The traditional model of employer-employee relations in the United States was a "psychological contract" in which employees made long-term commitments to organizations in exchange for long-term job security, training and development, and internal opportunities for promotion. Beginning mainly with the recession in the early 1970's, this paradigm began to unravel. Organizations began using extensive downsizing and outsourcing to decrease the number of permanent employees in the workforce. Among employees this situation has resulted in a decided shift in desire: instead of working their way up in an organization, many now prefer to work their way out. Entrepreneurship at the small business administration are now the fastest-growing majors in business schools.

Several factors have generated movement from the old paradigm to the new one. Organizations have had legitimate and pressing reasons to shift to a new paradigm of employer-employee relations. Large numbers of permanent employees make it difficult for organizations to respond quickly to downturns in demand by decreasing payroll costs. The enormous rights in wrongful discharge suites has created incentives for organizations to use temporary, contract, and leased employees in order to distance themselves from potential litigation problems. Moreover, top management is under increased pressure from shareholders to generate higher and higher levels of return on investment in the short run, resulting in declines in hiring, increases in layoffs, and shortage of funds for employee development.

At the same time, a lack of forthrightness on the part of organizations has led to increased cynicism among employees about management's motivation and competence. Employees are now working 15 percent more hours per week than they were 20 years ago, but organizations acknowledge this fact only by running stress-management workshops to help employees to cope. Sales people are being asked to increase sales at the same time organizations have cut travel, phone, and advertising budgets. Employees could probably cope effectively with changes in the psychological contract if organizations were more forthright about how they were changing it. But the euphemistic jargon used by executives to justify the changes they were implementing frequently backfires; rather than engendering sympathy for management's position, it sparks employees' desire to be free of the organization all together. In a recent study of employees' attitudes about management, 49 percent of the sample strongly agreed that "management will take advantage of you if given the chance."

The passage suggests that which of the following is a legitimate reason for organizations' shift to the new model of employer-employee relations?

Organizations tend to operate more effectively when they have a high manager-to-employee ratio.

Organizations can move their operations to less expensive locations more easily when they have fewer permanent employees.

Organizations have found that they often receive higher quality work when they engage in outsourcing.

Organizations with large pools of permanent workers risk significant financial losses if the demand for their product or service decreases.

Organizations are under increasing pressure to adopt new technologies that often obviate the need for certain workers.


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