Corporations are stepping up employe transfers again as the economy begins to recover, but transfer activity will not reach past highs in the foreseeable future, according to the head of Merrill Lynch Relocation Management.
"The floodgates will not open dramatically," said George Rathman, president and chief executive officer, who predicted an increase in relocation volume of 5 to 10 percent in 1983 over 1982. "Companies have learned to operate with tighter control. They are limiting the frequency and level of moves."
Relocation will remain a difficult and costly move for corporations, he maintained.
"Many companies have put clamps on relocation," added John M. Moore, executive vice president of the relocation assistance affiliate of the giant finance and brokerage firm. They now require higher levels of approvals, and many jobs that would have required relocations have been cut back."
Rathman, who, with Moore, discussed the status of relocation at a Merrill Lynch-sponsored seminar on the topic here this week, pointed to the rising costs of relocations borne by companies. While in 1979 it cost $28,140, or 80 percent of an employes' average annual salary, to move a homeowning employe, last year the cost was $46,800, or 104 percent of the average salary of all transferred employes.
"Relocation costs have peaked," he declared. "We've seen the worst behind us."
However, there won't be a sharp drop in those costs because of more liberal mortgage assistance packages and continuing historically high mortgage rates and housing costs, Rathman maintained.
"In 1982, 75 percent of the major U.S. corporations provided mortgage subsidies for three to five years," he said. "This compares with 70 percent in 1981 and 61 percent in 1980. Further, 97 percent of more than 600 top Fortune industrial and non-industrial companies we surveyed helped relocated employes dispose of their current homes last year.
"Employe relocation is a necessary cost of doing business that will not be eliminated," Rathman stressed. "Corporations will continue to transfer valued employes to fill critical positions. It costs more to go outside than it does to move someone internally. Mobility is critical to the management development process of a major corporation.
"And to ensure transfer acceptance, a company must provide employes with affordable mortgage financing but the company must also control escalating relocation costs."
Some corporations are eliminating mortgage interest differential allowances (MIDAs). Often companies that provided MIDAs when interest rates were at record highs one and two years ago now are forcing employes to refinance their mortgages at today's market rates, according to Rathman.
Another problem corporations still face when seeking to relocate employes is the refusal to accept a transfer, Rathman said. While a transfer is important to an employe's career, "a question now is what about the spouse's career," he said. "In a two-income family, if the spouse can't find a comparable job in the new location, the employe will reject the transfer."
Twenty-six percent of the 608 major companies surveyed by Merrill Lynch now offer some type of job-finding assistance for spouses compared with 25 percent in 1981 and 23 percent in 1980, Rathman said.
Some new geographical areas will benefit from future relocation activity, according to Rathman and Edward A. Robie, president of Merrill Lynch Relocation Management's Group Move and Consulting Services.
"Some areas are getting so expensive that companies are considering moving out of them," said Robie, who mentioned southern California, the San Francisco Bay area, including Silicon Valley, Phoenix and parts of Florida.
However, Robie mentioned exceptions, such as one company that was moving from costly southeast Florida to San Francisco for valid business reasons, despite even higher housing costs.
Rathman said rising housing and other costs in parts of the Sun Belt will not end moves to the Sun Belt. "Corporations will not leave the Sun Belt and return to the Snow Belt," he said. "They will change moves within the Sun Belt.
"Housing affordability is one of the newest items on many corporate agendas today," Rathman concluded. "No longer simply an individual's concern, the high cost of housing is a bottom-line corporate issue. Companies must address whether housing in their area enables them to attract and keep the talent they need to operate successfully. It is especially crucial for corporations that see relocation as a vital element in meeting corporate objectives."