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The Two-Tier Provision in the Chicago Teachers Union’s Tentative Agreement, Explained

Wednesday, October 19th, 2016

The tentative agreement that the Chicago Teachers Union (CTU) struck with district management less than an hour before a midnight October 10 strike deadline has been hailed by many as a victory. Facing another round of concessionary demands, the union managed to extract $88 million from the mayor’s corporate slush fund to restore some badly needed funding to the school system. The union also managed to win an increase in compensation.

But the way that the compensation is structured—with current teachers keeping their current 7 percent pension “pickup,” and new hires receiving a salary increase in lieu of a pension contribution—has some critics decrying the deal as a solidarity-killing, two-tier contract. A pickup is the percentage of a worker’s pay that an employer puts directly into a pension fund.

The CTU’s House of Delegates meets Wednesday to deliberate over the tentative agreement and vote on whether to send it to the entire membership for ratification. If the deal is rejected, there is no guarantee that management will agree to more of the union’s demands—or even return to the table.

Two-tier contracts are an emotional subject in the labor movement. Beginning in the 1980s, employers used threats of off-shoring and sub-contracting, as well as their legal “right” to permanently replace striking union members, to force a wave of wage and benefit givebacks across many unionized industries. In order to make these cuts more palatable to the members who would have to vote on their ratification, unions negotiated agreements where current workers preserved most of their pay and benefits while future hires would bear the brunt of the cuts.

There are many epithets for this sort of thing, but the most common may be selling out the unborn. These ticking time bombs blow up years later, as the “new” hires become a larger portion of the bargaining unit and resent their veteran colleagues both for their more generous compensation packages and for the fact that the older workers signed away their younger colleagues’ right to enjoy the same. As the veterans become a minority in the workplace, there is an obvious financial incentive for supervisors to push them out through aggressive discipline. In such a situation, worker unity in future rounds of bargaining is hard to achieve.

To be clear, not all “two-tiers” are alike. The powerful New York Hotel and Motel Trades Council accepted a two-tier wage structure after surviving a 27-day strike in 1985. But the tiers only impacted workers during their first year of employment. By year two, all workers were earning the same pay rate. And, decades later, ending the tiered pay scale remained a union bargaining priority.

The United Automobile Workers (UAW) accepted a two-tier pay scale at Chrysler when the company went bankrupt in 2009. It was so severe that new hires earned only half the hourly wage of veteran employees. When members voted down a 2015 successor agreement that did not go far enough in reversing the double standard, the UAW was able to renegotiate a deal that brings newer workers closer to the traditional pay scaleover the course of seven years.

The CTU’s proposed “two-tier” is a bit more of a shell game than those concessions. The fight over Chicago’s 7 percent pension pickup has more to do with symbolism than anyone’s actual paycheck. Pension systems are complicated things that only accountants and union researchers fully understand. But basically, a pension fund needs a certain amount of money coming in every year in order to guarantee a livable retirement income for actual and projected retirees. Currently, the Chicago Teachers Pension Fund has set that target at 9 percent of every pension-eligible employee’s annual income.

Before the CTU won collective bargaining rights in the 1960s, teachers had most, if not all, of their pension contributions deducted directly from their paychecks. Over the years, the CTU was able to bargain for 7 of that 9 percent to be contributed directly into the pension fund, instead of paid as a salary increase and then immediately deducted as a personal pension contribution.

Obviously, the difference between putting 7 percent in pension contributions directly versus rolling it into salaries, and then immediately deducting it, makes no financial difference to the employer. But the 7 percent became a visible target for Gov. Bruce Rauner and Mayor Rahm Emanuel. It was money they could portray to the public and the press as “extra” compensation that teachers get that other workers don’t and demand that teachers give it up. (It should be noted that Chicago teachers aren’t eligible for Social Security, so their pensions are the only thing that stand between them and an old age spent subsisting on cat food.)

Under the tentative agreement the CTU is considering, the pay for new hires would increase by an additional 3.5 percent in two successive years. It’s not entirely clear how soon new hires would be responsible for paying the full pension contribution.

Teachers at charter schools also participate in the Chicago Teachers Pension Fund. Members of the Chicago Alliance of Charter Teachers and Staff (Chicago ACTS) at the UNO Charter School Network (UCSN) are currently bargaining over the very same pension pickup, and have set a Wednesday strike deadline.

I was a part of the bargaining team that negotiated the first contract at UCSN in 2013. Because we had a significant amount of bargaining leverage in the wake of a very public insider dealing scandal, we realized that those negotiations were our best shot to get the charter network to pay more than the whole lot of nothing that it had been contributing to teachers’ pensions.

We were successful. That 7 percent was a part of an overall compensation package we were going to win anyway. But by directing the employer to put it towards the pension, we politicized a different figure: the network’s starting salaries. Because charters compete in the same labor market as the district to recruit new teachers, the salaries they can offer are key. If that 7 percent had simply been rolled into base pay, UCSN would be able to quote starting salaries that appear to be larger than what the district offers, but really aren’t, giving the union leverage to raise wages in future negotiations. Now that starting salaries at Chicago Public Schools will appear to be 7 percent larger—if CTU members ratify the deal—the salaries that UCSN offers will appear even less competitive.

As for ratification of their contract, CTU members have to decide how important the symbolism of that 7 percent is and what impact it will have on future rounds of negotiations. The shifting of that 7 percent from one column in a spreadsheet to another strikes me as a last minute ploy to give Rauner and Emanuel a face-saving narrative that allows them to say they didn’t suffer a humiliating defeat in this round of bargaining.

“This is not a perfect agreement,” said CTU president Karen Lewis. “But it is good for the kids. And good for the clinicians. And good for the teachers, and the paraprofessionals.”

This blog originally appeared at InTheseTimes.org on October 19, 2016. Reprinted with permission.

Shaun Richman is a former organizing director for the American Federation of Teachers. His Twitter handle is @Ess_Dog.

Chicago Teachers Are on the Verge of Striking—This Is Why

Tuesday, October 11th, 2016

Chicago teachers will likely take to the streets early Tuesday in an escalation of their campaign to defend their jobs and improve the education of the students and the communities they serve. The Chicago Teachers Union (CTU) has said it will strike if no deal is reached by midnight.

Four years ago, the CTU won a new contract with a dramatic 7-day strike that captured national attention. Although the CTU was unable in the following years to stop Mayor Rahm Emanuel from closing more than 50 schools, last April the union continued its contract fight with a mayoral-appointed Board of Education by calling for a 1-day strike over the failure of talks to renew their contract.

With the CTU and Chicago Public Schools (CPS) still at loggerheads over a new agreement, the teachers are preparing to establish picket lines once again at schools throughout the nation’s third-largest school system, taking on the Board of Education, Emanuel, the obsessively anti-union Republican governor, Bruce Rauner, and the local business class.

The fight is, in various ways, about money. The Board of Education, under Emanuel’s control, says it must cut costs since it is running a deficit. One of its proposed solutions would eliminate a longstanding agreement to pay for part of the cost of teachers’ pensions, effectively cutting teachers’ pay.

Rauner advocates a harsh and ideological strategy designed to humiliate the teachers and break their union. He has said bankruptcy might be the best option for CPS—a move that would allow a court to void union contracts.

But the strike is about more than money, too. The CTU sees negotiations as a chance to focus on the quality of education for Chicago students. The union wants to reduce class sizes, guarantee that all schools have libraries and librarians, give teachers professional support and training to teach more creatively, and provide social services and counselors who can help students resolve problems that may be interfering with their learning or leading them to drop out.

“In my 13 years of teaching, schools and students have never faced this type of assault,” said Lillian Kass, a special education teacher in CPS and a CTU delegate.

“We are going on strike to protect our students from further cuts. We need enforceable class sizes and adequate services so all students can succeed. Teachers and students have already suffered too many cuts. More cuts are not acceptable and not sustainable,” she said.

Historical backdrop

The contract dispute is linked to profound and pernicious questions regarding class and racial divisions in the city and state. The backdrop to the current conflict is the decades-long failure of the state government to follow the state’s constitutional mandate to carry the primary responsibility for financing public education.

As a result, schools are very unevenly and inequitably funded by local property taxes. The tax burden is greatest on working-class households, while businesses successfully resist paying their fair share. Chicago taxpayers suffer an additional burden: While state taxes—including taxes paid by Chicago residents—help fund teacher pensions for the rest of the state, Chicago residents alone pay for all pension-related costs for their schools.

Low-income communities, especially those that are predominately black, have suffered most from shortcomings in funding, school closings and many other CPS policies. Reinforcing the results of other investigations, a recent report by WBEZ, the Chicago public radio station, revealed that new school construction in areas of the city where the population is growing is carefully planned to maintain high levels of racial segregation, even though it would be easy to use the construction to create a more integrated school enrollment.

Community allies

Union leaders see community groups as crucial allies in the fight now unfolding. Chicago Teachers Solidarity Campaign (CTSC), with a dozen or more members, played an important role in the 2012 strike, says Steven Ashby, a labor educator at the University of Illinois. Ashby, who is the leader of a renewed CTSC, says the new coalition already includes more than 50 groups.

The CTU, CTSC and many other progressive groups are pushing for the city to redirect to the schools as much as possible from Tax Increment Financing (TIF), a funding tool. The money is largely a “slush fund” spent at the mayor’s discretion for business-related projects, and reformers argue that it could provide significant funding for schools.

The issues posed by the teachers’ strike involve a tangle of inherited pathologies of racism, business dominance, and corrupt local politics—together forming a Gordian knot that blocks progressive reform. The strike may not cut the knot, but it could help direct the next blows for reformers tackling the many challenges beyond the current, critically important task of educating the city’s children.

This blog was originally posted on In These Times on October 10, 2016. Reprinted with permission.

David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at davidmoberg@inthesetimes.com.

No Justice, No Peeps! Workers Walk Off the Job At Pennsylvania Peeps Factory

Wednesday, September 28th, 2016

Mario VasquezWorkers employed by candy manufacturer, Just Born Quality Confections, in Bethlehem, Pennsylvania, are on strike over the company’s pension plan proposal. The strike, workers allege, hits the company—which makes Peeps, as well as Mike and Ike and Hot Tamales candies—just as next year’s Easter orders are meant to be made.

“This is my livelihood,” says Alex Fattore, a mechanic who has been at Just Born since 1980. “We make Easter happen. I want to go back in there and make Easter happen.”

Roughly 400 workers walked off the job September 7, drawing a hard line against the company’s attempt to switch new hires to a 401(k), instead of the multiemployer pension plan that workers are presently a part of. They are represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) Union Local 6.

The company claims that it’s concerned about the pension plan’s long-term viability. The plan reported assets of $5 billion and liabilities of $8 billion, and projected insolvency within 14 years, according to the company. The union, however, counters that the company is not allowed to put pension details on the negotiating table, per pension fund rules. The company is pushing its plan as a part of collective bargaining negotiations for an agreement that expired in June.

“The company is growing,” says chief shop steward Keith Turner, a machinist with 21 years of Just Born experience, alluding to its claims of double-digit growth. “It’s kind of ironic that they would turn around now and tell us that they can’t afford anything.”

Workers additionally claim that if the move to a 401(k) plan for new hires were to go into effect, it would only further weaken the multiemployer pension fund, forcing the fund’s trustees to reduce retiree benefits.

Just Born did not respond to a request to comment, but it released a statement that read, in part: “Our proposal—to have existing associates remain in the current pension plan and to have future hires participate in a 401(k) plan—provides a respectful path that honors our current associates’ existing benefits, and provides a sustainable retirement benefit for our future hires.”

“It’s the equivalent of—let’s say you signed a 30-year mortgage, and after 20 years you decide, you know I don’t want to pay this part of it anymore so I’m just not going to—and you just can’t do that,” Turner tells In These Times.

The Pennsylvania AFL-CIO has called for a boycott of Just Born products.

While this is the first strike at a Just Born facility in decades, this is not the first time the company has attempted to impose a change in pension plans, according to union officials. Last year, the company implemented a final contract including the same 401(k) plan proposed at the Bethlehem plant, after declaring an impasse in its contract negotiations with the roughly 35 workers at its Goldenberg’s Peanut Chews factory in Philadelphia. BCTGM challenged the change with the National Labor Relations Board but was denied, leading the union to take the matter to federal court in a case that is still pending, a year and a half later.

“We’ll say, a few years from now, if we didn’t stand up and stand our ground—that we had the opportunity to stand our ground with this company and say we aren’t going to take this,” Fattore tells In These Times. “We’re going to stand our ground and we’re going to fight (for) what’s right.”

Since workers voted to strike, they have tried to keep up morale. An unfair labor practice charge was filed by Local 6 after allegedly discovering that an individual affiliated with Just Born contacted striking workers, posing as a union official, telling them to return to work. The complaint, filed with the National Labor Relations Board, is pending.

Another, more public, company action that is causing substantial worry among striking Just Born workers is the hiring of replacement workers at the facility, with about 175 reportedly attending a job fair and another 600 applying for jobs online. As of press time, both sides have agreed to come back to the bargaining table alongside a federal mediator this week.

“We pretty well know from people inside, and from what we can see on the outside, that they haven’t made a Peep yet,” says Turner. “The longer that this goes on, the more squeezed that they are for their Peep production. We’re hoping that a little bit of hunger from us, and a little bit of hunger from them, makes something happen.”

This blog originally appeared at inthesetimes.com on September 27, 2016. Reprinted with permission.

Mario Vasquez is a writer from southern California. He is a regular contributor to Working In These Times. Follow him on Twitter @mario_vsqz or email him atmario.vasquez.espinoza@gmail.com.

Detroit firefighters and police face pension cuts with no safety net. Not even Social Security.

Wednesday, August 14th, 2013

Laura ClawsonLosing a pension you’ve worked years to earn is a nightmare scenario, one that can change a comfortable, secure retirement into one filled with worries and penny-pinching as Social Security goes from being part of your retirement income to all of it. For public workers in many places, including firefighters and police in Detroit, it’s a doomsday scenario, because they don’t get Social Security at all.

About 30 percent of public employees nationwide aren’t covered by Social Security; government workers weren’t covered by the program at its inception and while many have been moved under its umbrella over the years, some cities, towns, and states continue to run pension plans that don’t include Social Security. Detroit’s firefighters and police are in that group:

Of the nearly 21,000 city retirees now collecting pensions, 9,017 retired police officers, firefighters or their surviving spouses don’t get Social Security, or about 44 percent of all city pensioners.

For those who have worked in other jobs for long enough to qualify for Social Security, those benefits are reduced by a percentage of their Detroit pension. That’s not a lavish pension, by the way: The average annual police pension in Detroit is $30,000, compared with $58,000 in Los Angeles, $47,000 in Dallas, and $42,000 in Kansas City. And public workers’ pensions, unlike the pensions of many private sector workers, aren’t insured by the federal Pension Benefit Guaranty Corporation, meaning if they lose their Detroit pensions, that’s it, there’s no safety net to catch them.

What we’re talking about here are workers who spent decades earning less than they might have elsewhere in exchange for the promise of a secure—though not lavish—retirement. And now they face the very real threat of being left with a small fraction of what they earned and need to live on. They kept their promises to the city of Detroit. It must keep its promises to them.

This article originally posted on Daily Kos Labor on August 12, 2013.  Reprinted with permission. 

About the Author:  Laura Clawson is the labor editor at Daily Kos

Banking On Bankruptcy: Emails Suggest Negotiations With Detroit Retirees Were Designed To Fail

Thursday, July 25th, 2013

Even before one of their own was appointed emergency manager of the city, lawyers who were consulting with Michigan officials over the winter believed Detroit should move into bankruptcy proceedings that would free the city to walk away from its commitments to retirees. Emails between Kevyn Orr — now Detroit’s emergency manager but at the time an attorney for the law firm Jones Day — and his colleagues show the lawyers believed moving directly to bankruptcy would be better for the city than going through a serious negotiating process.

In one email, an assistant to Gov. Rick Snyder (R) promises to set a meeting between Orr and someone “who is not FOIAble,” suggesting an intent to evade transparency laws. In another, Jones Day lawyers suggest to Orr that elevating Detroit’s bankruptcy in national media coverage would “give you cover and options on the back end to make up for lost time there.” Orr rejected that suggestion as unhelpful. Jones Day continues to represent Detroit in the proceedings, which could take a year or longer.

The messages made public thusfar show Jones Day attorneys defining bankruptcy as inevitable in their own words.

“It seems that the ideal scenario would be that Snyder and Bing both agree that the best option is simply to go through an orderly Chapter 9 [bankruptcy],” one Jones Day attorney writes to Orr in the emails. “Appointing an Emergency Manager, whose ability to actually do anything is questionable given the looming political and legal fights, would only serve to kick the can down the wrong path and unreasonably delay any meaningful resolution of Detroit’s problems.” Defining bankruptcy as the only route to a “meaningful resolution of Detroit’s problems” casts further doubt on the intent of the negotiations that followed Orr’s appointment in March, but a spokesman for Orr called those doubts “absurd.”

The emails were released in response to a Freedom of Information Act request by Robert Davis, a local labor activist with a troubled history. Davis faces federal corruption charges over school board funds that were spent on an advertising campaign. When the charges were filed in 2012,Davis called them politically motivated and said he is innocent.

One January exchange shows Orr reluctant to take on the emergency manager job, and concerned that the law empowering Gov. Rick Snyder (R) to appoint such officials “is a clear end-around the prior initiative that was rejected by the voters in November.” One January 31, Orr wrote that the entire emergency manager system “appears to merely adopts [sic] the conditions necessary for a chapter 9 filing.”

Orr’s assessment of the emergency manager process reinforces retiree advocates’ arguments that Orr’s actions once appointed were not good-faith negotiations with city employees, but an effort to check necessary boxes prior to filing for bankruptcy. In June, when Orr issued a proposal to retirees and bondholders in lieu of declaring bankruptcy, analysts wrote that the proposal appeared designed to be unpalatable, paving the way for the bankruptcy filing. Orr and Snyder have made clear that the bankruptcy resolution will include some cuts to retiree benefits, which are about $1,600 per month for most of the city’s 21,000 pensioners. “They made me some promises, and I made them some promises,” 76-year-old retired police sergeant William Shine told the New York Times. “I kept my promises. They’re not going to keep theirs.

Some legal hurdles may prevent the city from reneging on pension promises in bankruptcy, but the outlook is uncertain.

This article originally posted on ThinkProgress on July 23, 2013.  Reprinted with permission. 

About the Author:  Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org.

Strong Grassroots Actions Block Mass. Pension Scheme

Tuesday, May 14th, 2013

Image: Mike HallUnion members in Swampscott, Mass., this week showed just how grassroots democracy works when a coalition of unions from the North Shore Labor Council mobilized to turn back an attack on public employees’ health care and retirement security.

First a little background. In the Bay State, municipal employees’ health and retirement benefits, while negotiated on a local level, are part of a state-administered system. However, a Massachusetts “Home Rule Petition” law allows cities and towns to seek exemption from certain state laws and regulations.

In February, Swampscott’s Board of Selectmen voted 3-2 to seek a Home Rule Petition to cut town workers’ pensions by moving from the state system’s defined-benefit plan to a self-administered defined-contribution plan, and to change health care benefits. But a Home Rule Petition must be approved at a Town Meeting. In Swampscott, a town of about 14,000, that meant approximately 250 voter-elected Town Meeting members had to give the OK.

That’s when union members went to work to convince Town Meeting members that not only would the changes proposed for the teachers, firefighters, police officers, librarians and other public employees hurt the workers, it would save no money and be a major financial risk for Swampscott.

With a few months before the May 6 Town Meeting, unions and the labor council mapped out a mobilization strategy that included leafleting and neighborhood door knocking by union members, spotlighting the danger of the Home Rule Petition scheme. Postcards to each union member in town urged them to get in touch with their Town Meeting member—more than likely a neighbor or friend—to vote against the cuts to health care and retirement.

On May 6, the hard work paid off when the Home Rule Petition was defeated by better than a 3-to-1 margin.

The unions that carried the campaign to victory included AFSCME, Fire Fighters (IAFF), MassCOPS (an IUPA affiliate) and NEA.

This article was originally posted on the AFL-CIO on May 10, 2013. Reprinted with Permission.

About the Author: Mike Hall is a former West Virginia newspaper reporter, staff writer for the United Mine Workers Journal and managing editor of the Seafarers Log. He came to the AFL-CIO in 1989 and have written for several federation publications, focusing on legislation and politics, especially grassroots mobilization and workplace safety.

Flight Attendants Push for Equal Benefits for Domestic Partners

Monday, January 14th, 2013
Kenneth Quinnell

Kenneth Quinnell

Flight attendants who work for Spirit Airlines filed a lawsuit against the airline for reneging on a contractual commitment to provide equal benefits for all employees by forcing employees who want health care coverage for their domestic partners into a lower-quality health care plan than the plan covering other employees. The flight attendants, members of the Flight Attendants-CWA (AFA-CWA), said that management is using procedural loopholes to avoid providing equal benefits. Todd St. Pierre, the AFA-CWA president at Spirit, said:

We are outraged that management refuses to treat the families of their employees equally. At a time when equality issues have sparked a social awakening across our nation, management’s trampling on employees’ rights is deplorable. Their discriminatory behavior must be rectified immediately. Flight Attendants worked hard to ensure that these rights were included in our legally binding contract so that we could provide health care security for our loved ones. Shame on Spirit management for their blatant disregard for equality and for turning their backs on their obligations.

In a related story, aerospace manufacturer Boeing Co. said that despite the passage of a referendum legalizing gay marriage in Washington State—where Boeing has significant operations—they were not required to provide same-sex couples with benefits, including pensions. While Boeing publicly says they are evaluating what the referendum means to them, SPEEA/IFPTE Local 2001 executive director Ray Goforth said that Boeing officials explicitly told him that the benefits would not be extended to same-sex couples.

Alaska Airlines flight attendants, also members of AFA-CWA, issued a statement supporting members of SPEEA at Boeing in their fight for equal rights. Alaska AFA-CWA President Jeffrey Peterson said:

“AFA has a longstanding commitment to equality regardless of sexual orientation, gender identity and gender expression which is why Alaska Flight Attendants stand in solidarity with our aviation colleagues at Boeing in their struggle for equal rights. With an all-Boeing fleet of aircraft, Alaska Flight Attendants depend on the professionalism and dedication of SPEEA members each and every day.

Voters in nine states across the nation have instructed their elected representatives to address marriage equality issues. Recently in Washington, all couples regardless of gender finally have the opportunity to legally marry. Yet, Boeing is refusing to recognize married couples equally.

We are all partners in the success of the aviation industry and we call on Boeing executives to provide equal benefits to all couples legally married under state law.”

This post was originally posted on AFL-CIO on January 14, 2013. Reprinted with Permission.

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist.  Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.  Previous experience includes Communications Director for the Darcy Burner for Congress Campaign and New Media Director for the Kendrick Meek for Senate Campaign, founding and serving as the primary author for the influential state blog Florida Progressive Coalition and more than 10 years as a college instructor teaching political science and American History.  His writings have also appeared on Daily Kos, Alternet, the Guardian Online, Media Matters for America, Think Progress, Campaign for America’s Future and elsewhere.  He is the proud father of three future progressive activists, an accomplished rapper and karaoke enthusiast.

Just When You Thought the Hostess Story Couldn't Get Worse...

Thursday, December 13th, 2012

Kenneth Quinnell

Money that was intended for employee pensions was used by Hostess Brands management to cover operating expenses and workers were never compensated for the lost payment, Yahoo News reports. An undetermined amount of money that Bakery, Confectionery, Tobacco Workers and Grain Miller (BCTGM) members were supposed to receive as part of their contract with the company was used to keep the company running after mismanagement led to significant losses and eventual bankruptcy. 

This was during the same time period that Hostess began paying out massive bonuses to executives. BCTGM learned that the then-Hostess CEO was to be awarded a 300% raise, and at least nine other top executives were to receive raises ranging between 35% and 80%.

The process of taking the pension money was quite simple for Hostess:

For example, John Jordan, the local union financial officer for [BCTGM] Local 334 in Biddeford, Maine, said workers at a Hostess factory in Biddeford agreed to plow 28 cents of their 30-cents-an-hour wage increase in November 2010 into the pension plan.

Hostess was supposed to take the additional 28 cents an hour and contribute it to the workers’ pension plan.

Employees never saw that 28 cents. In July 2011, Hostess stopped making pension contributions and used the money to run the business. Employees never received the pension funds and the compensation Hostess promised the workers was not made up in wages, either.

In all likelihood, the tactic doesn’t violate federal law because the money didn’t get paid to employees first, but went directly to the pension fund. Lawyers call the situation “betrayal without remedy” and it’s unlikely the money can be recovered.

Hostess CEO Gregory Rayburn’s response ranged from understatement to “it’s not my fault.”

Gregory Rayburn, Hostess’s chief executive officer, said in an interview it is “terrible” that employee wages earmarked for the pension were steered elsewhere by the company.

“I think it’s like a lot of things in this case,” he added. “It’s not a good situation to have.”

Mr. Rayburn became chief executive in March and learned about the issue shortly before the company shut down, he said. “Whatever the circumstances were, whatever those decisions were, I wasn’t there,” he said.

Rayburn’s predecessor at Hostess, Brian Driscoll, refused to comment.

The end of pension contributions by the company was a key reason for the BCTGM strike:

Halted pension contributions were a major factor in the bakers union’s refusal to make a deal with the company. After a U.S. bankruptcy judge granted Hostess’s request to impose a new contract, the union’s employees went on strike. Hostess then moved to liquidate the company.

“The company’s cessation of making pension contributions was a critical component of the bakers’ decision” to walk off the job, said Jeffrey Freund of Bredhoff & Kaiser PLLC, a lawyer for the union.

“If they had continued to fund the pension, I think we’d still be working there today,” said Craig Davis, a 44-year-old forklift operator who loaded trucks with Twinkies, cupcakes and sweet rolls at an Emporia, Kan., bakery, for nearly 22 years.

The amount of employee compensation lost by the company is not known, but the numbers are staggering:

In five months before this past January’s bankruptcy filing, the company missed payments to the main baker pension fund totaling $22.1 million, Mr. Freund said.

After that, forgone pension payments added up at a rate of $3 million to $4 million a month until Hostess formally rejected its contracts with the union. The figures include company contributions and employee wages that were earmarked for the pension, according to Mr. Freund.

This post was originally posted on AFL-CIO on December 11, 2012. Reprinted with Permission.

About the Author: Kenneth Quinnell is a senior writer for AFL-CIO, and a former precinct committeeman in the Leon County Democratic Party. He is a former vice chair of the Florida Democratic Party’s Legislative Liaison Committee, and during the 2010 election, through the primary, Kenneth Quinnell worked for the Kendrick Meek campaign. He has written for Think Progress, AFSCME and for OurFuture.org on Social Security.

Where Did All Our Pensions Go?

Wednesday, October 10th, 2012

A total of 84,350 pension plans have vanished since 1985. This figure shocked Pulitzer Prize-winning authors Donald L. Barlett and James W. Steele, who just released their latest book, “The Betrayal of the American Dream.” Their chapter on retirement chronicles the heist of the American dream’s secure retirement by the financial elite and is a very important section of the book, says Steele, who spoke with the AFL-CIO about the retirement crisis. Steele says there is another number we should pay attention to: $17,686. That’s the median value of 401(k) accounts in 2011. For most working people, the amount in their 401(k) account would pay them less than $80 a month for life.

“What’s happening with retirement is almost parallel to what you see happening in other parts of the economy,” says Steele.

The elite has its agenda to eliminate pensions with the shift to 401(k)s, which cost companies less. Now, there’s a revenue stream for Wall Street and an obligation shift to people with little or no experience understanding how to deal with their own retirement issues….This is typical of all the other things the economy elite has been doing for decades with deregulation, unrestricted free trade and tax cuts—these things are all related.

“In the ’50s, ’60s and ’70s, the amount of workers with access to pensions was significantly rising,” says Steele. “We fully underestimated the speed in which the downturn would occu, and how Congress went along and encouraged it.”

Barlett and Steele write that the shift from defined-benefit pension plans to 401(k)s began in the 1980s. Companies realized 401(k)s would substantially reduce corporate costs. Workers were told that pensions no longer made sense and were outdated since people moved around from job to job. The 401(k) was marketed as more “portable.”

Steele says 401(k)s were engineered by corporations as another way for the wealthy executives to set aside money. They were never intended to be a principal retirement plan, only a supplement.

“Once corporate America got on to this, the idea took root,” says Steele. “The entire obligation shifted to the employees.”

Congress ignored the concerns raised by trade unions and other pension rights organizations. And the consequences are dire for middle- and lower-income workers.

“This is so typical of what has been happening over the last two to three decades,” says Steele. “This is the slow, steady erosion of economic security Americans had (or thought they had)….Now economic pundits, corporate folks and Wall Street people are saying people just have to work longer, in part because retirement plans now in place will not provide much security to people as they get older.”

Barlett and Steele feature stories of average people who did everything right (saved, worked hard) but are still living on the edge of poverty because of policies that enhance the rich at the expense of everyone else.

Over and over again, people thought they had something good. They were working hard and then, through no fault of their own, lost it all. Most people we talked to in the book are employed.

People thought it was something they had done to lose their job or benefits….They didn’t realize it was part of a broader pattern. There are great swaths of working people who are affected and we think it’s our fault. For most of these people, it’s not their fault, it’s just the way policy has been organized. Systematically dismantling pensions and retirement is the perfect example.

With the decline of pensions, it’s even more important to strengthen, not cut, Social Security benefits. Although the country dodged a bullet in 2005, when Bush’s plan for Social Security privatization fizzled, Steele says we still need to be vigilant to protect our benefits from the Wall Street casino.

Don and I make this point that the 2008 recession wouldn’t look a whole lot different from the Great Depression if we didn’t have Social Security and Medicare because there was no safety net then.

The economic elite, says Steele, attack Social Security because it’s a large pool of money for Wall Street to play with.

Nobody should kid themselves that they’re not going to come back and try to implement some parts of that [privatization]….The amount of money at stake is too good and that’s all they care about—access to that money, not American workers.

You can purchase “The Betrayal of the American Dream,” on Amazon.com and Barnesandnoble.com.

This post originally appeared in AFL-CIO Now on October 7, 2012. Reprinted with permission.

About the Author: Jackie Tortora recently joined the AFL-CIO as the blog/social Media editor. Before that, she was a Social Security and Medicare advocate for a national seniors’ organization.

Older Workers Confront Cold New World in Harsh Job Market

Wednesday, June 20th, 2012

Roger BybeeLeon Burzynski, president of the labor-backed Alliance for Retired Americans in Wisconsin, is someone who appreciates the steps that Barack Obama has taken to bring the economy back from the brink of disaster. But he remains deeply concerned about the plight of workers aged 50 to 64. These workers—eager to work and too young to afford retirement—remain marginalized in an economy where cash-laden corporations are still reluctant to retrain full-time employees.

“It’s a dark time for older workers,” said Burzynski. “I don’t see the economy coming around for older people who want to work.”

With hiring in the private sector slow and the Republicans systematically blocking each and every stimulus measure, the prospects for older workers are bleak indeed. At a point in their lives when they expected to be making their peak earnings, this group of workers finds themselves navigating a complex minefield of problems without significant social support.

JOB INSECURITY: While the pace of layoffs has slowed considerably, corporations continue to reduce their workforces unpredictably and to send both manufacturing and white-collar professional work overseas.

PAY INSTABILITY: Even though profits have achieved record levels for major corporations, firms like General Electric are imposing pay cuts of as much as 45 percent on long-term workers. The wage-cutting wave that began immediately after the Wall Street meltdown is persisting.

REDUCED SAVINGS: Falling wages have reduced the ability of Americans to save. Meanwhile, dropping home values have been a central factor in shrinking the net worth of American families, reported The Los Angeles Times:

The typical American family lost nearly 40% of its wealth from 2007 to 2010 as the Great Recession reduced household net worth to a level not seen since the early 1990s.
The net worth of the median U.S. family — one with an equal number of families richer and poorer — fell to $77,300 in 2010 from $126,400 three years earlier, after adjusting for inflation, the Federal Reserve said in a new report.

Among working families, “most folks have all their net worth tied up in their homes,” Burzynski says.

When laid off, older workers face especially long periods of unemployment, the Urban Institute found:

Job loss during the Great Recession is upending retirement savings plans for many older workers. Fewer than a quarter of workers age 50 and older who lost their jobs between mid-2008 and the end of 2009 found work within 12 months.

Another study revealed, “The median duration of unemployment for those 55 and older was 34.1 weeks in May, according to the Labor Department, in contrast to 22 weeks for all jobless people over 16.”

Prolonged periods of unemployment are remarkably stressful to both physical and mental health, with one noted British doctor equating the effects of long-term joblessness with the death of a spouse.

FORCED TO OPT FOR SOCIAL SECURUTY: With job-hunting stretching out and exhausting older workers’ savings, many older workers find that they need to opt for Social Security before age 66. This means a permanent reduction of 20 to 30 percent in benefits for the rest of their lives, but some find themselves with no other alternative, The New York Times reported:

Even as most Americans are delaying retirement to bolster their savings accounts, the recession and its protracted aftermath have forced many older people who are out of work to draw Social Security much earlier than they had planned.

According to an analysis by Steve Goss, chief actuary for the Social Security Administration, about 200,000 more people filed initial claims in 2009 and 2010 than the agency had predicted before the recession and he said the trend most likely continued in 2011 and 2012, though that is harder to quantify. The most likely reason is joblessness.

TRADITIONAL PENISONS DISAPPEARING FAST: For decades, Americans have relied on pensions that provided a predictable source of income in combination with Social Security and savings. But various Individual Retirement Account and 401(k) plans—infinitely cheaper for employers—have taken their place. As Jacob Hacker and Paul Pierson point out in their excellent book, The Great Risk Shift, “As recently as twenty-five years ago, more than 80 percent of large and medium-sized firms offered a defined–benefit plan; today, less than a third do.”

The funds being accumulated in IRA-type accounts are hardly sufficient to provide a secure and fulfilling retirement, says Burzysnki. “The average IRA contains only $55,000 to $60,000—that’s not enough for what I what I call a quality retirement.”

The lack of support for workers aged 50 and over is exacerbated by the unpredictable circumstances that can lead some to retire, often without the necessary savings and a solid plan. As Hacker and Pierson point out, “Four in ten retired workers today report that they left their jobs earlier than planned because of layoffs health problems, or sick family members.”

This blog originally appeared in Working in These Times on June 18, 2012. Reprinted with permission.

About the Author: Roger Bybee is a Milwaukee-based freelance writer and progressive publicity consultant whose work has appeared in numerous national publications, including Z magazine, Dollars & Sense, Yes!, The Progressive, Multinational Monitor, The American Prospect and Foreign Policy in Focus. His e-mail address is winterbybee@gmail.com.

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