The Washington Post has produced a terrific story on the 998 workers impacted by the 1994 closure of the Tulsa, Oklahoma, McDonnell Douglas plant. Many of the employees interviewed were able to eventually find work again, but in many cases, their new wages were less than half of what they had been making at MD. Unfortunately, it wasn’t just the loss of wages that has negatively impacted these workers, but the loss of pension benefits that they never were able to replace through their new employers.
Many of these individuals, now in their 70s, are still working today because of their lack of retirement assets and financial security. I’ve heard people joking over the years about likely having to work as a greeter at Wallmart because of their lack of retirement savings, but for several of the former employees in this cohort, that is exactly their reality. Their financial struggles include losing their homes, incurring significant debt burdens, liens, etc. Roughly 15% of them have had to file for bankruptcy.
Small companies have always found it challenging to be able to provide a retirement benefit to their employees, but for midsize and large companies, nearly 60% offered a pension plan at one point. Regrettably, the percentage covered by a traditional pension plan has fallen to only 14% of the private sector, when considering all employers, and that percentage is likely to continue to fall rapidly, as today’s employees are living longer exacerbating the liability that these companies are trying desperately to eliminate.
“The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges,” according to an October report by the Government Accountability Office (GAO). “Traditional pensions have become much less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts and “many households are ill-equipped for this task and have little or no retirement savings.”
Amazingly, most of these employees were in the MD pension plan long enough to secure some retirement benefit, if even a small one. Can you imagine the financial distress that many of our workers will soon face knowing that they only have Social Security to rely on? The Washington Post story claimed that the average SS payout is a little more than $14,000 (we think that it is >$16,000), which certainly isn’t nearly enough for anyone to live on for any length of time.
We have written a ton on the impending retirement crisis. It isn’t a joke. The U.S. will have tens of millions of once productive members of our society falling onto the social safety net. Let’s not let that happen. We need a recommitment to provide our employees with a benefit upon retirement that will supplement Social Security. Asking untrained employees to fund, manage, and then disperse a retirement benefit is a challenge that most of our workers are not going to handle appropriately.