solution: require your hourly employees to clock out and in for their meal breaks. It is imperative that during this meal break the employee is completely relieved from duty and is not performing any work whatsoever, but it is not necessary that employees be allowed to leave the company premises during the meal break. In order to discourage workers from working through this meal break in order to get extra pay each day, make it mandatory that the meal breaks are taken each day, and discipline employees who refuse to take the meal break. Additionally, if for some reason an employee works through a meal break one day, that employee can be sent home early on another day in the same pay week so that overtime does not kick in for that week.


4. Not paying for overtime that has not been approved in advance
    Many companies have a policy requiring employees to seek approval in advance before working overtime. The problem arises when an employer refuses to pay an employee for non-approved overtime. The FLSA, unfortunately, does not distinguish between approved and non-approved overtime—if the employee works the overtime, you are required to pay time and one-half the regular rate for that overtime. But the company is not without recourse: An employee who violates a company policy by working non-approved overtime can be disciplined or terminated for that violation of policy.


5. Allowing employees to “waive” their right to overtime
    Another common mistake, particularly among small businesses, is believing that an employee can waive his or her right to time and one-half pay for all overtime hours. What frequently happens is that an employee requests extra hours and agrees that he needs only to receive his regular pay for those hours. Sometimes this request is made out of a belief that other employees might be hired and everyone’s hours will be cut, or sometimes out of an employee’s particular need for some extra money.


    Despite your good intentions, any type of deal with an employee that results in the nonpayment of overtime is void and will not be a defense if the employee later files suit. A related problem sometimes arises when employees are paid out of two different locations or two companies owned by the same person. By way of example, an employer might own two ice cream stores, each of which is separately incorporated. If an employee works at both stores during a workweek for a combined total of more than 40 hours, that employee must be paid time and one-half for all hours beyond 40.


    The individual owner of stores cannot circumvent the overtime requirement (whether intentionally or otherwise) by paying an employee out of different stores or corporations. Not only will the courts or the Department of Labor likely find the companies liable under a joint or single employer theory, but the individual will also be liable as well.


The bottom line
    Compliance with the FLSA is a task you must take seriously. The number of lawsuits involving these claims is growing at an alarming rate, and the effects can be devastating for businesses of all sizes. Because the FLSA has a penalty provision that allows plaintiffs in some circumstances to recover twice their actual back wages, and because it automatically entitles prevailing plaintiffs to their attorneys’ fees, even a minor violation can wind up being very expensive. And many of these cases become collective actions, where the plaintiff invites all other similarly situated employees to join the litigation.


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Congress Might Take Aim at Backdating Options

Congress may weigh in on the controversy over soaring executive pay by changing a tax rule that experts say has encouraged companies to use stock options in compensation packages.


A bill is unlikely to come up in the short amount of time remaining in the current session of Congress. One might emerge next year as part of a larger tax reform bill or perhaps as part of a measure to close tax loopholes.


But Congress is already turning its attention to executive compensation. Two Senate hearings on September 6—one in the Finance Committee and one in the Banking Committee—explored the issue.


The Finance session featured Internal Revenue Service Commissioner Mark Everson and Linda Thomsen, director of enforcement at the Securities and Exchange Commission. SEC Chairman Christopher Cox testified before the Banking Committee.


Thomsen indicated that the SEC is investigating more than 100 companies for fraudulent reporting of stock option grants.


The Finance Committee focused on a tax provision that limits corporations to a $1 million tax deduction for executive salaries. An exception was made for performance-based pay, which companies can deduct beyond $1 million. Critics say that the rule has contributed to an increase in the use of stock options.


Recent controversy has focused on the practice of backdating options, which occurs when a strike price is retroactively set to a date that would produce a gain for the option holder.


Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, said that the tax code is “broken” when it comes to executive compensation.


“Companies have found it easy to get around the law,” Grassley said. “It has more holes than Swiss cheese. And it seems to have encouraged the options industry.”


Modifying the deduction for performance-based pay or tightening up eligibility are options Congress may consider, Grassley said.


Grassley intends to prepare the ground for such legislation by obtaining board minutes from meetings in which companies approved backdating. He also will seek information from attorneys, accountants and compensation consultants who contributed to the decision.


Grassley gave no quarter in attacking pay schemes that lead to bloated executive salaries. “It is behavior that, to put it bluntly, is disgusting and repulsive,” he said.


Everson recommended that Congress allow the IRS to share more tax return information with the SEC regarding companies that are suspected of reporting violations. In sometimes passionate testimony, Everson demonstrated his frustration with backdating scandals.


“In the area of corporate governance, the temptation to do the wrong thing is increased when he stakes are as staggeringly high as they are,” he said. “I do find it disappointing that the boards of these companies haven’t done a better job of preventing us from getting to (this) point.”


Charles Elson, a University of Delaware professor, suggested that board members hold stock in the companies they oversee so that they are more closely linked to their management. He also called for more disclosure regarding compensation consultants and greater shareholder say in board elections.


“There is an overcompensation problem in corporate America,” he said. “It has undermined shareholder confidence in the system.”


In testimony at a House hearing earlier this year, Thomas Lehner, director of corporate governance at the Business Roundtable, said that the increase in CEO compensation has been consistent with shareholder return.


—Mark Schoeff Jr.

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Prospects Dim for Immigration Reform Before Election

As Congress returned from its August recess on September 5, the Republican leadership on Capitol Hill put security issues at the top of the agenda for the remaining weeks of the session, lengthening the odds that immigration legislation will be approved before the fall elections.


Senate Majority Leader Bill Frist, R-Tennessee, and House Majority Leader John Boehner, R-Ohio, both indicated that bills related to funding the Department of Defense, paying for border security, setting up military tribunals for terrorism suspects and authorizing a terrorist surveillance program would be the priority until September 29, the target date for adjournment.


“We’re putting the safety and security of the American people first,” Frist said in a conference call with reporters on September 5.


As they did in the 2002 and 2004 campaigns, Republicans are portraying themselves as tougher and more resolute than Democrats in the fight against terrorism.


Legislative attention may be a zero-sum game as Congress winds down. Time spent on terrorism is time not devoted to reaching an immigration compromise.


Last December, the House passed a bill that focused on border security and workplace enforcement. In May, the Senate approved a comprehensive bill that also included a guest worker program and a path toward naturalization for most of the estimated 12 million illegal immigrants in the country.


Instead of launching House-Senate negotiations this summer to iron out differences in the bills, House committees conducted 21 hearings around the country to examine the Senate measure. Most of the sessions revolved around elements opposed by conservatives.


Boehner told reporters September 5 that House committee chairmen would meet within the next week to “assess what they heard in July and August and assess what we should and shouldn’t do.”


Neither Boehner nor Frist declared the immigration bill dead. “I’m not going to rule anything out at all,” Frist said.


Senate Minority Leader Harry Reid, D-Nevada, was pessimistic. He criticized Republicans for being in one of two gears on immigration—either opposing the Senate bill or saying nothing at all.


“I guess they’re teeing this up to get nothing done,” Reid said in a meeting with reporters September 5. “The president has been silent on this. The chances of doing something on immigration in the next 12 days are pretty remote.” Reid was referring to the legislative calendar.


Reid lamented that the GOP has conducted a “do nothing Congress” and warned that the party would pay at the polls.


One area that may get some action in September is border security funding. Boehner vowed that Congress would pass legislation that enhances border technology while increasing the number of patrol agents and the amount of fencing.


Employers may also get drawn into the fray. “You’re going to see a lot of activity on border security and work-site enforcement over the course of the next month,” Frist said.


Both the House and Senate bills contain provisions that would increase sanctions on companies hiring illegal workers and would require all employers to sign onto an electronic employment verification system.


—Mark Schoeff Jr.

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McDonald’s Japan No Longer Serving Up Forced Retirement

Senior citizens may soon be serving Teriyaki McBurgers, Chicken Tatsutas and Big Macs alongside the 20-somethings behind the counter at McDonald’s restaurants in Japan.


McDonald’s Japan announced recently that it would abolish its policy of forced retirement at 60 for its company-owned restaurants. That change complies with Japanese legislation that took effect in April, but the company says that’s not why it is instituting it.


“Basically this decision comes from the understanding that work opportunities should be provided to employees who have ability, physical energy and drive, regardless of age,” spokesman Ryosuke Tsuji says. “We should forget about age.”


The policy change allows qualified employees to go on working for the corporate office or in one of its 2,800 restaurants. The change will have little immediate impact on company culture. The average age of workers at McDonald’s Japan is 33, and only five employees are older than 55. Further, the company’s 1,000 Japanese franchisees have not abolished the mandatory retirement age.


Japan’s recent law calls for companies to let people work longer because the age at which retirees become eligible for pension benefits is being raised. The legislation is intended to add tax revenue to save the country’s pension system and, perhaps more importantly, fill a labor shortage created by a zero growth rate in the population.


Companies can comply with the retirement law in three ways. They can raise the retirement age to a minimum of 62, or, like McDonald’s Japan, can abolish the forced retirement age in effect at most employers. Companies that pay employees based on performance, not seniority, are more likely to abolish mandatory retirement ages, according to Nhattan Nguyen, a senior consultant for Mercer Human Resource Consulting in Tokyo.


Most Japanese companies, however, do base pay on seniority, as well as team performance. A third way offered by the bill will be less expensive for companies: rehire employees who are set to retire or who have recently been forced to retire.


Employees at banking groups Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group will resign at age 60, then sign re-employment contracts on an annual basis until they are 65, the new mandatory retirement age at the company.


Since most companies pay based on seniority, they will likely choose the third option to comply with the law and fill the labor shortage, says Ames Gross, president of Pacific Bridge, a recruiter for the Asian market.


Gross says that in Japan, many companies are hiring people on a temporary basis. Known as temps in the U.S., they’re called “freeters” in Japan.


“Companies are reluctant to hire full time and are making fewer full-time offers,” Gross says. Part-timers fill labor shortages, cost less and pay taxes toward the pension system.


Japan’s efforts to confront the effects of an aging and shrinking workforce offer a preview of the issues that will face both Western European and North American businesses as baby boomers begin to retire, says Ken Goldstein, an economist with the Conference Board.


The shortage of talent may be ameliorated by the recent legislation, Goldstein says, but it does not solve the long-term problem that low birth rates pose to companies.


“The bill delays judgment day, but at some point they’ll have to do more with less,” he says.


—Jeremy Smerd

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Stagnating U.S. Wages Seen As Threat To Business Growth

This Labor Day, the Americans who really have reason to celebrate are those at the top of the income ladder, according to a new report. The study, from the liberal-leaning Economic Policy Institute, finds that despite faster productivity growth in recent years, real income for the typical family is lower than in 2000.


“The unprecedented split between growth and living standards is the defining economic challenge of our day, and it’s begging for an activist agenda,” says Jared Bernstein, EPI senior economist and co-author of The State of Working America (2006-2007 edition).


Bernstein’s policy prescription includes raising the minimum wage, making it easier for workers to form unions, implementing universal health care coverage and “achieving truly full employment.”


Another view of how to close the gap comes from Martin Regalia, chief economist of the U.S. Chamber of Commerce. He asserts that the growing schism between rich and poor can be narrowed through continued economic growth, reducing regulatory and tax burdens on corporations, expanding energy sources, upgrading infrastructure and lowering the trade deficit. He also emphasized that more training and education of U.S. workers would substantially increase their wages.


“If you look at the statistics we get on the returns to education, they are phenomenal,” he says.


But the EPI report shows that the real hourly wage for college graduates grew just 1.3 percent from 2000 to 2005 after soaring 11.3 percent from 1995 to 2000.


With the election coming in just over two months, many Washington groups competed to frame the debate around national wage and employment statistics. A Department of Labor report released on Aug. 31 asserted that unemployment has reached new lows and wages have attained new heights.


The department stated that in 2005 real hourly wages were 1.9 percent higher than in 2000, compared to the 1.1 percent rise in wages from 1990-95. It also cited gains for women, minorities and veterans.

“Globalization is tilting against the bargaining power of blue- and white-collar workers alike,” Bernstein says.


Paul Clark, head of the department of labor studies and employment relations at Pennsylvania State University, says that employers gain in the short run when wages fail to rise. But he argues that moving toward a low-wage economy could eventually pinch companies as workers have less to spend and government struggles to raise revenue for education and infrastructure.


“If this continues, I just can’t imagine that it really is good for anybody,” Clark says.


According to the EPI, productivity grew 13.4 percent during the booming period from 1995 to 2000, and even faster—16.6 percent—from 2000 to 2005. Yet median family income, which grew 11.3 percent in the latter 1990s, fell 2.9 percent in the fast productivity growth of the early 2000s, the EPI says. Meanwhile, incomes of the best-off families have grown rapidly.


The EPI report comes on the heels of a U.S. Census Bureau study finding that real median household income in the United States rose by 1.1 percent from 2004 to 2005, reaching $46,326. But real median earnings of both men and women who worked full time and year round declined.


U.S. business leaders have been relatively quiet amid a growing debate about economic insecurity felt by Americans in an era of frequent layoffs, increased offshoring and pared-back benefits. Some analysts say corporate heads would be wise to take a larger role in the discussion.


John Challenger, chief executive of outplacement provider Challenger, Gray & Christmas, suggests that evidence of stagnant wages for many workers provides an opportunity for smart firms to stand out from the pack in terms of better pay and benefits.


“Companies are more worried today about retention than they have been in a long time,” he says. “It’s time for them to be investing more in their workers.”


—Ed Frauenheim and Mark Schoeff Jr.

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Startup Trovix Looks To Google As Role Model

HR tech company Trovix has a thing about Google. For one thing, the fast-growing recruiting software firm is in Mountain View, California, and as such is surrounded by Google’s offices. It also claims its technology for matching job openings to candidate résumés is in the same league as Google’s search technology. What’s more, Trovix sees the Google success story as a model for its quest to topple bigger rivals ranging from recruiting specialists Peopleclick and Taleo to industry giants Oracle and SAP.


Look at how Google came from nowhere to beat Yahoo and Microsoft in Internet search, says Jeff Benrey, Trovix’s chief executive and co-founder. “It happens,” Benrey says. “Better technology comes and it changes the game.”


But even if Trovix has built a better résumé-matching mousetrap, that alone may not win over clients, says recruiting consultant Ed Newman. “Automatic and intelligent search is valuable, but it rarely ever gets as automatic as the marketing hype,” he says.


Trovix began selling its recruiting software last year. It is on pace to quadruple its client base from 10 in December 2005 to more than 40 this year. Clients include high-profile names such as Treo phone maker Palm and Cisco Systems division Linksys.


Recruiting applications have been criticized for being cumbersome and failing to deliver. Even so, Forrester Research predicts recruitment software product revenues will grow 4.5 percent annually through 2009.


Trovix says it differs from other vendors because of sophisticated software that mimics the way a human recruiter looks at résumés. Its algorithms are designed to take into account the relevancy of skills and job experience and how recently a candidate worked in a particular field.


Still, Benrey says Trovix isn’t trying to “automate everything.” And while the emphasis is on résumé search, Trovix lets clients add questions for candidates on application screens.


Asked to name the company that can most closely rival the Trovix search technology, Benrey points out the window toward Google’s headquarters. Just as Google’s founders spent years working on their search software before it took off, so have he and co-founder Earl Rennison, who conducted research at the Massachusetts Institute of Technology.


Nonetheless, the Trovix focus on résumés is outdated, says Dave Michaud, vice president of product marketing at Taleo. Résumés can leave out critical information, he says. Taleo’s approach is to have candidates answer job-specific questions on clients’ sites in order to match candidate skills, interests and experience with job requirements. “They’re really taking an old-school approach,” Michaud says.


Yankee Group analyst Jason Corsello has a different view. He says searching functionality is becoming more important to recruiting systems, in part so average hiring managers can use the tools more effectively and efficiently.


Jim Holincheck, analyst at research firm Gartner, says Trovix will struggle to woo corporations that already have moved from paper-based systems to an automated approach. Trovix may have a great technology, he says, but a Google-like rise to supremacy is unlikely. “Is it going to take over the world and displace everyone? I just don’t see that.”


—Ed Frauenheim