Outten & Golden: Empowering Employees in the Workplace

Should Corporations Be Responsible for Health Care and Pensions?

December 12th, 2005 | Workplace Fairness

The headline for a column in Monday’s Des Moines Register says it all: Rethink entrusting health care, pensions to corporations. It’s starting to sound like something we need to revisit, considering the states of both the health care and pension systems. However, if employers stop being the primary source of health care and retirement benefits, such as they are — will employers pay more taxes to make that happen? pay higher wages? Or will it just be another instance of employees working more and getting less?

The statistics are startling: While twenty years ago, more than 114,000 U.S. companies provided traditional, defined-benefit pensions to their employees, now only about 30,000 do, and the number keeps falling. (See Des Moines Register article.) Now approximately 1.3 million Americans get their pension checks from the government’s Pension Benefit Guarantee Corp., because their company pension funds went bust. More companies have defaulted on their pension promises in the last three years than in the previous 27 years of the PBGC’s existence.

The health care statistics aren’t much better. In 1979, 70% of private-sector jobs provided health benefits; by 2004, only 60% did. In the last four years, workers’ health premiums increased 50%, about $1,000 per family, three times the average increase in income. (See Short-Changed: Critical Condition).

If we’re expecting corporations to ensure that the American worker had adequate health care coverage while working, and adequate retirement savings once he or she stops working, it’s just not happening like it used to. The expectation that workers’ needs will be taken care of by their employers is no longer necessarily a reasonable one. So it makes sense to question, as Register columnist Richard Doak does, whether you can count on a corporation to be there when you really need it. He astutely points out: “[W]e’ve built much of our lives in this country around the presumption that corporations are benevolent and eternal. They’re neither, as millions of former employees have learned to their dismay in recent years.” (See Des Moines Register article.)

Whether it’s avoiding bankruptcy or maximizing profits at stake, it’s clear that many companies are concluding that they no longer have to provide health benefits and/or a pension plan to stay competitive. In fact, the opposite is fast becoming true, where corporations seeking to eliminate benefits, either unilaterally or through union negotiations, claim that they cannot maintain such benefits and remain competitive.

Just last week, Verizon Communications, in a move that it certain to ripple through the telecommunications industry, announced that in mid-2006, it would stop contributing to pension plans for managers. (See USA Today article.) Verizon is hardly facing bankruptcy: it reported in October that its third-quarter earnings were $1.9 billion and “sustained overall revenue and customer growth” in the quarter. Nonetheless, the company claims that in order to stay competitive, it has to make the pension plan cuts. Verizon workers who have counted on the plans are outraged: one manager, 25-year veteran Maureen Aeckerle, responded, ”I was crying for two days because I just felt so betrayed. I just felt they look at us as being so worthless.” (See Associated Press article.) Other healthy companies looking to cut costs are certain to follow suit.

There are many similarities between the national declines in pension coverage and health care coverage. Workers who formerly could count on such coverage being available in most full-time jobs are now forced to make difficult decisions about when and if retirement is even possible, and stay in unfulfilling jobs just to maintain benefit coverage. Even then, they may have little protection if their company goes bankrupt, has massive layoffs, or even decides to follow the lead of other sector leaders to cut benefits, knowing that many workers have no choice but to swallow the changes and keep working for less money.

But what will crop up in its place? Pensions have normally been part of a three-part retirement strategy for Americans, coupled with private savings (becoming less and less possible in a time of slow wage growth) and Social Security (whose own future is increasingly uncertain?)

Will corporations pay higher taxes to support seniors, or will we again accept the very status quo that Social Security was created to counteract: that seniors should not be forced to live in extreme poverty once they are no longer able to work. Will corporations pay higher taxes to support better public health care and/or universal coverage, or will the working poor continue to cause the ranks of the uninsured to swell further?

Now that it is increasingly difficult to file for personal bankruptcy, what will happen to those impoverished by huge health care bills? Will our national mortality rate increase because we can’t figure out a way to ensure that costly medical care is available to everyone who needs it?

Tough questions for tough times: who will pick up the slack here? If not corporate America, and not our government, then who?

More Information:

Workplace Fairness: Short-Changed
Critical Condition: healthcare
Broken Promises: retirement

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