How Do Unions Defend Pensions When Most People Don’t Have One?
Are the days of the “defined benefit” pension over? After the last two years, many people seem to think so.
In a recent interview, Boston College Professor Alicia Munnell summed up a common view on pensions for the Wall Street Journal: “Our employer-based social welfare system is collapsing. [The pension freeze at General Motors] itself is not a big deal. It’s GM on top of Verizon and IBM…and then there’s everything that’s happening in weak companies like airlines.”
In the world of defined benefit pension plans, the dominos are falling in rapid succession.
The 40,000 salaried workers affected by General Motors’ March 8 pension freeze are unlikely to agree that the company’s switch to individual retirement accounts is no “big deal.” Nor would the 100,000 GM hourly workers whose pension coverage is up for re-negotiation in September 2007.
The UAW has already re-opened its contract to provide GM with $1 billion worth of retiree health care contributions and diverted wage increases (to fund future medical benefits for active employees).
Verizon announced in December a pension freeze covering 50,000 of its managers. IBM followed suit in January by curtailing any further traditional pension coverage for all 117,000 of its U.S.-based employees (none of whom have the right to bargain about this change).
Like GM, Verizon and IBM are replacing group pension coverage with individual savings vehicles like 401(k)s. Under these “defined contribution” plans, the investment risk and cost is shifted to employees, who must then manage—and contribute to—their own retirement accounts.
Upon retirement, they have no guarantee of a fixed monthly benefit—or lump sum—based on some combination of age, salary, and years of service. Their retirement savings are completely unprotected by the Pension Benefit Guaranty Corporation (PBGC), the federal insurance agency which has bailed out so many underfunded corporate pension plans in recent years that it now faces a $23 billion shortfall itself.
Twenty-five years ago, 81 percent of all workers with retirement coverage were entitled to a “defined benefit”—if they qualified under their plan. Today, less than 38 percent of the 100 million workers with any form of employer-provided pension coverage can still count on this. (Another 48 million workers have no job-based retirement benefits whatsoever.)
Sears, Sprint-Nextel, FleetBoston, NCR, Alcoa, Halliburton, Hewlett-Packard, Motorola, Milliken, and Armstrong World Industries are among the many big firms—most of them quite profitable—which have recently unloaded billions of dollars in future “legacy costs.”
PENSION BATTLES AHEAD
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This take-away trend doesn’t bode well for unions in any industry. General Electric, along with GM, will be looking for concessions in this area in 2007. Contracts covering 200,000 Teamsters at UPS and 10,000 West Coast longshore workers expire in 2008. There’s a high likelihood of battles over pension benefits in both of those units.
(One cause of the Teamsters’ last national strike against UPS in 1997 was management’s attempt to withdraw from jointly-trusteed Teamster pension funds—a move that would soon lead to replacement of defined benefit coverage under any company-controlled retirement plan.)
Also in 2008, 75,000 IBEW and CWA members at Verizon from Maine to Virginia will be fighting against any pension changes modeled on the recent cuts to their managers’ benefits. At Verizon’s newly acquired MCI subsidiary and at Verizon Wireless, 60,000 non-union workers have only 401(k) accounts.
As The New York Times notes, by cutting retirement benefits for a quarter of its workforce now, Verizon hopes to “set the stage for concessions from its unionized workers in the next round of negotiations.” The outcome of that struggle will affect bargaining at the nation’s largest telecom firm—ATT
While a small minority of unionized workers struggle to preserve past pension gains, the increasingly pension-poor majority of Americans has, at best, a 401(k) account with a paltry balance. So the challenge facing organized labor is how to defend negotiated retirement plans—and employer-paid health benefits—when both tend to be much better than the non-union norm.
BROADENING THE STRATEGY
Over the last 15 years, some unions have realized the importance of demanding “Health Care For All”—rather than just “Hands Off Our Medical Benefits.” They’ve used contract campaigns and strikes against medical cost shifting to build the movement for health care reform by enlisting community allies and educating members about the need for tax-supported, universal coverage.
Today, organized labor must frame its struggle on behalf of traditional group pension coverage in a way that also resonates with the public. Otherwise, the dwindling number of workers still eligible for a decent retirement check will be out on a limb by themselves—while it gets sawed off with no one protesting—because everyone else’s pension got pruned long ago.
In their outreach to former MCI workers at Verizon, CWA and IBEW organizers are stressing the disparity between union and non-union pension benefits. At the same time, Verizon local unions are mobilizing their own members around the threat to traditional pensions posed by the company’s preferred model of 401(k) coverage only.
Labor should also be strengthening its alliances with retiree organizations and pension advocacy groups, like the Claude Pepper Foundation and Center, which are exposing the inadequacy of 401(k) accounts as a substitute for guaranteed pensions.
Union members facing pension fights should begin networking now and develop mutually supportive contract campaign strategies at places like the Labor Notes conference.
Steve Early is administrative assistant to the vice-president of CWA District 1, which includes 55,000 workers at Verizon, ATT, and GE.