Hello, Labor Fightback!
Thanks for inviting me this evening to speak. I’m Karen Friedman, the executive vice president and policy director of the Pension Rights Center. We are a national consumer organization that has been around since 1976, working to promote and improve retirement security for American workers and their families.
We work to close gaps in the law which have prevented folks from getting pensions; we provide hands-on legal assistance to individuals to help them enforce their rights; and we work toward visionary polices for the future.
The Center’s work is needed now more than ever as the attacks on pensions and Social Security grow across the country. So, as I was preparing to come today, I thought who is more New Jersey than anyone?
Bruce Springsteen, of course!
And the Boss would certainly be inspired by all the work you’re doing to reinvigorate the labor movement and to fight for working people everywhere.
So I decided to channel the Boss and write a little poem to start my presentation. Instead of “Born to Run,” I present, “Born to Fight.”
In the day, you workers sweated it out, to get a pension from the company team
At night you slept peacefully, thinkin’ you’d captured the American dream
But now legislators and companies are betraying all your trust
By cutting your benefits – making those secure dreams go bust
But whether you’re driving on the highway, or workin’ a factory with smokestacks
It’s time to get together, and yes, labor’s fighting back
And you’re organizing here today, because you know you’re right
‘Cause folks like us, baby, we were born to fight
Yes, folks like you, baby, we were born to fight
I’m going to talk today about how we’re going to fight back to protect pensions for today’s and tomorrow’s retirees.
To that end, I’ll be discussing the retirement crisis facing this country, the need to protect the good plans that people have, and the need to work for a new movement for retirement security for all.
Let’s start with the big picture:
Because of all these factors, we now have a huge and growing Retirement Income Deficit in this country of $7.7 trillion. That’s the gap between what people have saved as of today and what they would need to have saved today to meet their basic retirement needs. This Retirement Income Deficit would be a lot higher if private, state, and local pensions are cut and if Social Security is decreased.
National opinion polls reflect America’s anxiety. A Gallup poll shows that Americans are more worried about not having enough money for retirement than any other economic issue – including paying for health care, their mortgage, or their kids’ education. Another poll shows that baby boomers fear outliving their money in retirement more than death!
So given all this, policymakers should be making pensions and retirement security a national priority, right?
But sadly, we at the Pension Rights Center are seeing an assault on retirees in ways that we have never seen in our 39 years of existence.
Assault #1: Social Security
Social Security is the most successful social insurance program in the country. It is the bedrock of security for American families. Nearly two-thirds of retired Americans receive half of their income from Social Security, and it’s the only source of income for one in five older Americans (Social Security now averages about $15,977 annually for the typical retiree. It is much less for women and lower-wage workers).
Yet, despite the importance of this program, policymakers have been trying to undercut this program for years.
What most people don’t hear is that, despite the reports of doom and gloom, Social Security can pay 100 percent of benefits for the next 18 years – without a single change. There are many practical ways of fixing Social Security.
We need to fight back and save Social Security.
Assault #2: State Plans
While state workers have given up wages to get good pensions – and generally make lower wages than their counterparts in the private sector – we keep hearing that public pensions are bankrupting the states.
You’ve heard it here in New Jersey where Governor Christie negotiated cutbacks after he was elected in 2011in exchange for putting in more money into the pension plans. And then, as I understand it the Governor reneged on this deal the unions are suing. The workers and retirees won in the lower court, and that decision is now on appeal. We’ll see what happens.
In Illinois, the state Supreme Court recently ruled that the cut-backs violated Illinois’ constitution.
And fights continue in state capitols across the country, despite the fact that most state pension plans are well funded and, when they’re not, it’s usually because the legislators didn’t fund the plans.
This is NOT the fault of retirees and workers who held up their end of the bargain, and who typically also provide direct contributions to the plan.
Public pensions are an important and ongoing source of economic stimulus to every state, city, and town across America. According to one study by the National Institute on Retirement Security, the system of traditional defined benefit pension plans distributes $140 billion annually and adds $200 billion in economic stimulus to the nation each year.
We need to fight back against these cuts in state plans.
Assault #3: Municipal Plans
Of course, we’ve also seen attacks on municipal plans – and Detroit is test case # 1. You all know that the city declared bankruptcy to try to shed most of their pension obligations.
Retirees and workers did get some of their pension benefits cut, but, thanks to AFSCME and philanthropic foundations that helped get a better deal, these cuts were much less than they could have been.
Other cities, like Stockton, California, are trying to follow Detroit’s lead.
There needs to be an open and honest discussion about what caused cities’ and states’ problems, but policymakers should not use scare tactics to cast teachers, firefighters, and other state workers as the cause for the fiscal problems of states and cities.
We need to fight back against these cuts.
Assault #4: Attacks on Private Plans
And finally attacks are also happening in private plans.
As I said earlier, over the past decade, more and more companies have found ways of breaking promises to workers and retirees, by dropping good guaranteed pension plans, cutting benefits, freezing plans, and replacing them with 401(k)s.
As bad as these trends have been, at least retirees and workers in company and union pension plans could depend on one thing: while companies could change the plan for the future, benefits earned could not be taken away.
We were appalled when, in December, Congress passed a law that will allow for the already-earned pensions of retirees to be cut in certain underfunded union-negotiated plans called multiemployer plans.
At the tail end of 2014, with only hours to go before Congress adjourned, a bill called the Multiemployer Pension Reform Act of 2014 was snuck into the year-end, must-pass omnibus spending bill.
This new law allows for those who run pension plans to balance their books on the backs of retirees. The bill, which passed without hearings or public debate, overturns 40 years of private pension law by allowing retiree benefits to be cut now – by 60 percent or more – long before any plan is projected to run out of money.
The bill will hurt hundreds of thousands of retired truck drivers, pipefitters, construction workers, and food-service workers. These are men and women who toiled for years, giving up wages while working so that their employers could put money into the pension fund on their behalf – and they were promised they could count on this money.
As everyone here knows well, pensions are not freebies. They are earned. Every teacher in state plans and every worker in a company or union pension plan gives up wages, either explicitly or implicitly, so that their employer can put money into the pension plan so that they will get a pension when they are too old to work.
Yet folks who worked hard and did everything right are now finding the rules changed on them mid-stream. Retirees who are living on fixed income and have to rely on this money are suddenly told, “Sorry, Charlie, the pension you thought you can count on? We’ve changed our minds.”
This is unjust and unconscionable, and it affects not just workers and retirees but ultimately it affects all of society.
This is an issue of economics and of values. If policymakers allow cutbacks of retiree pensions, which undermine the most the most sacrosanct principle of all pension laws, what does this bode for America?
Do we as a country value promises made to people, especially our elderly and our most vulnerable? Or have we become a country that obliterates promises and has no regard for workers and retirees?
We at the Pension Rights Center – and I know everyone here this evening – believes that keeping promises to people in public and private plans is fundamental to answering these questions.
And, we still think that America, as the richest country in the world, can and must keep our promises.
These issues are tied together. When Congress passed this law that allows for cuts in retirees’ pensions in multiemployer pension plans, one legislator remarked, “Thanks for doing this. It gives us an excuse to cut Social Security.”
I read a report written by the hedge fund BlackRock, in which they say point-blank that the Multiemployer Pension Reform Act of 2014 may lead to what they euphemistically call other “reform” in corporate pension plans, and in state and local plans.
The end game: retirees, who once got the strongest protections in society, are the new scapegoat for all budgetary problems, and they’re on the chopping block everywhere.
Is that the America we want? I don’t think so.
According to Generations United, almost 8 million children live in what they call “grandfamilies” – households headed by grandparents and other relatives. As all too many families are struggling to keep jobs, to pay for their kids’ education, grandparents often help out with expenses. And those grandfolks with good pensions are most likely to be able to afford to help out.
I want to stress here we cannot let this become a fight between the young and the old, which these battles in pensions are increasingly becoming. Pensions should not be cut to pay for education. And retirees and workers should not be penalized because plans become underfunded.
We live in a civilized society where we need to take care of the young and the old. We need to fund education and we need to keep pension plans that are working. It shouldn’t be us or them.
Ultimately we need to have a larger movement for Retirement Security for All – for today’s and future retirees.
Here are some principles for the future:
A fairer private pension system can be funded by rejiggering some of the enormous tax breaks that now fuel the pension and 401(k) system to the tune of $80 billion a year.
In closing, since I started with Springsteen, let me end with a few more Springsteen-inspired lines:
Born in the USA, I deserve a pension in the USA
Born in the USA, I gave up wages, now we gotta make them pay….
Labor Fightback, we can work together for a fairer system and ensure retirement security for all. Thank you.