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Transit strike reflects wider pension concerns

There is an only-in-New-York quality to the city's crippling transit strike, but the central issue in the labor dispute is the same one facing millions of workers across a broad range of industries: The security of their pensions.
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New York City's bitter three-day transit strike is over, but the two sides remain at odds over an issue that increasingly is being faced by millions of workers in a broad range of industries: pension security.

“It’s a very common situation with a unique dimension,” said Harley Shaiken, a labor economist and professor at the University of California at Berkeley. “The common part of it is that millions of workers are very apprehensive and deeply disturbed and often very angry about what is happening to their pensions.”

Transit union leaders ordered workers to return to work Thursday as talks aimed at seeking a permanent settlement continued with pensions still a central issue.

Pensions and associated health-care costs for retired workers also are a principal factor in this year’s landmark bankruptcy of auto-parts maker Delphi, financial problems at General Motors and the turmoil that has sent eight airlines into bankruptcy protection.

“It is not at all surprising to me that we would see a powerful union taking a stand on pensions,” said Jared Bernstein, senior economist with the labor-affiliated Economic Policy Institute.

He noted that many industrial companies in the private sector have aggressively tried to shed pension costs through negotiations or by putting themselves into bankruptcy.

“That kind of thing hasn’t been seen in the public sector,” Bernstein said. “So these unions are absolutely going to fight tooth and nail to maintain their pension coverage.”

Ironically the two sides in the New York transit strike did not seem to be all that far apart on pensions when workers walked off the job. Initially the Metropolitan Transit Authority wanted to reduce pensions by raising the retirement age to 62 from 55. Just hours before a strike deadline the authority withdrew that demand, offering to leave the pension system unchanged for current transit workers.

Instead the MTA wanted all new workers to contribute 6 percent of their wages toward pensions, up from the 2 percent that current workers pay. The proposal, which was rejected by the union and triggered the walkout, would have saved the authority a mere $20 million over three years, according to The New York Times.

The MTA plan would amount to a pay cut for new workers, but it would be far from the haircut likely to be endured retired workers at big struggling companies in the automotive and airline industries. At United Airlines, for example, pilots could lose up to half their promised pensions because the federal Pension Benefit Guaranty Corp., which has taken over the obligation, caps payouts at about $45,000 a year.

Unions at other airlines have been forced to give back tens of millions of dollars or face the prospect of similar pension failures.

Altogether private employers have underfunded their pensions by about $450 billion, according to the PBGC, raising the likelihood that the federal agency will have to take on billions of dollars more in obligations. This year alone the agency has taken over 120 private pension plans, and Congress has been trying to come with a compromise plan that would require private employers to fund their pensions more fully and pay higher premiums to the PBGC.

The transit strike underscores the point that high pension costs are a growing issue not only for the private sector, but for employee in the public sector as well, where unionism is far higher.

Public-sector jobs historically have offered base pay that is lower than what private businesses offer, but with the trade-off that they offer better job security and in many cases good pensions and benefits. And the public sector is still heavily unionized, with about 36 percent of workers represented by unions, compared with only 8 percent of private-sector workers.

For public-sector employers like state and city governments, the strike by Transit Workers Union Local 100 is “a shot across the bow” said Shaiken. “They are making a point that many other public sector workers feel strongly,” he said.