Last week, a federal bankruptcy judge in White Plains, N.Y., approved Delta Airlines' request to rid itself of its pilots' pension plan as part of a capital expense and labor restructuring to get out of Chapter 11 by next summer.
Subject to approval by the Pension Benefit Guaranty Corporation (the feds), Delta will be able to avoid an estimated $2.5 billion in payments required to fully fund the pilots' retirement program. This is not a new development within the airlines (United Airlines and US Air have terminated pension plans) or any other major industries (GM, US Steel, e.g.) as American companies have underfunded the retirement promises to the now-retiring baby boom generation.
Termination of pension and health-care plans is the latest in employment instability anxieties facing workers in the United States. However, like most anxieties, The Eye notes that there is a big difference between the real and the imagined. Around the South, the textile industry, agriculture, and smaller manufacturing concerns have been disappearing for going on the third generation since post-WWII, as have the auto and steel industries. As much as the affected employees refuse to admit, this had more to do with those industries being inefficient than cheap labor from across the pond.
However, it's now easier for American workers to move from job to job, and according to the Bureau of Labor Statistics, long-term employment numbers have changed very little since the 1960s. What has changed is the amount of risk that employees now bear as corporations have eroded pension and health-care plans. Defined-benefit plans have been replaced with defined-contribution plans such as 401(k)s. Defined-benefit plans' success or failure depended on the company while defined-contribution plans are at the discretion of the employee — regardless of that employee's financial sophistication. Compounding this is that the top-tier employees in companies now take home dramatically increased wage packages as these are now tied to financial market performance.
Stagnant and falling wages are the real problem for production and nonsupervisory employees these days as pay rates have fallen for 80 percent of these folks since 2001. Back in the aforementioned 1960s, real wages grew as productivity increased. This doesn't happen anymore because gains in productivity have been transferred to equity holders, debt markets, and the boss. Employees have now assumed more financial risk with lessened possibility for rewards, such as retirement packages.
How American companies arrived at this point is important to understand in the scheme of things. Defined-benefit programs were unrealistic in the long term as they assume a company's financial well-being for 20 to 30 years. American companies face increased labor costs internationally because company-provided pension and health-care programs are in competition with universal health-care and state-secured retirement programs.
Now, The Eye is not suggesting that socialism is a cure for retirement and health packages plans for American workers. Americans are far too craven and selfish for that. However, there is a way to expand the risk pool for these workers and guarantee benefits within a public/private partnership that reduces costs for employers.
That is, of course, if American companies would begin thinking in terms of the future financial well-being of their industries, and American workers would stop feeling sorry for themselves and looking to the feds to bail them out. American industry has been on the vanguard because it innovates, so why doesn't innovation happen here? The Eye bets there's some smart folks out there who could figure out a way to make a dollar out of this. Hell, the dollar is the gas for innovation.