Automation is the boogeyman buzzword when it comes to discussing the future of work. Yes, it’s true that automation will displace workers, as an estimated 32% of U.S. jobs are expected to be eliminated by 2030.
However, some economists and futurists have surmised that, if handled properly, new roles will grow from those displaced jobs and that technological advancement is ultimately a good thing.
“Jobs don’t go away, they transition, and they transition in different ways,” Parminder K. Jassal, Ph.D. of the Institute for the Future (IFTF) said in an interview with WorldatWork. “So, what we do believe is that many more jobs will be affected by automation, but we believe they’ll be affected in different ways. We think it affects the entire process and how we do things, not just front-line processes.”
When it comes to how those front-line workers will be compensated, however, some economists are reassessing. David Autor of MIT and Anna Salomons of Utrecht University concluded that the use of AI explains the decline in the share of national income going into workers’ paychecks over the last three decades.
There’s a growing belief that one of the reasons workers have not seen larger wage gains in the past few years is because, despite the significant advances in technology, overall productivity has not improved all that much.
There is some hope, however, that trend could change in the future.
“It takes time for people and processes to adapt to new technology and take full advantage of technological advancements for productivity gains to be realized,” said Sue Holloway, CCP, CECP, director of executive compensation strategy at WorldatWork.
Like workers, the professionals compensating them are aware they too will need to adapt. WorldatWork’s "Compensation Function of the Future" survey of 364 members in conjunction with Salary.com demonstrated how the profile of a successful compensation professional is changing. It revealed that while there is an expectation of artificial intelligence (AI), machine learning and predictive analytics to become increasingly influential in their compensation processes, respondents are anticipating other variables as well. They expect activities related to creating, analyzing, interpreting and/or presenting analytic results, pay equity and transparency to top the list of their most important responsibilities in two to three years.
“As technology produces more advanced insights, compensation professionals will need to have greater contextual expertise and an ability to articulate powerful stories to aid in rewards decision making,” said Alison Avalos, CCP, CBP, GRP, director of membership and total rewards strategy at WorldatWork.
Tracey Malcolm, global future of work leader at Willis Towers Watson, said that because of automation, organizations will need to consider a myriad of factors to get the right mix of work and value.
“What’s coming into play is a need to determine if the job will continue to slope upward in terms of compensation, or do we need to reinvent the job,” Malcolm said. “Then there’s a need to be proactive about compensation or total rewards decisions in what the optimal equation is for that.”
A Bleak Future for Pension Plans
While employer utilization of pension plans have been in decline for some time now, organizations received extra incentive to move off their long-term responsibility.
On March 6, the U.S. Treasury Department issued a notice that will allow employers to buy out current retirees from their pensions with a one-time lump sum payment. In doing so, it reversed its 2015 guidance that banned the practice of lump-sum payments after officials determined it shortchanges most seniors.
Pensions, which are insured by the federal Pension Benefit Guaranty Corporation in case employers go bankrupt, cover 26.2 million people across more than 23,000 single-employer plans, but companies aren’t offering them to their new hires.
Furthermore, organizations are increasingly undergoing efforts to decrease their risk profile when it comes to pension plans. One way is that organizations are handing off their pension plan obligations to insurance companies. Another is offering deferred vested participants — those who are previous employees of a company that are still entitled to future benefits — a lump-sum payment for a benefit that’s not payable until sometime in the future.
So, what does this mean for the future of these defined-benefit pensions?
Elliot Dinkin, CEO and president at Cowden Associates Inc., said there are three main groups of employers when it comes to pension plans. The one area that is staying in the pension business as of now are single employers, multi-employers, governmental and those that are involved in unions, because it’s still meaningful to what they do.
“They will continue to make decisions on how to manage their liability, including de-risking strategies,” Dinkin said. “They will take steps from time to time to take volatility out of the plan and manage the liability, because this is managing retiree debt.”
There’s a second group that have determined that a defined-benefit pension plan isn’t strategically in their best interest. Dinkin said these organizations, rather than liquidating the entire program, are essentially doing so in pieces as a form of de-risking.
“They’re not using it to attract, retain or motivate people any longer, so they have frozen their pension plans, meaning that there’s no more additional accruals and their ultimate goal is to figure out how to best manage that remaining debt,” Dinkin said. “They’re trying to do that as quickly and efficiently as possible, because it’s no longer a strategic asset.”
Lastly, there’s a group of plan sponsors that has frozen the pension plan and are no longer managing it. “They are just sort of letting it sit out there and aren’t sure what to do,” Dinkin said.
Jan Jacobson of the American Benefits Council said the Treasury pointed out in its notice that they will continue to study the issue of retiree lump-sum windows, which means this most-recent notice isn’t necessarily the end of it.
While plan sponsors will now have the option to provide a lump-sum payment, retirees aren’t obligated to take it. But the option exists, for now.
“You’re still a fiduciary of the pension plan, so you have to make sure you take the proper steps and make sure you did all the right communications and everything else and who knows if sometime in the future the IRS might change its mind again and eliminate this feature,” Dinkin said. “You still have to have all the other things in line, but there will be some plan sponsors and some retirees who will be interested in the lump sum. This gives them that opportunity, but whether that continues forever, I don’t know.”
About the Author
Brett Christie is a staff writer at WorldatWork.