Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers: Book Club

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Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers

What Will They Do When the Money Runs Out?

Comment by Dean Baker

Ellen Schultz has given us a fascinating account of the ways in which corporate America has been able to game legal and accounting rules to emasculate the private pension system. It was only a few decades ago that a secure pension was a staple of middle class life. Workers in middle class jobs, whether in offices, construction, or manufacturing expected to have a pension in retirement to supplement their Social Security income. In many cases, the pension would provide the larger portion of their income, with the Social Security benefit being the supplement.

We should be careful not to glorify the pre-1980 period as a golden age of pensions. Many pensions were not especially generous. Women and minorities were far less likely to have a pension than white men. And, many workers walked away from jobs with nothing after just missing a vesting period by a year or even a month.

Nonetheless, in 1980, roughly half of the work force had a defined benefit (DB) pension on their job. Today, the figure in the private sector is less than 20 percent and it is dropping rapidly. This shift reflects a great loss in the level of retirement security that workers can expect. The 401(k) system of defined contribution has not come close to replacing the losses from the old DB system. The percentage of workers who have access to any retirement plan at their jobs, including a 401(k), is roughly the same as the percentage who had a DB plan in 1980.

We know that the vast majority of workers end up accumulating little in their 401(k) accounts. The median holdings at age 60 for those with accounts is less than $150,000. This is enough to provide a retirement income of about $750 a month. And three quarters of retirees will get less. This is not a story of a middle class that will enjoy a middle class life-style in their retirement.

Ellen Schultz’s book is the story of how we got from there to here. From a world where at least a substantial segment of the population could count on a defined benefit pension to give them a substantial degree of retirement security to world in which the majority of the middle class are looking at a retirement where they are not too far above the poverty line.
The book is essentially a menu of ways in which companies have found to scam the pensions of their workers and the code in order to increase corporate profits and

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http://fdlbooksalon.com/2012/02/05/fdl-book-salon-welcomes-ellen-e-schultz/