The new contract between Boeing and it’s union workers contains the following essential changes:
From Bloomberg.com The new contract is an eight-year extension to 2024 and includes $15,000 per member in bonuses and retention of a seniority system letting workers reach the top of the pay scale within six years. In exchange, they agreed to freeze pension contributions in 2016 and shift to a 401(k)-style plan with defined employer contributions instead of their current program of fixed benefit payments.
While I doubt the average Boeing employee will ever buy a Boeing jet, an analogy with Henry Ford comes to mind. In January 1914 Henry Ford doubled the daily wage for most workers to $5.00 ($116.53 in 2013). He sought to motivate assembly line workers, but also reasoned that as long as he was building a more affordable car he needed more people to be able to afford to buy them. His higher wage affected all of America and auto sales took off.
In contrast, in America today we are creating a generation of future retired citizens who won’t be able to afford much of anything. While it’s true the majority of Americans in the private sector never had a defined benefit pension, those with such a pension has been declining rapidly for forty-years.
Here is what the Wall Street Journal had to say about the Boeing agreement on January 6, 2014:
One reason union membership in the U.S. has shrunk to 6.6% of private workers from 35% in the mid-1950s is that to remain competitive businesses are fleeing union workforces that refuse to change. Detroit was a casualty of this jobs flight, and Seattle may have been another had Boeing machinists insisted on preserving their traditional pensions, which no longer exist in most of the private economy and leave workers hostage to economic fate. A 401(k) lets workers build assets immediately and transport them from job to job. The Boeing vote is a victory for common sense, the U.S. economy, and especially the Boeing workforce.
I find this amusing because that “transport from job to job” nonsense is the same cool aid we swallowed thirty years ago. The fact is that workers such as Boeing union employees do not jump from job to job with regularity. The fact is they will be significantly worse off with a 401k than with a traditional pension. The fact is that with a 401k the workers are also hostages to economic fate. They are individually subject to the vagaries of the stock market plus there is no guarantee of the employer match critical to building savings. During the Great Recession many employers reduced or terminated the company match; some later reinstated it, some didn’t. A 401k is better than no pension, it sure as hell is not better than a defined benefit pension. Ask government workers where traditional pensions at the federal, state and local levels are the norm and likely to remain so.
Companies can’t be competitive while offering a pension plan, workers can’t (or won’t) fund their own retirement and health care coverage, but everyone can pay the taxes needed so government workers can enjoy pensions, low-cost and sometimes free health care in retirement and sometimes a 403b plan as well. What’s wrong with this picture? Is this the utopian world of progressives?
The actions by Boeing and hundreds of other large employers across the Country are setting the stage for more and more dependency on Social Security and thus giving credibility to the Elizabeth Warren types who want to raise benefits and taxes. Employers worried about being competitive should think about what they are doing in terms of creating an environment where their costs will be determined by Washington in the form of new and increasing taxes for the very things (pensions and health care) they seek to avoid.
And while the older population increases and the secure income of this group decreases and the costs for health care increases, the ability for us seniors to buy our own Boeing 777 (or a Ford, a vacation, perhaps even groceries at Walmart) diminishes. Does anybody think ahead? I wonder if that Boeing $15,000 bonus is eligible for 401k employer match?
Retirement is trashed