Boeing announced plans to move its nonunion workforce from pensions to 401(k) plans starting in 2016. This, despite the company enjoying record profits and stock price. It also comes at a time when the remaining pension plans are at their strongest in years.
American Express established the first private pension plan in 1876. By 1980, 46 percent of all private-sector workers were covered by pensions, according to the Employee Benefit Research Institute. In 1978, section 401(k) of the Revenue Act created qualified deferred compensation plans.
By 2011, defined contribution plans such as 401(k)s were the only retirement plan for 31 percent of all workers in the private sector. Traditional pensions as the only plan were enjoyed by 3 percent, with 11 percent having both. There are other ways this has been measured, but all show a stark change.
The basic difference: With a traditional pension, the employer promised to pay a retiree a fixed sum. With 401(k)s, it was DIY retirement planning, heavily dependent on stock-market performance. Sometimes employers matched the employee’s contribution. Abuses and bad practices involving 401(k)s have come to light. In many cases, Americans with these plans are ill-prepared for retirement.
Traditional pensions, along with steadily rising wages and a greater share of productivity gains going to workers, were the pillars of the middle class. Goodbye to all that. It’s a good thing young people entering the workforce don’t have staggering college debt and are being hired at good salaries. To be sure, Boeing workers are better off than most. They have jobs, decent wages, what seems like a fairly good plan, and existing pensions. Millions of workers lack even 401(k)s.
On the honor system, and excluding ideology of what ought to be in theory, what has been your personal experience.
This Week’s Links:
• Inside today’s employment report | Dean Baker
• London’s laundry business | NY Times
• President Obama’s 2015 budget is a disaster for health research | The Incidental Economist
• The doomsday cult of Bitcoin | Daily Intelligencer
• When ‘job creators’ create lousy jobs | Naked Capitalism
• Redistribution, inequality and sustainable growth | Economist’s View
Today’s Econ Haiku:
Can the waterfront
Survive Seattle process?
Bertha will beat it