Decline of pensions and the "Wal-Martization" of America

[Dave Benjamin]

How many airline union employees drive cars built in non-union shops? The brotherhood is somewhat narrow in the big picture of how it all works. ALPA members buy Honda's, Toyota's and BMW's.

My Honda was built in Pennsylvania by IAM represented American workers. The majority of the parts content is North American according to the factory sticker.

Meanwhile that Dodge pickup truck down the street was built in Mexico by non-union laborers making a few pesos per hour. The Japanese manufacturers seem to care more about quality so their idea of low cost outsourcing is building cars in the US.

My Honda will likely be more reliable and hold better resale value than the so called American cars being built in Mexico.

 

[Redneck]

This article is pro-union, thats fine, but dont use exagerations to make your point.

Younger workers have no idea what a defined benefit plan is because what’s in vogue today are defined contribution plans, which mainly take the form of 401(k) plans: A certain amount of cash is deposited in such a plan, but it does not guarantee any specific benefit. If you’re lucky to retire when your 401(k) investments have done well, you may be able to feed, clothe and house yourself. If you retire when the market is down or if your 401(k) just happened to be chock full of your company’s now-worthless stock (names like Enron and WorldCom come to mind), tough luck: It’s time to choose between food and prescription drugs.

1. When you are closing in on retirement you move OUT of riskier investments(stocks) and into less risky, more stable investments(bonds) etc.

2. You ensure you are diverified (holding many different stocks are bonds, so that if one becomes worthless) If a company 401k only offers company stock, dont become a member, its like gambling your whole gambling bankroll on one bet.

3. The broader stock market has returned 7% on AVERAGE yearly above inflation from the period 1926-2001. Yes there are periods where it tanks, but thats why, #1 is important, most plans have options where to invest.

4. The money in a 401k is your OWN,YOU decide how much to invest and where. and if you invest prudently, you WILL have done well over the long term. But what happens if you gave up a pay raise in order for a defined benefit plan increase. THe money in a defined benefit plan is never "yours", the company is obligated to pay you, but there are many ways, as people have seen that theose obligations can be broken.

But that’s simply crisis management. The bigger question remains: How do we turn back from a Wal-Mart economy to an economy in which, among other things, real pensions become the standard? One long-term solution would be to create a national defined benefit pension plan that would be portable; such a device would absorb the administration costs, encouraging small and medium-sized businesses to choose start real pension plans for their workers. More important, as I’ve argued in previous columns, the best way to guarantee middle class livelihoods is to encourage unionization and collective bargaining. Unless unions thrive, the end of pensions is near, signaling the obliteration of yet another pillar of the middle class.

We already have a national defined benefit plan , its called Social Security, and it is suffering the same fate as company pensions, only the numbers are MUCH bigger. To be able to pay for the estimated SS funding shortfall we would have to put 3.7 TRILLION in the plan this year.

The biggest problems with defined benefit plans IMO is #1 the fact that estimates must be used. There are so many variables in calculating the the present value of all the benefits. Who could know 50 years ago what healthcare would cost now, how much inflation would be etc. #2 the fact that they have become so monolithic. I mean GM is supporting 2 retirees for every one current employee.

Americans are supposedly self reliant go getters, but when then are we so willing to let our retirement be controlled by others?

 

[skykid]

Redneck - you made some good points.

The bigger question remains: How do we turn back from a Wal-Mart economy to an economy in which, among other things, real pensions become the standard

There is no turning back from losing defined pensions now. What the PBGC is doing in court is going to speed up the process, for everybody. UAL mgt wants the flexibility of not paying into the plans AND putting off the decision on the pensions. The PBGC is correctly pointing out the existing plans have to be funded, or steps have to be taken to terminate them. UAL is not going to pay 500 mil this year to the plans, so their hand is forced.

 

[100LL... Again!]

In socialist wonderland (Europe) the pension system is so grossly strained that it is beginning to fail, especially in Germany.


As Margarette Thatcher so brilliantly put it, " The problem with socialism is that sonner or later you run out of other people's money."

At some point, the general public will wake up and realize that neither unoins or Wal-Mart are the answer to prosperity.

Hard work and buying locally are.

I do both.

 

[CitationLover]

speaking as a former pension actuary here are my $0.02.

the BIGGEST problem with DB pensions nowadays is way TOO much regulation. it costs so much to setup/manage/administer a defined benefit plan that their popularity has dwindled.

the interest rates the PBGC uses in determining "unfundedness" are way too low, imho. they have created this problem with this.

the RPA '94 current liability rate, which is mandated by federal law, is another relatively low interest rate driving funding contributions through the deficit reduction contribution (DRC), which must be at least 90% funded of the current liability.

one other major problem in the airlines has been the introduction of the GATT lump sum rates that allow people to liquidate their pensions in one payment. this has created a serious cash crisis that has led directly to the current state. again these rates have dropped thus increasing benefit payouts.

typically pilot pension plans are among the richest, in terms of benefits, offered out there. most retiring pilots will hit the govt max allowable benefit when projected out. as ALL rich plans out there, you are now seeing the effect of the above factors listed above being realized. congressional action has just exacerbated the problem (how is ALPA supporting a DEFERRAL of contributions going to help FUND pensions? that is assinine, short term thinking mr. woerth.)

two simple, unpopular solutions: cut benefits or freeze benefits.

fyi mw44, unions have traditionally negotiated away retirement benefits as they do not benefit DUES PAYING MEMBERS. your altrustic pro-union article needs to wake up to certain economic realities of today and not live in the 1950's/60's. ALPA's support of the DRC "holiday" legislation shows their true colors in not wanting to find a "true" solution to the problem.

as far as social security and european national social "insurance" programs their failures is a simple mathematical fact. they were set up as a pay as you go basis (ie todays workers pay the benefits of current retirees) when the worker to retiree ratio was 16:1. it is now 2:1 as the population has aged. modern medicine has helped feed this "problem". as bjorn borg proposed in sweden, "people need to have more sex to have more babies to save social security."

 

[airbrush]

"people need to have more sex to have more babies to save social security"

O.K., I'm ready to do my part. I'll just tell my wife that it's our obligation to the future of our great nation...a duty that we must embrace with the spirit of those courageous pioneers who settled this land against overwhelming obstacles...


Nah.....she'll never buy that.

 

[I.P. Freley]

Another classic American success story turned upside-down...

I thought that we would be happy about what Sam Walton managed to pull off in his rags-to-riches life.

 

[46Driver]

Another classic American success story turned upside-down...

I thought that we would be happy about what Sam Walton managed to pull off in his rags-to-riches life.

True enough. That's what he gets for doing it better, faster, cheaper - now survival of the fittest is protested.

 

[Rez O. Lewshun]

True enough. That's what he gets for doing it better, faster, cheaper - now survival of the fittest is protested.

Survival of the fittest? Are your twin rotors beating your head sensless??

Wal Mart are captalist Nazi's,

....their blitzkreig is unrelenting, they "liberate" small towns only to alienate themsleves and they force thier will on EVEYONE! (municipalities, venders, customers, citizens, etc...).

Why the heck do I need a gallon of Vlasic pickels for $2.99? I can't eat them that fast, they end up getting moldy and thrown out...

Sooner or later, (later probably) Wal Mart will fall from grace. Nothing last for ever and sheeple will find the new flavor of the month, without learning...

 

[GogglesPisano]

Saw an interesting piece on the news the other day (I know -- liberal media and all.) The segment claimed that when Wal-mart enters a neighborhood it actually drains the community. Property values decrease. The strain on the local taxpayers increase because the jobs that are created are so low-wage and lack health coverage the burden is passed on to the local municipality.


But at least those gallons of pickels are cheap!