We’ve lost 85,000 pensions since 1985. It’s the destruction of the American Dream for millions of people – and it should be a concern for all of us.
By Bob Monks
Part of the Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream series.
What does the middle-class person have as a prospect for success in America today? And how does that compare with what it was 50 years ago?
Great literature has emerged on that subject, and the 1950s and 60s, which is when I came of age, are taken as a golden period when people who worked in assembly lines and had blue collar jobs were able to buy second homes, good cars to drive, send their kids to college and retire comfortably. Is that still true? Or, is the American Dream only for the privileged today?
If you just reflect on what has happened over the last 30 years to the dream of an American retirement income system, you’ll see that we are fast approaching a generation of people who may have few or no guaranteed retirement resources.
Once we had a system based on people working and paying into a pension system sponsored by employers and guaranteed by the government. It elevated a generation of workers to a healthier and happier retirement, and we were proud of it. Do you know of anyone with a pension anymore? Maybe executives or legislators – but is there anyone else?
Pensions & Retirement Funds: No Longer Protected
This is an important aspect of governance that gets short shrift.
Pensions and retirement funds are such personal things and as employee collective bargaining power continues to decline, the voice for protected retirement funds is getting fainter. Indeed, with news of the Detroit bankruptcy, pensions are painted as the villain instead of the true problems of poor management by states and municipalities, lack of fiduciary trust or the greed of Wall Street.
Retirement prospects for the middle class are simply much, much more slender these days. A series of economic doctrines and political policies have justified the kidnapping of the vast preponderance of our national wealth for the benefit of a very few people. The working and middle class are demonized for their modest expectations for a guaranteed retirement while, in fact, government policies have enabled the one percent to take what they want, pay in what they want and still be bailed out of the problems they create.
Dreaming of a Rewarding Retirement
All the while, corporations continue to cut and restrict the benefits that we as a country used to value. We used to think it was a good thing to have a safety net for people as they got older – a reward system for years in the workforce. We viewed it as a part of their overall pay package. They worked under this promise and now we, as a society, want to renege. The decline of the pension system isn’t part of the public dialogue and it’s a huge loss for us all.
We’ve lost 85,000 pensions since 1985. To put it another way:
“The share of workers in defined benefits plans (pensions) fell from 39 percent in 1980 to 18 percent in 2004. Correspondingly, defined contribution plans (like 401(k)) rose from eight percent to 31 percent.”
It’s the destruction of the American Dream for millions of people – and it should be a concern for all of us.
I ask these questions because we have an agenda that is increasingly directed toward achieving corporate objectives and preserving corporate wealth. More and more, we see attacks on any policy that would protect or benefit consumers, savers and working by the Chamber of Commerce, ALEC and corporate interests because it “isn’t good for business” or it might raise prices.
You know what goes up when pensions are abolished? CEO salaries.
In 2006, IBM abolished its pension plan and started a 401(k) plan. The company expected to save $450 - $500 million in that first year. That same year, CEO Samuel Palmisano earned $24.46 million, up from $14.4 million the previous year.
Delayed Benefits and the Instability of IRAs & 401[k] Plans
You might be thinking that at least we have IRAs or 401(k) plans. At least we have something.
But these funds aren’t guaranteed amounts like pensions, and involve so many fees and charges - intended to protect the beneficiary but administered so as to enrich the service providers - that a chunk of the income is consumed. I’ll say it again:
We used to view pensions as a part of peoples’ salaries – delayed benefits that they had earned. Now we advise them to invest in the Wall Street casino and hope for the best.
As Jack Bogle asked:
“Do you really want to invest in a system where you put up 100 percent of the capital, you, the mutual fund shareholder take 100 percent of the risk, and you get 30 percent of the return?”
Again and again, pensions and retirement plans are blamed for municipal and state debt. They’re deemed too expensive for corporations who meanwhile pay a small handful of executives millions along with extravagant benefits packages. Pensions are under siege, working people are under siege, the elderly are under siege but we can’t fulfill our promises because it isn’t good for business.
Since when did democracy become about business?
I thought it was about people. But the human element has been taken out of the equation and the nation is crippled by an all-consuming campaign to promote and enrich business. There’s a word for a country that governs in the interests of corporations – you know and I know it.
Part V: Reshaping Corporations: Can Divestment Work?
Part IV: Is Doing Nothing The Same As Doing Bad?
Part III: A To-Do List for Shareholders: Three Things We Must Address
Part II: If We Want Responsible Corporations We Need To Be Responsible Owners
Part I: A Simple Solution to Runaway Corporate Power