Why Are Companies Scaling Back Employee Benefits?

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March 7 (Bloomberg) -- Harvard Kennedy School Professor Brigitte Madrian discusses employee benefits on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

And corporate minutes at the harvard kennedy school.

Is this unusual that this kind of bifurcation, you might say, the 401(k) plan where it is available to a varies small number of corporate and and but -- corporate and executive staff at mcdonald's but not to the rest?

Waxman donald is a little bit unusual because a lot of their locations -- mcdonald's is a little bit unusual because a lot of their locations are franchisees, so most big companies, microsoft, google, great -- places like harvard, even retailers like target, all of the employees would be under the door preparing and probably would be eligible for the plan, but you do see it in some companies.

The fact that these employees are employed by the franchisee, essentially, is there really an obligation for mcdonald's to make sure that they are heart of some sort of 401(k) plan?

You know, unfortunately, no, there is no legal obligation for them to do that.

If they were part of mcdonald's, the parent corporation, then the company would be required to have a plan that is broadly available to everyone, but due to the way they're set up, unfortunately no.

This is all part of the way companies -- right, the way they are just changing their retirement benefits.

They used the pensions, now it is 401(k) plans, easily automatic enrollment, and now it is more voluntary, and it is all a way for companies to try to find the most cost effective, i guess they would say, way to offer these kinds of benefits.

Yes, absolutely.

The move from a traditional pension to a 401(k) plan is driven in large part by first the regulatory cost of offering a traditional pension and second, the traditional pension poses a lot of financial risk on companies whereas with a 401(k) plan, the participant is bearing all of the risk.

It is attractive for companies to transfer that risk, and they have moved almost wholesale to 401(k) plans.

Are you finding that those plans are becoming less and less generous as a whole in corporate america?

I don't think we have really good trend data on that.

Certainly what happens is that when we have a market downturn, and is happened in 2008 and 2009, a lot of companies will cut back on their employer match because they are financially constrained, and in the big question is when the economy picks up, how many of them reinstate their 401(k) plan.

I think what is surprising is in the last few weeks, we have had announcements of companies cutting back on their match and were not in the recessionary environment of the 2008, 2009. that is a cause for concern.

Quite why do you think that is?

-- why do you think that is?

I think companies are trying to be more cost conscious and what we have seen over the last few weeks is companies deciding that they are only going to provide a match once a year and the match will only be given to employees who are still at the company, so they are basically trying to save money in matching contributions to employees who leave the firm.

That is great for the company's bottom line but it is not a great public policy of what you are trying to do with promoting saving for retirement.

Right, a key component, obviously, of your career and your goal, essentially.

Professor, thank you so much for joining us.

Because her brigitte madrian -- professor brigitte madrian, professor at harvard kennedy school.

We are a few moments away from the february employment numbers.

Chief markets correspondent scarlet fu is with us.

Economics editor mike mckee is with us and our chief washington correspondent peter cook it outside the labor department with those numbers in just a few seconds.

We are expecting 100 49,000 jobs

This text has been automatically generated. It may not be 100% accurate.


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