Layoffs, underemployment and a still-meager safety net aren’t hurting only U.S. workers. The failure to provide much economic security for average Americans is likely to wound companies and the economy overall. It’s probably doing so already.

What I’m getting at is the way shell-shocked, struggling individuals may make less-than-optimal choices because they’ve become so risk averse. When people pick jobs out of fear or an obsession with financial safety, they often end up in positions where they don’t thrive. And by passing on a job that would have been a better fit but may have entailed a bit less money or more risk, they deny that firm an engaged, enthusiastic employee. It’s suboptimal all around.

Even top performers are saying security is a top priority. In fact, they want it more than do employees overall, according to a recent survey by consulting firm Watson Wyatt Worldwide. Job security was cited as a reason for joining an organization by 37 percent of top-performing employees.

That made it the second-ranking reason after “nature of work” for top performers. Thirty-three percent of all employees cited job security, tying for second place. Employers, meanwhile, appear clueless about this stability focus: Security didn’t make the top-five list for employers when asked why employees join an organization.

The recent career deliberations of a friend flesh out the point. He had two job offers in hand: a stable job he didn’t think he’d love and a position at a startup that is riskier but the kind of work he’s been fantasizing about. He eventually went with the startup, but came very close to turning down his dream job.

In particular, at one point he felt he couldn’t take the post without a guarantee of severance pay in case the job fell through. This demand, which the startup would not agree to, is unusual for midcareer business consultants like my friend.

But it is understandable given his recent economic experience. After losing his job nearly a year ago, he has been unemployed or underemployed as an independent consultant despite holding an advanced degree with a focus on China from an elite university. Without work, he has faced the loss of a cherished private school for his kids, home foreclosure and strained relations at times with his spouse.

And yet a dispassionate look at my friend’s work situation showed him getting an increasing number of consulting projects, two recent full-time job offers (the ones he was weighing) and growing economies in both the U.S. and China. His prospects would be good even if the startup flopped in a few months.

In other words, he was approaching his job choice with the scars of economic insecurity distracting him. And they came close to keeping him from a choice likely to benefit both him and the startup.

The severance issue was not my friend’s only concern with the startup job, but it was a major one. Eventually, he dropped that demand and took the leap. But how many of the country’s millions of unemployed and underemployed are going for the safer bet? How many will go for the safer bet in the months and years ahead?

Yes, we’ve made some improvements to the safety net. But jobless payments remain proportionately lower than those during the Great Depression, and health care continues to be a concern for many.

Companies overall were quick to ax employees during the recession. And they are rehiring slowly.

If economic life for Americans is akin to climbing a mountain, we’ve allowed that journey to become very hazardous, very slippery. It’s easy to lose your footing or get knocked off your feet and tumble down far. Firms want people who are eager to take risks and rise to new heights. But don’t be surprised if battered and bruised Americans instead seek refuge in low-lying caves—to the detriment of all.

While U.S. leaders debate whether and how to do more to fight unemployment, China’s government has taken a novel approach.

The country’s Ministry of Human Resources and Social Security recently signed a deal with recruiting software provider MrTed to help match job seekers with jobs.

Under the contract, thousands of recruiters in cities and districts across China will use London-based MrTed’s software to better connect employers with workers in the private sector.

“For the employer, it’s a recruiting service,” says Jerome Ternynck, CEO and co-founder of MrTed. “For the employee, it’s a placement service.”

Recruiting software products such as MrTed’s TalentLink do such things as manage job requisitions, track résumés and rank applicants against job openings.

Ternynck says the project in China is focused on “talent,” which refers to a class of workers distinct from farmers and civil servants. The goal behind the software effort is to speed up the time it takes to return “talents” to employment from an average of four months to three months, Ternynck says.

Although exact terms of the contract weren’t disclosed, Ternynck says it will bring MrTed annual revenue in the seven figures in U.S. dollars. The deal amounts to a feather in the cap for MrTed. Ternynck’s firm prides itself on its global capabilities, and calls the Chinese effort the largest-ever implementation of talent acquisition software provided over the Internet.

According to U.S. government estimates, China’s urban unemployment rate was 4 percent in 2008. But if the country’s large population of migrant workers is included, the total unemployment rate may have been as high as 9 percent.

Labor unrest in China can get ugly, and potentially represents a threat to the authoritarian government. In this light, the deal with MrTed is a forward-thinking move. I’m also not aware of many other deals by government agencies along these lines. Ternynck says MrTed was tapped for a similar pilot project in France not long ago, and showed decent results. But the effort died partly because of bureaucratic infighting, he says.

If so, it wouldn’t be the first time promising technology for boosting employment was unplugged for suspect reasons. In 2007, the Bush administration killed public job board America’s Job Bank without a thorough explanation. The absence of the site hamstrung an effort at the beginning of the recession to help Americans get back to work.

At this point, I’m not sure whether restoring America’s Job Bank is the best use of government resources to battle unemployment, which hit 9.8 percent in September. But it’s pretty clear U.S. political leaders ought to do more to jump-start employment, whether through an additional stimulus package, a tax credit for companies that create new jobs or investment in new infrastructure projects.

Not only will more jobs restore a sense of economic stability and peace of mind to millions of out-of-work Americans, but it will also help make the nascent recovery more sustainable.

China is taking action to combat unemployment. America can too.

A new picture of the economy is emerging, one that may threaten large organizations when it comes to talent.

Companies keep cutting workers during the recession, and indications are they won’t rehire many during a recovery. A report this month from consulting firm Watson Wyatt Worldwide finds that 43 percent of firms expect a permanent decrease in staff size in three to five years compared with pre-economic crisis levels. Twenty-nine percent expect a permanent increase in staff size, and 28 percent expect no change.

What this means is a large pool of “unintentional entrepreneurs” is forming and will grow. Many high-quality people may choose never to return to the large companies that cut them loose and now show disdain toward hiring them.

Earlier this year, Wired magazine editor-in-chief Chris Anderson saw an economic tectonic shift in the works. Bigger corporations, he argued, have to make bigger, riskier bets with lower payoffs. And amid fast-paced change, larger organizations are likely to become less flexible given increased regulation.

“[T]he next new economy, the one rising from the ashes of this latest meltdown, will favor the small,” Anderson wrote in May.

Many top employees could be headed to new startups. Earlier this year, the Corporate Executive Board research firm found that one in four high-potential employees plan to quit over the next 12 months. As disturbing, the report found that disengaged workers are 31 percent less likely to quit than they were in 2006.

No wonder the study found that engaging employees was the top priority for this year among global heads of HR.

The recession could be propelling the workplace toward a future envisioned by experts polled by Workforce Management last year: clusters of core employees and satellites of transient talent helping with short-term needs.

What is a Global 1,000 company to do? In general, large firms will want to get their culture headed in the right direction—toward a team orientation and history-making mind-set described by authors Dave Logan, John King and Halee Fischer-Wright in their 2008 book Tribal Leadership.

But in the wake of heightened distrust toward business and the apparent rise in employee disengagement during the downturn, U.S. companies may first need to establish a new kind of compact with workers.

More than a specific contract with an individual or bargaining unit, I’m talking about the overall principles that guide a firm’s relationship with employees. In the last three decades, the compact has shifted from one grounded in a degree of economic security for workers to one more about arm’s-length, transactional ties with employees. Layoffs became ubiquitous and health care and retirement risks were pushed onto employees in the quest for higher profits.

But it’s becoming clear that this treatment of workers has its limits. An employee-employer bond built for lasting success, it seems to me, would include a bias toward sustained connections, transparency, shared decision-making and concern for the “whole” worker—including their overall economic security and the well-being of their community. These principles should lead to trust, engagement, productivity and even greatness.

Creating such a 21st century connection with employees is a major undertaking. But especially if small becomes huge in the economy of tomorrow, large organizations will need to think big today.

The recent murder of a steel plant manager by workers in China has lessons for both American businesspeople and Chinese officials.

The killing, according to The Wall Street Journal, occurred when employees at Tonghua Iron & Steel feared their jobs were in jeopardy. A group of the workers apparently beat Chen Guojun to death in an office.

Chen worked for a privately owned company promising to modernize Tonghua Iron & Steel. The company had just come to an agreement to take control of Tonghua Iron & Steel from the government, the Journal story indicated.

The idea of workers and management at odds over jobs and restructuring plans isn’t new to Western businesspeople. What may be surprising, though, is the Chinese reaction to the tragedy. According to the Journal, the official Xinhua News Agency criticized local government officials, asking: “Wasn’t the Tonghua incident really a matter of failing to consider the interests of workers during the restructuring process?”

And in response to the plant protest, with Chen missing and feared injured, the government said the deal for Chen’s firm to take over the plant was off.

In the U.S., the Xinhua statement comes across as excusing murderers. And the axing of the takeover plan seems like capitulation to thuggery.

What those reactions miss, though, is the deep-seated collectivism in China. While Americans are prone to focus on the individual act or acts of violence, Chinese are more likely to see the role of the wider social context. The restructuring of state-owned industries in China has been proceeding for years, often with little regard for workers who lose their jobs.

The Journal quotes Li Xinchuang, vice chairman of China Metallurgical Industry Planning and Research Institute, a state think tank that helped draft the government’s policy for the steel industry. Prior to the Tonghua riot, restructurings “were concerned only with benefits of local governments and companies,” Li says. “But the interests of employees should draw a lot more attention.”

I observed this contextual, social sensibility during a reporting trip to China a few years ago. It’s something Western firms must be aware of if they are to succeed in China. And I think it is something American business leaders—often obsessed with individual pay-for-performance schemes—would do well to learn from.

But there’s also a lesson for Chinese officials in the murder of Chen Guojun. Protests not all that different from the one at the steel plant have become commonplace in China this decade. Public demonstrations are among the only ways average citizens can fight back against perceived injustices, given the lack of meaningful democracy in China.

I hope Chen’s death helps Chinese leaders see how vital more democracy is.

“Old” Europe is suddenly the new new thing.

Deepening gloom about the recession and job market is opening up debate in America about whether European-style employment and social welfare programs may prove to be a vital part of a healthy economy for employees and employers alike.

The sturdy safety net of universal health care, generous unemployment benefits and relatively secure pensions often has been derided as anti-entrepreneurial and part of the reason for Europe’s relatively high unemployment.

Indeed, those benefits and strong job protections may have played a role in high jobless rates in European nations such as Germany.

But now it appears ample jobless benefits and the like are cushioning the blow of the global recession. Government-provided health care helps prevent public panic around layoffs in Europe. And unemployment benefits that can cover 70 percent of net earnings or more for years at a time fuel continued consumer spending.

With the stimulus plan passed earlier this year, the U.S. took some steps in Europe’s direction. A COBRA subsidy makes it much easier to maintain health insurance after losing a job, and states were encouraged to loosen eligibility rules for unemployment insurance. In addition, jobless benefits were bolstered by $25 a week and the extended unemployment benefits program—which provides up to 33 weeks of additional benefits—was continued through 2009.
 
Even so, U.S. workers still face the prospect of running out of jobless benefits after about a year. And despite the $25-per-week boost, U.S. unemployment insurance checks are paltry: The average weekly benefit in 2007 was $288, or just 34 percent of the average weekly wage.

What’s more, many out-of-work Americans don’t receive unemployment benefits.

Amid evidence of increased employer aggressiveness in challenging jobless-benefit claims, the rate of recipiency—which captures the percentage of unemployed people who have qualified for and are claiming benefits—was 45 percent in the third quarter of last year when considering all unemployment insurance programs.

The stimulus act’s eligibility reforms should bring that number up. But all the insecurity built into the U.S. economy has already pushed people into their shells. Americans have been spending less at a time when companies need their business.

Better benefits for those out of work in Europe may help explain why economic contraction in the European Union in the fourth quarter of 2008 was not quite as severe as the shrinking in the United States.

Also finding its way into the spotlight is a German program to preserve jobs through reduced hours and wages. Similar “work sharing” programs in the U.S., where businesses can cut employee hours and pay but government helps make up the difference, exist in just a minority of states. But those programs are getting more attention, as is the idea of a tax credit for paid time off.

European countries also have been lowering payroll tax rates, another intriguing idea for battling the recession.

Critics who claim Europe should invest in larger stimulus programs—closer to the scale of the U.S. effort—may have a point. But it seems clear we, too, have some lessons to learn from our friends across the pond. “Old” Europe could help a sluggish America put a spring back in its step.