Pensions, Retirement, and Wage Theft

Let us say that I ask you for $20 and promise to keep it safe for you so it will be available when you need it. You hand over your money and I tuck it into my wallet and everyone sort of forgets about it for a while, until you need it, and you come to me and I say ‘oh, I can’t give you your money, I spent it all.’ You would probably accuse me of theft; after all, you didn’t give me the money to have and use as I wanted, you gave it to me with the specific intent to use it later. You might have agreed that I could invest the money while I was holding it, but the core of the agreement was that when you came back in 10 years, I would have $20 for you. Maybe not the same $20, but still.

This scenario is happening across the United States right now, except that the sums at stake are higher than $20 and the participants aren’t people making personal arrangements, but companies, banks, the government, and workers. For decades, workers in companies large and small have enrolled in pension programmes and other retirement plans, giving up part of their paycheques to their employers with the understanding that the money will be available when they retire. And all of us have been paying into Social Security with each paycheque, a mandated payment.

In turn, we are supposed to be provided with payments out of these funds. They’re called ‘entitlement programmes’ because we are entitled to that money; we paid into them, we earned that money, in many cases we did not have a choice about participation. That is our money. It is not the government’s, or the banks’, or the employers’. The word ‘entitlement’ is often used with a sneer to describe such programmes, like people are being completely unreasonable to expect and demand benefits. What, exactly, is unreasonable about asking someone who entered a legal arrangement to hold up the other end of the deal?

This is wage theft, pure and simple. If people give up part of their wages to an entitlement programme and it doesn’t pay out, their money has been stolen. This is not like taxes, where you are forced to submit your earnings to the government to pay for services. An argument could be made that taxpayers should be more aggressive about demanding the services their monies are supposed to fund, but at their root, taxes are not our money[1. And the tax system is in significant and urgent need of reform.]. Not like the payments into 401ks and pensions and other plans that are supposed to help people prepare for retirement.

Workers who submit to such plans get regular reports on how much they have contributed, and how much is supposed to paid out on retirement, assuming the current contribution rates remain stable. People, understandably, make financial planning decisions on the basis of that information. If you own your house free and clear and have no major expenses, for example, you might decide that a $1,200 pension payment is ample to live on, and you don’t need to make other arrangements for retirement. Or perhaps your payments are lower or your expenses will be higher, so you decide to establish a savings account to prepare, on the basis that you will have a partial monthly payment from your retirement plan, and can supplement with savings.

So when you retire and that money is not available, it creates a rather dire situation. If you are counting on money to support you in retirement and you earned that money fair and square, you may suddenly find yourself unable to meet even the most basic of needs. This is not like like making a bad investment and losing your money, where you took a gamble and lost. Payments into pensions and retirement plans are supposed to be highly stable and reliable; that’s the whole point. This is not betting on retirement, it is preparing for retirement.

Pension plans are being gutted, and in numerous regions payouts are lower than they should be, if they happen at all. The protests on the part of pensioners are treated as ridiculous. Government employees are told they don’t ‘deserve’ those kinds of benefits, not with the economy the way it is. But, the thing is, they actually do deserve those benefits. Because they entered a contractual agreement with their employers. That contract might not have been sustainable, the employer might not have thought it out well at the time it was established, but this is not the responsibility of the employee. This is the responsibility of the employer, which is why numerous companies are having to dip into their reserves to fund their pension plans. This, again, is treated as utterly unreasonable, that former employees should ‘extort’ these funds, but, again, the company took their money, and now they want it back.

Wage theft occurs at all levels; this is a sort of delayed form, in contrast with activities like refusing to pay overtime, abusing minimum wage laws, calculating hours incorrectly, classifying workers wrong, or simply not paying wages. But it’s an important form of wage theft and it needs wider discussion because it’s having a tremendous impact right now. As people are told to plan responsibly for retirement and other life events, their plans are being deconstructed through the denial of entitlement benefits. And they, in turn, are blamed for not being responsible enough, even though they followed all the directions and did the right things. They paid into their pension plans and signed the contracts, and now they just want their $20 back.

I have a lot more thoughts on pensions and wage theft over at AlterNet today; ‘Is Cutting Benefits For Public Workers Actually Wage Theft? Reframing The Right’s Attacks On Unions