You see them everywhere: RV’s plying American highways, piloted by silver-crested charioteers, sporting impish bumper stickers like “We’re spending our kids’ inheritance.” For the first postwar generation of American workers, putting in a faithful forty years “doing time working for The Man” may have sometimes felt like a jail sentence but offered a handsome reward. Corporate and state employee pensions bolstered the federal government’s Social Security system to provide a secure if not always lavish retirement for a substantial majority of Americans. But recent and long-term trends have eroded that assurance. Their kids and grandkids will likely inherit a far less ample retirement, if indeed they receive any at all.
The good news is that despite alarming predictions of imminent insolvency by those who seek to privatize the system and hand it to Wall Street, for the moment the Social Security system remains well-funded. A federal program of mandatory social insurance established during the New Deal, it draws on payroll taxes from both employees and employers and is placed in a separate fund not to be accessed for other purposes. Never intended to be the sole source of retirement support, Social Security pays its beneficiaries (who include not only retirees but the disabled and survivors of recipients) lifetime benefits that average 40 percent of the inflation-adjusted pre-retirement income of middle earners and 50 percent for low-income workers. As those lifetimes have grown longer, the increasing burden on the system has pushed the age at which full retirement benefits become available from 65 to 66, a figure that’s expected to rise further in coming years.
As part of their traditional benefit packages, until recent years employers in the public and private sectors routinely provided their employees with private pensions to supplement Social Security. But as the U.S. manufacturing sector has dwindled and unions have lost membership and influence, the percentage of American workers covered by private pension plans has dropped to less than half. Most of these workers are enrolled in defined contribution plans to which employers may but are not required to contribute.
Moreover, as titans like General Motors have plunged into bankruptcy, they’ve sought to shed long-term commitments to corporate pension plans. Business interests complain that $1600 of every vehicle’s purchase price goes to cover “legacy costs,” mostly contract-mandated retiree health and pension benefits. In return for saving jobs, auto workers have surrendered many of these benefits, but apparently not enough to prevent attacks on the rest. Watching GM’s struggles, many employers from newer industries avoid such long-term commitments. Increasingly they’ve turned to outsourcing and contract labor to provide them with the flexibility to shed workers when revenues won’t support them.
Public sector workers – city, state and federal employees – have long figured that while they generally receive lower pay than in the private sector, they’re compensated by rock-solid pension plans. But as state governments facing billion-dollar budget deficits slash away at public services, health care and higher education, many employees fear that politicians will raid their once sacrosanct public employee retirement plans.
As always, however, those most vulnerable of all are the tens of millions of American workers who have never been covered by a pension plan. These include temporary and part-time workers, farmers and migrant laborers, and service workers in industries like retail and the restaurant and hospitality trades. They also include a higher income class of knowledge workers, professionals, independent contractors and others who’ve chosen a more independent but insecure path. Most of these free-spirited boomers have yet to retire and look on the prospect with increasing unease. They’ll need to cobble together a patchwork retirement from Social Security benefits based on intermittent incomes, their own often modest savings and whatever they inherit from their more security-minded parents.
And now comes the Great Recession. If, as predicted, it’s a slow and painful recovery, it will only further fray America’s already threadbare retirement safety net. Low income wage-earners in industries like fast food, retail, maintenance and construction that routinely provide no pension face a future of work without end. Nearly half of all Americans have no net worth and many of these are mired in chronic debt. Often in poor health from the multiple stresses of work, family conflicts, lifestyle choices and violent, toxic environments, 45 million Americans also lack the health insurance that would enable them to treat or prevent their worsening health.
But increasing insecurity about old age is by no means limited to the working poor. Many faithful workers find themselves laid off in their fifties, struggling to be rehired as prospective employers turn to eager youth willing to work for less. Until recently, middle-income boomers looked to the rising values of their mortgaged homes as retirement collateral. Now that both their homes and stock portfolios have shrunk by a third, they look to the future with increasing anxiety. They dread the prospect of putting their kids through college as tuition costs rise to replace declining state support. And they wonder whether they’ll ever be able to retire – or, absent that option, to maintain their health and keep or create income-producing work into their seventies and beyond.
It wasn’t supposed to be this way. The postwar promise of steady work and a secure retirement lasted just one generation before the profligacy of politicians, metastasizing private and public debts, the venality of the financial sector, the decline of American manufacturing and other adverse trends rendered it moot. In an increasingly unbalanced society, inequalities of wealth and income are producing radical inequities of ultimate outcome. For as the fortunate few who’ve come through the recession still richer than they went in, retirement plans hardly matter: they’ve got their own. But for the great majority who depend on public and private pension plans to reward them for lifetimes of labor, retirement may be one American Dream that will remain painfully out of reach for many years to come.
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