Pension cuts and inequality wiping out retirement for American workers

Pension cuts and inequality wiping out retirement for American workers: "By Jonathan Keane
24 April 2006

By Jonathan Keane
24 April 2006

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For a growing number of US workers, dreams of a decent retirement are quickly evaporating as companies shift retirement costs onto workers, in the form of deductions from already declining wages, in order to maintain profits in a competitive global economy.

In the wake of the post-World War II business boom, US workers were granted certain limited concessions in a three-legged system of retirement security that included individual savings, government programs and private employer pensions. Between the 1940s and the 1980s, private pensions with a guaranteed payout (also known as defined-benefit pensions), became a standard component of compensation for a large section of the American workforce.

However, in the early 1980s, defined-benefit pension coverage peaked and then fell in part due to that decade’s deindustrialization. The service sector jobs that supplanted industrial jobs had, for the most part, lower wages, fewer employer-paid benefits and less job security.

According to a recent study by the Aon Corporation, a consulting firm, a majority of over 1,000 US employers surveyed believe that a large portion of the US workforce will not have enough income to retire at a reasonable age. Of the employers surveyed, 32 percent said that between half and three-quarters of their employees would not have the needed income to retire between the ages of 62 and 65. And 37 percent asserted that one-quarter to nearly half of their employees would not be able to retire in this age range.

“A growing number of companies are shedding their pension plans, accelerating a trend that has resulted in the loss of nearly three-quarters of pension plans during the past two decades,” Tami Luhby wrote in Newsday April 3. “Just under 47,000 companies offered defined-benefit pensions in 2001...down from more than 170,000 in 1985.”

Company after company is now freezing its pension plan, replacing defined benefits with employee-paid 401(k) defined contribution plans. These include Alcoa Inc., General Motors Corp., Hewlett-Packard Co., IBM Corp., Lockheed Martin Corp., Sprint-Nextel, Unisys Corp. and WellPoint Inc.

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