The 401(k) Travesty

Hugely profitable companies that won't restore the 401(k) match they ditched in 2008.

By Daniel Gross
Posted Wednesday, Aug. 4, 2010, at 3:56 PM ET

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Recent government data suggest an economy in confusion. Growth and consumption are slowing, but savings are rising, up to 6.4 percent of personal income. The savings rate, in fact, has been climbing for three years, as Americans have been hoarding cash to protect themselves against the struggling economy.

While the rising savings rate is generally good news for the economy, it is the problem that's discouraging businesses from taking risks, investing, and hiring. In its June 2010 survey of its members, the National Federation of Independent Businesses found that the single most important problem, by a long shot, is "poor sales" (30 percent). Twice as many identified poor sales as the single most important problem as they did "government regulations and red tape."

But businesses aren't helping matters much. One of the reasons Americans are saving more of their salaries and wages is that in 2008 and 2009, employers stopped doing the things they have historically done to make their employees feel confident about spending—contributing to 401(k)s, paying for benefits, raising salaries in line with inflation. Corporate America's productivity and efficiency gains since the onset of the Great Recession have been impressive and an important contributor to the recovery. Businesses cut costs aggressively largely by cutting jobs, salaries, benefits, and perks.