Liberal Talk Radio

Thanks to the Contrarian for pumping out so many kilobytes on the transit strike. One thing that occurred to me the other day is what role, if any, labor has in working towards changing the stalemate over pensions and health care and other benefits.

It’s clear that the current system is deeply flawed. If you haven’t read Roger Lowenstein’s NYT Mag article on pensions from last October, go read it ($). It tells us several interesting things that are directly relevant to the current dispute (lest we be accused of knee-jerk arguments that belie the specific facts of the particular case!). The big issue here is pensions, and so let’s talk about them.

First, Lowenstein reminds us why pensions are important:

This is the beauty of a pension or of any collectivized savings pool. The pension plan can afford to support people who live to 90, because some of its members will expire at 66. It subsidizes its more robust members from the resources of those who die young. This is why a 401(k) is not a true substitute. Jeffrey Brown, an associate finance professor at the University of Illinois at Urbana-Champaign and a staff member of the president’s Social Security commission, notes that as baby boomers who have nest eggs in place of pensions begin to retire, they will be faced with a daunting question: ”How do I make this last a lifetime?”

However, the main problem is that the employer has to make the math work out, and too often, the employer has neglected that responsibility. And when that employer is a government agency, which can always fall back to tax dollars if need be, the underfunding problem is even worse. State and local government pensions are underfunded by a total of $300 billion, Lowenstein estimates.

So, to simplify, pensions are better than 401(k)s, so long as they’re properly funded. There are three ways to make sure they’re properly funded, it seems: (1) eliminate the P.B.G.C., the government entity that ensures pensions and there fore gives companies incentive to under-fund, (2) fine any company that doesn’t meet their obligations, or (3) make workers contribute to the pension fund directly, so that it’s sure to be funded.

(1) is a good idea, but doesn’t help in the case of governments, which can still tap tax dollars, (2) is impractical because any fine would be smaller than the liability, and anyway the government wouldn’t be affected because of (1). So that leaves us with (3), which, as I understand it, is exactly what the MTA is proposing.

But now, to end the strike, TWU demanded and MTA agreed to take this pension funding proposal off the table, even though it would only apply to workers just starting out. It boggles the mind.

I’d never pretend to be an expert on retirement policy, but it seems that this is a pretty good idea, considering what we now know about how pensions are and aren’t funded. Maybe having employees contribute to their pension funds would be a better alternative, a “third way” of sorts between a pure 401(k) system and the currently flawed pension system. If anyone has any wonkery out there that applies to this, send it over, I’d love to read it.

To return to my original question, what role should labor play in experimenting with these ideas? I’d argue a more significant role than they currently play. The 21st Century will almost certainly include “a total reimagination of the basic contract between government, businesses and workers” at Matt Bai wrote in an overly-criticized article in last week’s NYT Mag. Workers can bring something to the table in those discussions, or they can be left out in the cold, like millions of New Yorkers were this week. A good first step would be to acknowledge that pushing back against this shifting landscape will simply cause more significant problems down the track.