Pension: Right or Privilege?
As we have observed the latest political fighting in Wisconsin, the labor movement and its unions has been forced to justify some of its sacred cows, such as collective bargaining. But this kind of labor struggle brings about more interesting and fundamental questions not only about unions and their membership, but about what we think about work itself.
In our city, two questions related to workers are marginally discussed: should government employees, like police officers and firefighters, be allowed to be members of unions, and if yes, should they, like the workers of Memorial Hospital and the Utilities, have pensions? Perhaps in the wake of empty big ideas propounded by the mayoral and council candidates in the past few weeks, such as “we should have a vision,” “we need to create more jobs,” and “I am committed to transparency and accountability,” some real issues can be addressed once the election is over.
For example, should budgetary cuts include the police and fire departments? If not, why not? Is it because they are a big voting-block no candidate dares alienate? Or, rather, is it because every candidate checks the details of their budgets and found no way to cut five or ten percent without affecting services? And if public safety is the issue, and we have broad support for public safety, would it be any less safe to ensure efficiency in these departments? Put differently, would it not be less safe for all of us if these departments displayed complete disregard for public accountability and operated as if it were above the laws of supply and demand?
The fact that we are too frightened to even raise these questions is a problem. The fact that these are sacred cows is an even greater problem. The fact that whenever budgetary cuts are proposed both departments threaten with slower response time and human-power shortages for criminal investigations—while having all the personnel needed for speed traps with two motorcyclists at each spot—is even more frightening. And the fact that it has recently been rumored that some “public servants” are using classic strong-arm tactics to discourage businessmen from supporting a candidate that they don’t like is morally and legally unacceptable! Last I checked, only dictatorial regimes retaliate against their own citizens, those who pay taxes that pay salaries and new cruisers. We are all on the same side, and as such are all trying to figure out how to reconcile a low tax-base with high expectations of government services.
Back to workers and unions. We all know the historical narrative of work exploitation and dangerous working conditions, from New York garment workers of the turn of the last century to miners up the Colorado hills. We also know that, depending who counts, less than ten percent of the American workforce is unionized. So, it seems that the problems of the past have been solved. Manufacturers who remain in the United States have learned their lessons: no more child labor, no more twelve-hour workdays, no more suffocating factories and dangerous fire hazards. Yet, as we solved one set of problems, we seem to inadvertently have created another.
To understand this problem we should pay closer attention where union growth has come from in the past few decades: government employees. Don’t get me wrong: I have nothing against government employees; without them, basic public goods wouldn’t be available. But should they be unionized? If yes, should they have pensions? If yes, what kind of pensions should they have—life-long percentage of their last paycheck or others, such as 401(k)? Why do our local K-12 teachers get full pensions while state university professors get only what they put into a TIAA/CREFT program that is similar to a 401 (k) plan? It’s one thing to support the education of our children (which account for the bulk of our real estate taxes) and quite another to subsidize the long retirement of teachers after twenty years of service; incidentally, that’s why some university professors never retire—they can’t afford to…
Work in the Soviet Union was a right, while in the United States it has been more of an obligation, and for some a personal choice. We laughed at the Soviets, and, indeed, their regime collapsed. In fact, they messed up their socialist ideals so much that they forgot about the capitalist stage of their development and turned themselves into a totalitarian regime. By contrast, we have fully developed our capitalist system and inculcated a regime of hard-working type-A individuals who are always so busy that they must continuously multitask. We work harder as a society than any other and our productivity, as measured nationally, keeps on rising year after year. Of course, technology helps us work harder and more efficiently, but we also have encouraged a culture of motivated workers who embody the Protestant Ethics that find laziness to be sinful. We don’t tolerate slackers and find their “free riding” or riding on the backs of others to be punishable by dismissal. So, in general our attitude towards work is pretty much set: we believe we should all work, and when we work we should work hard.
What are the rewards of hard work? Money is only one element in the reward system. Promotion is another. Praise and other forms of recognition are the third. Vacation and sick leave are the fourth. What about satisfaction? This could be a fifth. Health-insurance is definitely a sixth element that is becoming more contentious. And somewhere at the bottom of the list is a retirement package. When car manufacturers in America couldn’t keep up with wage increases and health insurance benefits, they offered generous pensions. Why? Because it was a deferred cost that could wait for years before being paid out (and therefore could be only partially funded, unlike insurance premiums that are paid monthly). We are talking here about post-World War II.
Without being unkind, pensions make sense if people work for a very long time and die not too long after they retire. The longevity of a white male around 1900 was around 47 and by 2000 it was around 74, depending whose statistics you consult and what variables are included (gunshot wounds were more likely to kill you in 1900, just like birthing a child, than some one hundred years later). Assume you began working after high-school at 18 and worked till 68 (having contributed to your own pension fund for fifty years—being matched in whatever ratio by your employer—and having invested prudently for those fifty years), and then died in your early seventies, your pension would have been fully-funded even if it paid seventy percent of your last salary. Okay, let’s say you worked only till 58, and died at 78. You still have a ratio of forty working years to support twenty years of retirement. Any financial adviser would agree in general terms that even an annual increase of 5% of your fund would ensure pension payments. But as we all know, close to home, this is not the case anymore.
Colorado Springs is home to many retirees from the military and other government departments and agencies, and the retirement eligibility is now twenty years. Imagine, then, contributing for twenty years (18-38) and living another forty years to the ripe old age of 78. Can twenty years of pension funding support forty or more years of retirement payment? Of course, not? So, how do these pensions function? They expect new workers to support the retired ones, but as is the case with Social Security, there aren’t enough new workers in this recession to ensure payments to retirees.
If we are to maintain collective bargaining, as we probably should to ensure fair representation of workers’ needs and concerns, then such bargaining should be collaborative: wages may go down in recessions and up in boom times; more workers may be needed at some point and less at others, so that flexible staffing makes the operation efficient at all times. We can try the German model and have representatives of the unions as part of the management team to ensure an overall appreciation of budget constraints rather than an adversarial relationship that leads to resentment and strikes. This is not a philosophical ideal, it is already operational elsewhere.
If we are to maintain pensions, as we should as a token of appreciation for those working for many years in public service, then the ratio of work-years and retirement- years needs to be adjusted. I’m sure we’d feel morally and socially more inclined to support our retired neighbors after forty years of service more so than after twenty years. Especially if their own contributions are significant, then, like Social Security, it’s their money and they deserve to get a supplement from their employers. A hefty pension shouldn’t be the only motivating force to induce one to apply for a government job, a steady and secure one under most circumstances. Instead, from the President of the United States all the way to state and city employees, it should be serving one’s fellow citizens.
While we are still suffering from the worst unemployment rate in many decades, while millions are still out of work and eagerly looking for any job whatsoever, we have an opportunity to rethink workable solutions to labor concerns in a postcapitalist society.
Raphael Sassower is professor and chair of philosophy at UCCS and the author of Postcapitalism (2009). He has employed dozens of workers over the years and believes in their collaborative input to ensure financial sustainability if not profitability.
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