What happens when employers start chipping away at their workers’ promised retirement benefits?
Given that position, the question asked in the first paragraph demands a review.
Unfortunately, we already know the answer.
All we need to do is look at private-sector workers who had their retirement security taken away in the 1980s and ‘90s. They have now reached retirement age and are facing a life of deprivation and struggle.
Last month, The Washington Post published a revealing case study of nearly 1,000 former McDonnell Douglas workers whose pension benefits disappeared when the company closed its Tulsa plant in 1994 to reduce its retirement obligations.
The study found that many of those workers are still toiling away at low-wage jobs well into their 70s. Most are struggling financially and many suffer from health issues. About 15 percent had filed for bankruptcy or faced liens as a result of delinquent bills.
This is a portrait of what led the Government Accountability Office to conclude a “retirement crisis may be looming” when it urged Congress last fall to create an independent commission to study the U.S. retirement system.
Wall Street’s answer to the demand for profits over all else was to remove one of the legs in the proverbial three-legged stool: pensions. The result was predictable: Only about half of all workers who now only have access to 401(k) plans use them. Most can’t afford to contribute and others lack financial education. Among the median income workers who do contribute, the average balance is only $25,000, far too little to retire on.
The one sector of the economy where pensions remain is the public sector. Teachers, nurses, firefighters, police, school bus drivers and other public workers have been able to withstand the Wall Street ethic of putting the short-term interests of stockholders far above the long-term welfare of workers.
Increasingly, however, those remaining pensions are under attack. Critics repeat the falsehood that they cost too much, and that those costs are “crowding out” the ability of governments to deliver services. In fact, pension costs are cyclical and there is no evidence of substantial crowd out. The reality is that pensions are a core reason governments are able to deliver services at all, as they are a benefit that keeps teachers in classrooms, firefighters on the fire lines and police officers patrolling the streets.
If there is real concern about costs that “crowd out” governments’ ability to deliver services, these critics might instead look at the costs of tax breaks and subsidies granted corporations and wealthy individuals. One recent study found that in California, the cost of those tax breaks and subsidies are more than 150 percent the cost of providing pensions to workers.
One of the most persistent pension critics in California recently wrote that by continuing to fund pensions for public workers the state is “kicking the can down the road for someone else to deal with at a later time.” He recommends the Wall Street approach of simply walking away from retirement promises. Well, we now know how that story ends. The former McDonnell Douglas worker who lost his pension is, at 74, now working as a school crossing guard at minimum wage. Another is a Walmartgreeter. Still others are on public assistance.
Ensuring that public-sector pension funds remain financially healthy requires diligence and give-and-take. Significant statewide reforms that raised the retirement age and increased pension contributions for new workers took effect in 2013 and are projected to reduce costs by over $80 billion over time.
But simply breaking pension promises is not a solution. It will make the problem worse. Evidence proves it. Providing all workers with a secure retirement is an ethic that must be preserved and restored, not diminished and degraded.
Ben Valdepeña is a lead custodian with the Yucaipa-Calimesa Joint Unified School District, where he has worked since 1983, and president of the California School Employees Association. Reach him at email@example.com.