People didn’t use to simply work for a company. Nope, there was a time when they stayed with it, with their whole career happening under one roof, sometimes even across generations in the same family. Companies built ladders you could climb & paid more as you stayed with them.
It’s not that way anymore. Let’s find out what changed.
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Key takeaways
You’ll learn about:
- How internal job ladders worked & why they rewarded long service
- The importance of unions and defined-benefit pensions
- The change to shareholder value & large-scale downsizing
- How pensions and job tenure numbers changed afterward
What loyalty meant in mid-century America
Between the 1940s & 1980s, big companies hired workers and planned careers. This system was called the “internal labor market.”
It worked like a set of tracks, in the sense that once you were on, you moved forward mostly through seniority & clear job ladders. These included promotions & training, tied to how long you’d been there. Such a system locked workers into steady progress.
However, this wasn’t by accident. Early in the 20th century, welfare capitalism had already become more important, with companies rolling out benefits & job security pledges. They also created personnel offices, simply because they wanted to keep people loyal.
In some cases, firms had no-layoff traditions that ran for decades, such as with IBM & Kodak. Many of these big companies famously avoided layoffs entirely until the late 1980s.
How long service was rewarded
There were a few things that made it worthwhile to stay put. These included:
- Job ladders & seniority rules
- Unions
- Pensions
Job ladders & seniority rules meant that moving up the ranks wasn’t a mystery. Workers knew exactly what came next, as long as they hung around long enough to experience it.
In terms of unions, about one in three private-sector workers was unionized in the early 1950s. Contracts made seniority rights clear. These gave longer-tenured workers first dibs on promotions & more protection in layoffs.
But by far the biggest hook was defined-benefit pensions. They were designed to pay out more the longer you stayed, meaning that leaving early would involve leaving a lot of money on the table.
Together, these factors made loyalty far more compelling. It revolved less around feelings and more around math.
When and why the deal started to change
But by the late 1970s, companies began adopting a new approach to business. The new focus was on shareholders. This was thanks to economists like Michael Jensen, who wrote about “free cash flow” & argued that companies should return more to investors. It was the kind of thinking that really took off in boardrooms.
Soon, companies began restructuring & merging, which meant laying off workers in ways they hadn’t before. Entire industries started treating layoffs as a normal business tool. As a matter of fact, studies show that merger-heavy industries between 1984 & 2000 saw big spikes in job cuts.
This meant that even the “no-layoff” giants gave up by the early 1990s. IBM announced massive cuts & Kodak followed. Clearly, the old promise was over.
What changed in retirement benefits
Beyond employment, the pension system also changed.
In the early 1980s, about 85% of private-sector workers with pensions were in traditional defined-benefit plans. This had completely changed by the 1990s, when many employers had begun converting them to 401(k)-style accounts.
The difference between the two was quite notable:
- Defined-benefit (DB) pensions were back-loaded. As such, you got the real money late in your career, so quitting was expensive.
- Defined-contribution (DC) plans like 401(k)s were portable & tied to individual accounts. They didn’t penalize you for leaving early, but didn’t reward you either.
As a result, workers no longer had a financial reason to stay put for 30 years.
What happened to job stability & tenure
Employment patterns show a clear decline in long-term private-sector jobs from the 1970s through the 2000s. Sure, workers still held long careers in government. But the numbers were very different in corporate America & private-sector long-term employment dropped.
Because of these changes, job stability doesn’t look anything like it did in the past. Long stretches at one company have given way to people patching together work. Sometimes that’s with temporary jobs, sometimes that’s with contracts.
And many employers have supported this shift. Why? Because it gives them flexibility. No longer do they have to fill holes with long-term hires, as now, they can pad things with short-term help, which also saves them money.
Gig has become a huge market, too, with millions of people earning money through apps or online platforms. The demand for this kind of work increased by more than 40% between 2016 & early 2023, according to a World Bank Report.
All told, the meaning of “job stability” has changed to involve people stringing work together to simply pay their bills. That’s freedom for some people. And that’s shaky for other people. Either way, the old version of stability, with one company & one path, is almost entirely gone now.
Sources: Please see here for a complete listing of all sources that were consulted in the preparation of this article.
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