By 1985, at age 37, he had snared a vice president's title. "I'm going up the ladder," he remembers thinking. He and Donna picked out a design from a Ryan Homes catalog and had a house built along the Ohio River north of Pittsburgh — a blue aluminum-and-brick colonial with four bedrooms, two-and-a-half baths and a 15-year mortgage.
Still, by 2000 Fredo was pulling in more than $160,000 annually. And he thought he was in line for the top spot at steel-plant builder Voest-Alpine Industries Inc., where he had been chief financial officer for eight years, helping the company grow from 14 employees to 450.
But in October 2001, as the steel industry swung from boom to bust, Voest-Alpine began to winnow its executive ranks. Instead of a promotion, Fredo was handed a pink slip. The setback seemed to stun family and friends even more than Fredo himself.
"I called my fiancee and said, 'Dad's been downsized,' " remembered Fredo's son Stephen. "She said, 'Did the company go under?' "
Don Battaglia, a Pittsburgh computer consultant who has worked for Fredo, was equally incredulous. "I was convinced he'd be the guy who turned out the lights," Battaglia said.
The Fredos quickly made adjustments. They canceled plans to trade in their 1998 Chrysler sedan. They drew up a bare-bones budget for groceries, utilities, Christmas gifts and an occasional permanent for Donna's hair. They started collecting buy-one-get-one-free coupon books at the Walgreens pharmacy.
Meanwhile, Fredo pulled down his copy of the Iron and Steel Institute's industry directory. Before, whenever he needed a job, he landed one by writing to a few of the companies listed in the book and calling a couple of Pittsburgh employment agencies.
He assumed this time would be no different. Little did he realize how much the world of work had changed.
Employers Break a Bond
For most of the post-World War II era, Washington had a partner in helping to shield working families from risk: corporate America.
Businesses considered themselves duty-bound to provide stable jobs and strong ties to employees, cushioning workers against the vicissitudes of the economy.
Employers must find ways "of protecting the individual against the more damaging effects of inevitable change," Standard Oil of New Jersey President Eugene Holman said in the late 1940s. "So far as the management of my own company is concerned," he added, "we have formed the habit of thinking in terms of lifetime employment. That is our goal."
For decades, employers delivered on the promise of job security. "The workers of our parents' generation typically had one job, one skill, one career — often with one company," Bush said last month at the Republican National Convention.
Beyond that, businesses erected a bulwark against the risk of illness by raising the number of workers with employer-provided health insurance from 1.5 million before World War II to more than 150 million. They helped families deal with the economic costs of death by giving life insurance to 160 million of their employees, up from 9 million. And they offered seemingly ironclad protection against the insecurity of old age by boosting the number of workers with pensions from 4 million to 44 million.
But like the government's safety net, corporate America's began to fall apart in the late 1970s — shifting still more risk onto working families.
Twenty-five years ago, almost 40% of the nation's private full-time workforce was covered by traditional pensions, under which the employer bears the risks and pays the benefits. That number has fallen to 20%. In the place of pensions have come defined-contribution plans such as 401(k)s, under which an employer may kick in some funds — typically about half what would have been spent previously — but employees alone bear the burden of ensuring that they have enough money to retire on.
A similar shift is underway in health insurance. As recently as 1987, employers provided health coverage for 70% of the nation's working-age population, according to the Employee Benefit Research Institute in Washington. By last year, that had dropped to 63%. The change translates into nearly 18 million people who would have been covered under the old system scrambling to make their own arrangements. What's more, even when employers continue coverage, they increasingly push more of the costs onto employees. Since 2000 alone, employers have raised the premiums their workers must pay by an average of 50%, or about $1,000 a family, according to a recently released study by the Kaiser Family Foundation and the Health Research and Educational Trust.
When it comes to job security, employers have largely broken the bond they had with workers. A late 1980s study by the Conference Board, a business research group, found that 56% of major corporations surveyed agreed that "employees who are loyal to the company and further its business goals deserve an assurance of continued employment." A decade later, that number dropped to just 6%.