How's Your 401K?

Back in the late 70’s and early 80’s American corporate employers began the systematic destruction of the American worker’s pension plan. Rather than employers contributing to secure pension plans, leaving employees a secure future upon retirement, employers, along with Wall Street, saw the opportunity to convert pensions into plans that invested in the stock market. Not only did Wall Street get a huge influx of the American workers’ pension money but employers reduced their costs for workers’ pensions.
Unions fought against the trend to the “defined contribution plans” because the value of the pensions were open to fluctuations in the market and the employer got off the hook in paying a fair share to employees’ pensions. Instead they were able to decrease their contributions and leave the employee holding the bag to pick up the difference.
Unfortunately, Americans came to believe the employer could be trusted more than employee organizations advocating for workers. Unfortunately, unions allowed themselves to be infested by unscrupulous managers of their pensions and leaders tied to organized criminals like the Mafia, Wall Street and Congress.
After the passing of the Taft-Hartley Act in 1947, restricting unions ability to organize and creating “right to work” laws in 22 states, the union membership fell from 36% to 12% in the U.S.. Even though union members earn approximately $9,000 more than non-union members nationwide and both non-union and union members earn $2,000-$3,000 less in yearly wages in right to work states, employees still hold on to the idea management “knows best”. This idea is constantly reinforced by corporate industrialists funding campaigns to get right to work laws passed in all states. The laws are in fact “right to earn less laws”.
There remains a constant barrage by management of large multi-national corporations to undermine and destroy labor unions. One of the key strategies to the undermining of unionism is taking away secure pension plans negotiated by unions. The selling of 401k type plans to replace the defined benefit plan was a key.
Since the beginning of these plans there has been a steady decline in savings for the average worker’s pension. This decline occurred at the same time the market was rising at record rates. Only the more affluent wage earner could afford to contribute enough to take advantage of the market’s increase. Even a 2002 article in Wall Street Journal conceded the average wage earner has seen decreased earnings in their pensions over the last 15 years. Today (October 8, 2008) the 401k type pension plan has lost 10-20% in value due to the collapse of the stock markets across the world. Today there is a report from the federal government over 2 trillion dollars has been lost in American pension plans that rely on investments in the stock market.
Companies like Wal-Mart have perpetuated the idea unions are intrinsically evil and will lead to the destruction of American businesses. All while, Wal-Mart and corporate America has sent jobs to China and third world nations willing to overlook slave camps of workers getting paid wages ten times less than American workers. And CEOs of these corporations now make salaries thousands of times larger than the average American worker.
The combination of union corruption and corporate greed and corruption has betrayed workers around the world. American workers once believed they could be part of a strong middle class with some job security and a pension allowing them to live comfortably at retirement. They saw the “greatest generation” of parents and grandparents cashing in their pensions at retirement and thought they could do better by being “in charge” of their pensions through 401k type plans.
The promises of being in charge of their pensions were the same lies as those being told about the Wall Street bailouts. Corporations, banks and investing firms claim they didn’t see it coming but the truth is now coming out. The CEOs of the failed and “bailed” planned ahead for themselves. While they lied to investors about the coming carnage, they started putting away their “golden parachutes” before it came. The management of Lehman Brothers told investors things were “good” while they started taking their bonuses and investments out of the sinking ship. The 75 billion dollar bailout of AIG resulted in the firing of the management initially, only to see them rehired for one million dollars a month to manage what they allowed to fail.
In the 1990’s I worked as a RN at a state hospital with a defined benefit plan. Our union was allowed to die when a Republican became governor. A short time after the governor took office; privatization became the buzz from the capitol. The hospital was turned into an “authority” free of “cumbersome” state regulations and union restrictions. The pensions of those working at the hospital longer than ten years were kept in place but all others were converted to a defined contribution plan (401k type plan).
Try as they might, the explanation by management of how beneficial the conversion from a defined benefit pension to a defined contribution plan didn’t compute as favorable to employees. It amounted to a loss of parity between employer and employee contribution and a far less secure future if the stock market were to go bad. Of course, all were assured the plan would be safe and the market would only deviate up and down in small increments that would balance out and a steady growth would make the pensions much more profitable.
Now, you have to ask who was really making out with the pensions going into the stock market. The employee was getting small returns for their contributions. The employer was getting to pay much less in employee benefits and in many cases the employees were mandated to have part of their pensions invested in the company they worked for (see Enron). And the stock market continues getting a steady infusion of cash to gamble with courtesy of the American worker.
If the duped American worker, who continues to rail against unions for taking money out of their pockets with dues, really examined things they’d see unions actually increase their wages every time unions negotiate wage increases for themselves and over 80 percent of union workers have pension plans while less than fifty percent of non-union workers have pension plans. Non-union employers will increase wages to maintain non-union shops when unions do get wage increases. And sometimes they even offer benefits as bait to keep the union away.
Most union members have health insurance that allows them to actually access care while most non-union members can’t access insured healthcare. Companies like Wal-Mart brag they offer health benefits to their workers but the employee portion of the policies often prevent the worker from participation because they can’t afford the cost and still pay for housing and food. Even when these workers participate, high co-pays keep them from using the benefit except in urgent and emergency conditions. And still the notion of unionization escapes most workers.
If American workers fail to understand the concept and necessity of unions they fail to understand the corruption of corporate America taking their jobs to slave camps in China and third world countries. They fail to understand unless there is a world-wide union movement; no worker in the world can ever be secure in their employment.
The Wall Street crash has taken over 20-50% of savings from pensions and investments such as whole life insurance plans from “main street Americans”. There are quotes of Americans saying they will have to defer retirement because they’ve lost so much. The predatory loans, the reckless investors and the virulent greed of Wall Street, Congress and CEOs has created the likelihood the American worker will lose jobs, wages and benefits.
The fact Americans didn’t see this coming is the same blindness that fails to connect spending ten billion dollars each month in Iraq has consequences not only on the life of their troops but also on an economy already built on a house of cards. They failed to be outraged with the savings and loan scandals led by Charles Keating and certain Congress people (including a certain Presidential candidate). They failed to be outraged at the dot.com crash of tech stocks even though it was obvious there was nothing being sold but promises and lies. And now Americans are outraged that the inevitable has happened to them.
The American people allowed themselves to believe taking away watch dogs of the corporate world would increase their personal interests despite a litany of historical events that flew in the face of such beliefs. George W. Bush, Dick Cheney and cronies have raided the American treasury and disbursed it to corporate America. The have left social programs, pensions and healthcare gutted for the rest of America. And Congress has been complicit in the greatest robbery of citizens since the Great Depression. Congress refuses to indict and impeach the Bush Administration. Congress refuses to protect the American middle class and the poorest Americans. Congress is as guilty as Bush in the failure of government. And Americans will look at statements concerning their 401k and continue to wonder what happened. And reelect many of the same criminals responsible.
As the American economy crashes and the perpetual wars continue, Americans are coming to realize the “dream” is now a nightmare. Wealth at the cost of moral values has come back to haunt us. We were sold a hollow dream by criminals posing as leaders. We were promised security but given a future that leaves our children and grandchildren our unfathomable debts. Like our wars of aggression, our greed and obsession with wealth has left our nation bankrupt in financial terms and bankrupt of honor.
It is easy to construe such sentiments as anti-American or traitorous. That tends to be the way flag waving Americans react to any criticism of the policies of the American government. As long as we continue to believe we are beyond criticism and we think a corrupt system can be fixed with some tweaking, we will remain mired in our own failures.
Americans can prove their faith in this nation by demanding fundamental changes in leadership that goes beyond Democrats and Republicans who have shown they’re incapable of leading. They can prove their patriotism by beginning to sacrifice and assure all Americans are taken care of with housing, food, healthcare and education. They can prove their courage by standing up to a failed and corrupt government.
It is unfortunate Americans didn’t rise up when their sons and daughters were sent to unnecessary wars. It is unfortunate they failed to rise up when it was clear their rights were being stripped from them in the name of “homeland” security. It was inevitable the economy would become the major focus. The bottom line is; it has always been about the bottom line for this nation. Now we must change our values. We must decide if we are a moral people. We must decide if we want to be respected as honorable by the rest of the world.
JFK once said” When written in Chinese the word, crisis, is composed of two characters. One represents danger and the other represents opportunity.” JFK was part of the problem that brought us to this point in history but he wisely saw the truth of crisis. Now is our opportunity.