One year ago last November, in Washington State, the Boeing Co. told 30,000 members of the International Association of Machinists: Stick ’em up! Your pensions or your jobs!
CEO’s threatened to move new work out of state unless IAM members gave up their defined benefit pensions in exchange for a 401(k). After a fierce battle to stop this attack, members swallowed the deal under extreme pressure from Democratic Governor Jay Inslee, other Democratic and Republican Party politicians, news media and the IAM International leadership. The vote was close, at 51 percent, taken during a holiday break when many veteran IAMers were away. In this same state in 2011, the legislature eliminated the annual pension Cost-of-Living Adjustment (COLA) for 52,600 retired government workers.
In July, Detroit’s public workers and retirees were forced to take a 4.5 percent pension cut and permanent loss of COLA, as part of the plan to dig Detroit out of debt. But locals of the American Federation of State County and Municipal Employees (AFSCME) and retiree groups are calling the deal “Grand Theft Pension” and vow to fight it every step of the way.
This fall, in Stockton, Calif., a U.S. bankruptcy court judge ruled that bankruptcy law trumps legal protections for pensions. The city developed a plan to save pensions that included dumping retiree health benefits, but Franklin Templeton Investments is appealing to demand Stockton wring even more from public workers. This case gives a green light for other financially strapped governments to slash pensions.
What is behind this attack? Wall Street, bosses, and their political henchmen in both major parties want to get their claws on a huge pot of money they don’t yet control — retirement funds.
First and foremost, this is a greedy money grab. Secondarily, it’s another front in Corporate America’s overall war on organized labor. With private sector unions massively weakened, public employee unions are now the target. And what better way to make them less attractive to potential members than to destroy a huge benefit, pensions, won through mass strikes in the 1930s and ’40s.
Your new pay cut — the 401(k). For decades retirement was made possible through a defined benefit plan. This is the traditional pension, where workers and employers pay into an account, and upon retirement the worker gets a guaranteed monthly income based on past pay and years of work. Pension accounts are invested in large pools by experts over long time periods to keep funds growing at good interest rates. Pensions are neither employer gifts or taken from current workers. They are deferred wages.
The 401(k) originated in 1978 as a section of the Tax Revenue Act. Under this law, workers could set aside pre-tax income for retirement. The 401(k) was considered a supplement to pensions. And for a while, especially during market upswings, it was great. That is, until big business began replacing pensions entirely with 401(k)s, placing the risk of the stock market on workers.
In these schemes, the worker sets an amount to be deferred from their paycheck and chooses investment options. The checks received upon retirement vary depending on the Dow Jones and guessing ability of the worker.
Such “defined contribution” plans are sold on the false promise that you get higher returns by controlling your own pension funds. Good luck! A study by Millman Inc. shows that over a 30-year period traditional pensions have a 25 percent greater return than 401(k)s!
Divide and conquer. Between 1990 and 2010, the number of private sector employees in traditional pension plans fell by nearly half, from 35 to 18 percent. With most private workers’ nest eggs cracked open, the pensions of government workers are now in jeopardy. Right-wing pundits claim that public pensions are “given” to spoiled “big government” job-holders, trying to pit them against the over-taxed working class. Don’t fall for it! Instead of fighting for scraps, private and public-sector workers must unite. Everyone has a right to a livable retirement income!
Social Security stretching thin. Millions of workers don’t have any pension or retirement savings. Social Security will be their only income later in life.
To enable the theft of that income, conservative news outlets push the lie that Social Security is going broke, even though it’s funded through 2036 and needs only minor adjustments.
The Social Security Trust Fund has over $2.8 trillion, yet politicians constantly threaten to raise the qualification age for full benefits to 70, cut payments, and reduce Cost-of-Living Adjustments (COLA).
They also forced the Social Security Administration (SSA) to close 80 offices and 500 contact centers where people get in-person help. SSA has also laid off thousands of workers.
In a move akin to attacks on U.S. postal delivery, SSA plans to move to automated phone systems and subcontracting. The American Federation of Government Employees (AFGE) is blowing the whistle and leading a campaign to defend Social Security. Take action at afge.org/…/SaveOurSocialSecurity
Higher benefits and a lower retirement age for all could easily be funded if the wealthy paid into Social Security on their entire earnings! Currently they only pay on the first $117,000 of wages each year.
The simple and fair legislative fix — making millionaires and billionaires pay social security on their full earnings, would enable SSA to boost COLA and fund a livable minimum income for all retirees. Scrap the cap!
Unite to stop the theft! Pensions and Social Security are not grand gifts bestowed upon workers by benevolent bosses — they are incomes earned by years of labor. Pensions were originally won by unions as a way for workers to set aside money for retirement. Social Security is funded with deductions that are taken from workers’ paychecks, so attempts to cut this important benefit amounts to stealing workers’ money!
In November, over 100,000 workers in Brussels, Belgium, hit the streets to defend their pensions. U.S. labor needs to follow suit, independent of Democrats, and welcome retirees as a powerful force with a huge stake in the fight.
Save defined benefit pensions and pension COLAs!
Tax the rich — scrap the income cap on Social Security!
Stop the wage theft!
Lois Danks can be reached at email@example.com.
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