JOIN USFor the first postwar generation of American workers, putting in a faithful 40 years ‘working for the man’ may have sometimes felt like a jail sentence, but it offered a handsome reward. Corporate and state employee pensions bolstered the 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.
The good news is that despite alarming predictions of imminent insolvency by those who seek to privatise the system and hand it to Wall Street, for the moment the social security system remains well-funded. A federal programme 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 lifetime benefits that average 40 per cent of the inflation-adjusted pre-retirement income of middle earners and 50 per cent for low-income workers.
Until recent years, as part of their traditional benefit packages employers in the public and private sectors routinely provided their employees with private pensions to supplement social security. But as the US 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.
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Watching GM’s struggles, many employers from newer industries avoid such long-term commitments. Increasingly they’ve turned to outsourcing and contract labour to provide them with the flexibility to shed workers when revenues won’t support them.
Public sector workers 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.
The most vulnerable are the tens of millions of American workers who have never been covered by a pension plan. 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 baby boomers have yet to retire and look on the prospect with increasing unease. They’ll need to cobble together a 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 50s, 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. 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 70s and beyond.
It wasn’t supposed to be this way. In an increasingly unbalanced society, inequalities of wealth and income are producing radical inequities of ultimate outcome.
For the fortunate few who exit the recession richer than when it began, retirement plans hardly matter: they’ve got their own. But for the great majority who depend on public and private pension plans, retirement may be one ‘American dream’ that will remain painfully out of reach for many years to come.