There are numerous pitfalls to being an employee, and unfortunately for most people, they don't find out about these pitfalls until during recessions. When you're an employee, and the company you work for makes mistakes, it is you that may ultimately pay the price when times get tough. When tough times strike either an economy or a company, it is those at the bottom of the pyramid, the employees, who will be the first to get fired or laid off. When you think about it, it isn't really fair. I mean after all, if a company is struggling financially, isn't this because of the decisions made by the leadership, the CEO, board of directors, and upper level managers?
The answer to this question is yes, these are the people who are responsible. However, the reason why the employee is let go first is because they “are on the front lines.” While the company can always replace employees, it is not easy to replace the CEO or board of directors. Another reason why employees pay the price for mistakes made by the company leaders is because at the end of the day, it is often the leaders that own the company. As long as the company remains afloat, they will remain afloat, but if they need to downsize in order to remain afloat, then this mean some employees will have to go.
The higher you are in the corporate pyramid, the harder it is for you to be fired or laid off during bad economic times. There are a couple of reasons for this. First, if you're an upper level manager, you may have a strong relationship with other managers which will allow you to better maintain your position. Second, because you will often tend to have specialized skills which are beyond those of the entry level employee, this means that replacing you won't be as easy. However, in the end, even upper level managers are vulnerable. The only group in the company that is the hardest to remove is the CEO and board of directors.
In fact, the only time that a CEO or members of the board of directors will leave the company is when they die, are convicted of fraud, or the company itself collapses. In other words, these people are the last to go. If you're an employee, you may be the first. It is for this reason that working for anyone else, regardless of how much you make per year, is inherently risky. While things will be great during good times, when bad times arrive, your very livelihood could be in danger.
Another dangerous pitfall that many employees face today is from the very same companies that issue them their paychecks. Enron is a classic example of what can happen when the company leadership decides to turn against the employees. When you talk about Enron, you are talking about a company that stole millions of dollars from its employees, and much of this money was invested in the company's 401K plan. I watched a documentary about Enron, and one part of the movie which particularly shocked me was a part near the end, where a former employee who was nearing retirement explained that he had over a quarter of a million dollars saved up for retirement, but after the scandal, the only thing he got back was $1600.
Given the fact that this man was middle aged, there is a good chance that he will have to work for the rest of his life in order to make ends meet. While Enron may seem like an isolated incident, it isn't, and in the future, more company scandals like this will become common. The only way to protect yourself from these scams is to rely on the only person in this world who truly has your best interests at heart: yourself. If you think for a single second that big corporations are going to take care for you, either now or when you retire, you are sadly mistaken. Corporate America has already shown its hand. It has already demonstrated that profits come first, and employees come second, and perhaps not even that.
One vivid example of how corporations have turned their backs on employees is the passage of the Employee Retirement Income Security Act, better known as ERISA for short. You can read more about this act here at Wikipedia: http://en.wikipedia.org/wiki/ERISA, but to make a long story short, ERISA is basically an act passed by the U.S. government which allows large corporations to avoid giving employees defined benefit pension plans, providing them with contribution benefit plans as an alternative. A defined benefit pension plan is a plan which allows you to get paid a pension each month after you retire, for the rest of your life. This is the plan that much of the World War 2 generation enjoyed.
A contribution benefit plan is just what the name implies, it is based on the amount “you contribute.” If you don't contribute anything, you won't have anything available to you when you retire. If you do contribute money to this plan, the amount you will have when you retire is only what you put in, and the company won't provide you with a monthly pension. Does this plan sound familiar? If this sounds a lot like the 401K plan, that is because it is. The 401K plan is inferior to the original defined pension plan in every way. It is nothing more than a savings plan, but if your company goes the direction of Enron, you could lose every thing you contributed. If you don't contribute anything, you will have nothing for retirement.
The real reason why ERISA was passed is because large corporations decided that paying people money every month years after they retired was cutting into their bottom line, and to save more money and remain competitive on a global scale, these companies got together and urged the government to pass an act which would favor them. This is why the 401K is the most popular retirement plan available today. Unfortunately, it is also extremely dangerous, because it is dependent on company investments, and company honesty. Most countries around the globe also have this type of plan.
Another way in which large corporations have abandoned the employee is by the advent of outsourcing and in-sourcing. For large corporations, it wasn't enough to save money by eradicating employee pension plans, they decided that hiring cheap labor abroad would allow them to save even more money. This is why you hear about corporations moving off-shore in order to hire workers in India, China, or the Philippines, they do so because they save millions of dollars per year as a result.
Many Americans are finding that they now have to compete with people who live in countries where the cost of living is only a fraction of what they have at home. Not only are low end jobs being affected by outsourcing, but even jobs that require a college degree are no longer safe. Despite this, large corporations, and the wealthy men and women who run them, are always looking for new ways to save money, and it comes as no surprise that they have yet another arsenal up their sleeves which allows them to cut costs, and this is “in-sourcing.”
As you've probably guessed, in-sourcing is the opposite of outsourcing. With outsourcing, while you relocate to facilities outside the U.S. and hire people there for a fraction of what it costs to hire workers at home, with in-sourcing, a company will actually fly foreign workers into the country on short term visas, and they will work for a period of time before returning home. In-sourcing is actually cheaper than outsourcing, and the reason for this is because with outsourcing, a large company may need to actually build a call center or infrastructure in their country of choice, which costs a lot up front. With in-sourcing, all you have to do is fly the worker to you, and they can simply use the infrastructure and resources you already have available in your country, which is a fraction of the cost of moving your operations abroad. Once again, in-sourcing is forcing Americans to compete head on with individuals from foreign countries who have a much lower cost of living, a difficult task indeed.
The next step in the cost cutting game is for large companies to utilize the Internet as a tool for hiring workers from cheaper countries, particularly when it comes to any task which can be digitized. Jobs such as programming, accounting, computer animation, and any job which can be done on a computer over the Internet will prompt many companies to simply outsource jobs through the web. Why pay an American programmer $40,000 per year to write code, when a guy in China will do the same job for $8,000 per year? This is the logic that moves corporations these days. Loyalty to employees means nothing to them.