Today’s aging workforce faces an uncertain future. The announcement this week that General Motors will lay off 15 percent of its salaried workforce and shutter multiple plants in North America was a sobering reminder of how far the American worker has fallen. Unlike most large private sector corporations today, thousands of employees at GM still enjoy some union benefits. The company has reportedly set aside $2 billion for layoffs and buyouts. It's not much, but it's something — many workers, if they are laid off en masse, will be far less lucky.
Some older Americans are lucky enough to have been grandfathered into generous pension plans and others hope social security and personal savings will be enough to sustain themselves. But for millions of younger people, the outlook is bleaker — an ever-diminishing social safety net, with retirement dependent almost entirely on how well they manage savings. Two-thirds of millennials have nothing saved for retirement.
The private sector pension as we once knew it is all but dead. Public sector pensions, meanwhile, are under attack at the state level.
The private sector pension as we once knew it is all but dead. Public sector pensions, meanwhile, are under attack at the state level. “Companies don’t offer pensions anymore. Social security, when it was established, was meant to be one leg of a stool,” says Gerald Friedman, an economist at the University of Massachusetts at Amherst. “One leg would be the private pension through employment, a second leg personal savings, and a third leg social security. Social security is now the only source of income of a lot elderly have.”
What, if anything, are our politicians doing about this? Progressives rail against President Donald Trump, but real retirement security has not been a big enough part of the conversation on either side of the political spectrum. Millions of Americans are in danger of entering their final decades unable to afford ballooning medical bills and cost-of-living expenses. This is a huge problem, and one that liberals in particular should have capitalized on this election cycle.
In 1975, 88 percent of private sector workers had defined benefit pension plans, like those still enjoyed by public sector workers today. Over the course of the 1980s and 1990s, that number plummeted dramatically. By the 2010s, it dropped below 20 percent. The decimation of unions in the private sector, along with federal changes in the Reagan era that made pension funds more volatile, fueled this decline. The New York Times recently illustrated the real-world impact of this trend by examining the differences between employees of Sears, which recently filed for bankruptcy, and Amazon.
Like many large 20th-century corporations, Sears invested in its workforce. The company earmarked 10 percent of pretax earnings for a retirement plan for full-time employees, and by the 1950s, the workers owned a quarter of Sears. Contrast that with a company like Amazon, which in exchange for a $15 minimum wage yanked stock options for hundreds of thousands of employees. The typical Amazon employee now receives $680 annually from the company in a 401(k). The average Sears worker received the present-day equivalent of $2,744, according to the Times. Dividends on accumulated stock could add thousands annually.
Amazon and its corporate brethren are potentially damaging public sector pensions, too. States and municipalities that have underfunded their pension funds for decades now trip over themselves to offer billions in tax breaks to lure new corporate headquarters.
Corporate executives once believed in profit-sharing and using strong retirement benefits to retain employees. In today’s economy, with relatively low unemployment but a proliferation of low-wage jobs, human labor is viewed as more expendable. A hedge funder took control of Sears and led the company into a bankruptcy that would benefit his hedge fund. Wealthy shareholders are prioritized; the workforce itself is secondary.
Meanwhile 401(k) plans, which have often replaced pension plans, provide “no formula that gets you to a defined benefit. At the end of them, you retire and get X amount of money… because you are an individual, you bear the risk of market on your own,” argued Bridget Early, the executive director of the National Public Pension Coalition.
Individual employees with 401(k) plans must fend for themselves while lacking leverage to negotiate, since they are not collective and centrally managed.
Individual employees with 401(k) plans must fend for themselves while lacking leverage to negotiate, since they are not collective and centrally managed. Traditional pension funds created a collective shareholder voice that has been muted over time. In the public sector, where they remain viable, these funds have driven corporate accountability movements, including almost all of the most successful shareholder lawsuits.
Right-wing activists and billionaires like the Koch brothers have long understood the power of pensions and the stability they grant workers. Hollowing them out and breaking unionization efforts has been their life’s work.
As long as Trump is president and anti-worker Republicans control Congress, there is little hope for change. But progressives can make a real difference in the lives of American workers by making serious, sustainable retirement benefits central to their platform. Just as cries for universal healthcare has made supporting "Medicare for All" an increasingly mainstream political position, pressuring powerful corporations to provide pension plans of some sort to employees, once a common practice even 40 years ago, can regain some measure of dignity and comfort for the American worker.
This piece was written with support from the Economic Hardship Reporting Project.