Once upon a time, U.S. workers labored 30 years, until age 55 or so, and then retired to live their golden years.
A “living wage” used to mean a pension and health benefits in old age. But these days, wages barely get workers to their job each day after filling the gas tank. And retirement? Forget it!
Facing retirement with puny pensions and mega medical costs, workers are desperately pinching pennies so they don’t have to flip burgers until they die.
Yet even here, the speculators who brought us mortgage meltdowns and stock market bubbles are finding ways to get their claws on this money.
However, there is a flaw in the profiteers’ grand scam. Older workers are a growing share of the labor force – 38 percent are 55 years or older, up from 29 percent in 1993. And these babyboomers know how to raise hell. They did it in the ’60s to stop war and social inequality. And it’s time to do it again to win the right to retire for this generation and others to come.
Goodbye golden years. Though bosses won’t admit it, pensions are deferred wages, paid to workers for the value they create. But Corporate America, in its war on workers, hopes to redefine pensions as optional – rather than as a necessary cost of doing business. Accordingly, the number of workers enrolled in pension plans has dropped from 30.1 million in 1980 to 20.6 million workers in 2004.
Many companies dump their pension plans by forcing new hires into 401(k)s – a poor cousin that offers no guaranteed income at retirement. Bosses also often contribute zip to 401(k)s.
Money goes primarily from workers’ paychecks into personal accounts for buying mutual funds, bonds or stock – often company stock. Remember Enron? Bosses cooked the books, fled with golden parachutes, and left workers with 401(k)s full of worthless Enron stock.
Even when 401(k)s aren’t invested in company stock, they are still vulnerable to market fluctuations. Also, investment companies charge workers lucrative fees for managing 401(k)s. Yet only 17 percent of workers are aware their accounts are charged fees, according to the U.S. Government Accounting Office.
These days, even 401(k)s are not an option for many workers. A study by the Employee Benefit Research Institute showed that healthcare costs have soared for 63 percent of U.S. residents – 30 percent of whom are consequently reducing their savings for retirement.
Especially hard hit are women, who earn less and work fewer hours due to family obligations, and people of color, who also earn less due to job discrimination.
A flawed system. Workers with pensions are hardly doing well either. The last decade saw major companies like Bethlehem Steel and United Airlines declare bankruptcy and dump their pensions. The Pension Benefit Guarantee Corp. took over many of these plans, and is also now in debt. The PBGC, funded by insurance premiums from companies with pension plans, has a $23 billion estimated shortfall.
It’s not unusual for companies to emerge from bankruptcy, pension-free, to then turn huge profits. Turnaround crooks, like Steve Miller, earn big salaries by helping corporations do just that. Right now, he is steering Delphi, an auto parts supplier, through bankruptcy court.
Other Fortune 500s, like GM and IBM, freeze pension benefits for current workers and eliminate pensions for new hires. And who can blame them? After all, pensions are optional, and the “solution” by U.S. Congress is to charge companies higher PBGC premiums – rather than require all employers to pay pensions as part of a living wage.
Corruption galore. Still, there is plenty of pension money for Wall Street to sink its claws into. This is especially so in the public-sector, which constitutes the lion’s share of pensions.
Increasingly, trustees of public pensions are investing in higher-yield, riskier schemes. Already, many funds are expected to suffer from investments made in the sinking mortgage debt market. Agencies like Standard and Poor, which were supposed to rate mortgage securities according to their risk level, overrated the securities. But when mortgages default, it won’t be S&P that pays.
Pension funds also pay exorbitant fees to investment managers, many of whom have conflicts of interest. Weak laws, like those governing home loans, enable sharks to thrive.
The world’s largest pool of investment cash, a pension fund for New York state workers, is currently being investigated because the comptroller who ran it allowed investment firms to pay his cronies millions of dollars in exchange for giving the firms contracts to manage the money in the pension fund. More millions may also have been lost in poor investments. Who pays for corruption like this? Retirees, in lower benefits – and taxpayers, in bailouts of pension funds.
Also feeding off pension funds are private-equity firms like Carlyle Group and Cerberus Capital. These firms often buy companies on the cheap, take them off the stock market, and slash labor costs through layoffs and dumping pensions. The “restructured” companies are then resold at great profit. (See auto contracts story, page 2.)
Pension funds often provide the investment cash for equity firms, and are charged hefty fees for the privilege! The firms gain access to public pension funds because their executive rosters read like a “Who’s Who” of ex-government officials. George Bush, Sr., and former Defense Secretary Frank Carlucci worked for Carlyle. John Snow, former Treasury Secretary, now heads up Cerberus.
Fire up labor to fight back! In addition to bad investments and high fees, paltry employer contributions are taking their toll on pension funds. During the stock market’s boom years, many companies and governments reduced payments to their funds.
In 1981, 24 percent of New York City’s budget went to pensions. By 2000, the city donated only one percent, while workers contributed three percent of each paycheck. When the Dow Jones was up, healthy pension funds were diverted into tax cuts and other city budget items. Now that stocks are down, city officials claim a pension crisis, even though city contributions have dropped significantly.
But workers aren’t taking this lying down. City employees in Seattle hit the roof when they learned their unions had signed a tentative labor pact that shifts half the cost of keeping their pension fund solvent onto the backs of workers. Workers are now demanding the deal be scrapped – and are exposing plans to invest city pension funds in a local billionaire’s real estate scheme.
In 2005, New York transit workers made headlines by going on strike to save pensions for new hires. And at Delphi, GM, Ford, and Chrysler, retirees are connecting with active members of United Auto Workers to fight contracts that gut pensions and retiree healthcare.
These battles are the front lines of the war over retirement security. And the two labor federations, the AFL-CIO and Change to Win, need to help workers fight by redirecting the cash now going to Democrats into strike funds and organizing campaigns instead.
The momentum to create a fighting labor movement needs to come from the ranks. It’s time to demand labor officials do their job, or step aside for leaders who will take the offense. Let the many isolated battles become a movement to stop retiree takeaways.
For starters: Provide free coverage for retirees through nationalized healthcare under workers’ control. Tax corporate profits to fund guaranteed retirement security for all! Open company books, pension funds included. Heck, let’s retire the entire profit system!