Wednesday, January 18, 2006

Say "Bye-Bye" To Pensions

Say "Bye-Bye" To Pensions

It seems like the average worker in the U.S. today cannot expect much of anything from their employers.

Sure, some companies, institutions and government agencies still provide decent benefits and pensions, often in exchange for a lower wage or salary. But the numbers are rapidly dwindling.

Recently, Verizon announced salaried staff pensions would be frozen in June '06. IBM made a similar announcement recently as well.

Meanwhile, Alcoa announced it would move to a 401(k) for all new hires.

It seems like it's only a matter of time before this spills over into the public sector, long renowned for its good pensions.

A couple recent posts on, from Saturday 1/14/06 and Sunday 1/15/06, suggest that one of the Mayor's goals is reducing "the unfunded liabilites of the public employees' pension systems."

Admittedly, I'm not an expert on the details, but I do realize the city's financial obligations are substantial to these three entities: the City of St. Louis Employees Retirement System; the Police Retirement System of St. Louis; and the Firemen's Retirement System of St. Louis.

Corporations and government agencies must keep their promises to their employees about financial security during retirement -- particularly "first responders" like police, firefighters, EMTs, and even utility company workers who repair downed power lines, etc. They have pretty damn tough jobs, so they deserve to at least have some sense of security in retirement.

Often, I feel like I'm part of the problem in this debate - undercutting this struggle to keep pensions in place, because I'm a young worker with an advanced degree but willing to work for whatever I can get. And that's not much more than $10/hour, cobbled together from different sources, with no pension, Wal-Martesque health insurance, and no sick pay, vacation pay or holiday pay.

Granted, I'm a helluva lot better off than a lot of other people, so I really shouldn't complain. Nevertheless, it is clear the days of job security and guaranteed health benefits and pensions are long gone -- even in the public and education sectors.

While this may be beneficial to some workers, I think in the long-run most of us will lose. As the processes of offshoring and outsourcing continue -- both practiced heavily by public agencies and educational institutions as well as in the private sector -- even workers with advanced degrees and technical skills will have increasing difficulty in getting and keeping jobs.

Offshoring impacts jobs both in call centers and in computer programming; and as India and other places in Asia build their capacity to do more and more complex work for dramatically less money than U.S. and European workers demand, this will continue.

I certainly don't fault the average worker in India, China or Southeast Asia for taking whatever they can get to put food on the table. We've gotten perhaps too comfortable in the U.S. with our relatively extravagant lifestyles. But it's not like lower wages are causing that to change, because credit is still pretty readily available. So it's no surprise bankruptcies are still on the rise, in spite of recent changes in the law making them less of a "fresh start." Many of these bankruptcies are precipitated by burdensome medical bills.

The big winners are still the corporations and their stock holders. While some middle-class workers do own stock, mostly through these much-touted 401(k) plans and through mutual funds, the stock brokerage firms take out a big chunk of the dividends in fees and commissions.

Meanwhile, low-wage workers have no hope of owning even high-fee mutual funds. Many rely on ridiculously high interest "refund anticipation loans" to get by financially. If more of them had access to free tax preparation services that use E-File, perhaps that could be avoided.

There's still usually a fee for E-File, but it's considerably less than the several hundred dollars charged by the big tax prep firms. Also, you'll notice their offices in "urban" locations are only open from January through April - sitting empty but with long-term leases the rest of the year! Only selected suburban locations, many catering to small businesses which need to file taxes quarterly, are open year-round.

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