One reason corporate profit margins are at record levels is that employee compensation seems to be under compression. While this might be good for stockholders, it does not have good things to say for today’s worker. Daniel Gross aptly calls this trend, “cramdown nation.”
James Surowiecki at the New Yorker comments on the increasing anxiety of today’s workers. Today’s workplace seems ever more fluid with workers changing jobs at the drop of a hat. However he cites studies that show workers are staying at jobs not that much less than twenty years ago.

If that is the case where does all this anxiety come from? Shifts in compensation including less health care coverage and the elimination of many pension plans have made existing jobs less attractive. In addition, those workers who do get laid off seem to stay out of work longer.

Surowiecki believes some of these changes do in fact make some sense, with a serious caveat:

Some of these changes make good business sense. But cumulatively they add up to what Jacob Hacker, a political scientist at Yale, calls “the great risk shift.â€? The underlying problem is that workers are not being compensated with higher wages for taking on all this new risk.

In short today’s workers are taking on “more risk and less reward” for their labor. Corporations seem to be the ones benefiting from today’s workplace. Surely some of the “flat world” phenomenon seems to be at play.

With all these changes afoot today’s workers need to take ever more responsibility for their own retirement. The Economist notes studies that show today’s workers have poor financial literacy. This makes them vulnerable to serious investment errors that will come home to roost at retirement. These errors will come back to haunt central governments.

The potential economic benefits of financial literacy extend beyond government budgets. More informed consumers—not just investors—would increase the efficiency of markets and help keep unscrupulous sellers at bay. If financial illiteracy leads to greater debt, then increased consumption today will be at the expense of less later, as interest payments weigh on household budgets.

The challenge is to create education programs that workers want to take and provide them with the proper methods and messages to get them to make informed decisions. A strand of behavioral finance research is dedicated to researching how people make investment decisions. Hopefully the fruits of this research can be used to design efficient, user-friendly investment programs in the future. We are going to need it.

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