Retirement insecurity on Legislature’s agenda

What’s the greatest threat to quality public education and public services? According to some, it’s the secure pensions that public workers and teachers receive as part of their compensation.

One writer recently said that these pensions are “threatening the fiscal health of many states.” 

And politicians seem to heeding this warning. Susan Combs, Texas Comptroller for Public Accounts, recently told a San Antonio Rotary Club meeting that a number of bills would be introduced in the next session of Legislature that would establish a two-tiered retirement system for Texas’s state employees and teachers.

One tier would be for current employees, who would remain in the traditional defined benefit pension plan in which retiree benefits are based on salary and years of service.

The other would be for new hires, who would be shifted into private defined contribution plans like a 401(k). Their benefits would be determined by the amount of money in their private account upon retirement.

Combs made the comment in the context of finding ways for the state to save money as it faces a budget shortfall of $21 billion over the next two years.

And in January, the Texas House Committee on Pensions, Investments, and Financial Services will issue a report recommending that the Texas Legislature consider the possibility of creating a two-tier pension system for current and newly hired teachers and state employees.

The pension committee’s report doesn’t cite any potential cost savings. It does say that the state employee and teacher pension plans are well-managed, have recovered from the market crash, are well-funded, and are well-positioned to provide employees with a secure pension.

Inexplicably, the report goes on to say that “there is significant interest in reforming Texas public pensions, particularly in light of current market conditions” and recommends that the state Legislature study the impact of shifting newly hired teachers and state employees into private defined contribution plans.

Or to put it another way, the Legislature should study the impact of shifting the risks of a volatile market onto newly hired teachers and state employees.

“Our defined benefit plan benefits all Texans,” said Tim Lee, executive director of the Texas Retired Teachers Association at a recent meeting of the Texas Teachers Retirement System board of trustees. “And we oppose any plan that may interrupt benefits for future educators.”

The problem with relying solely on defined contribution plans for retirement security is that they make retirement less secure and don’t save money.

According to the Employee Benefits Research Institute, workers between the ages of 45 and 65, whose sole retirement plan is a defined contribution plan “have about a 45 percent chance of running short on cash” ten years after retirement.

Time magazine ran a long account of the problems faced by retirees with defined contribution plans that you can see here.

As for saving money, the National Institute on Retirement Security in a report entitled A Better Bang for the Buck found that “the cost to deliver the same level of retirement income to a group of employees is 46 percent lower in a [defined benefit] plan than it is in a [private defined contribution] plan.”

And it’s not just future educators and state workers who would suffer if new hires are diverted away from the defined benefit plan. Doing so “would decrease state contributions to the defined benefit plan, [which would] require decreased benefits,” said Lewis Ward of Gabriel, Roeder, Smith, and Company, which prepared TRS’s 2009 actuarial valuation.

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Warehouse work becomes more precarious

Warehouse work, according to the New York Times, once “promised a secure middle-class career,” but now much of that work has become precarious as more and more warehouses employ temporary workers, who work without benefits, job security, or decent pay.

Warehouse Workers for Justice is trying to reverse this trend by organizing “perma-temp” workers in the Chicago area warehouses. The way that warehouse work is structured, however, makes this a difficult task, which has led WWJ to seek allies in the community.

At a November 13 meeting of African-American community activists in Joliet, Illinois, located about 40 miles southwest of Chicago, Abraham Mwaura of WWJ reviewed the findings of  a survey of warehouse workers in Will County, Illinois where Joliet is located. The survey found that

  • 63 percent were temporary, 
  • average pay was $9 an hour, nearly $4 an hour less than permanent workers. 
  • 37 percent had to hold a second job to support their families and,
  •  one in four were receiving some form of government assistance.

Tory Moore, a former warehouse worker who now works as a WWJ organizer told the audience, “I worked six years as a temporary worker. I started out at $6.50 an hour, left at $10 and was still trying to pay my bills.”

Cindy Marble, who was laid off last year by Bissell Warehouses after the company learned that she was trying to organize a union,  said that temporary work is difficult in ways that most people don’t think about. For example, “a lot of landlords won’t rent to you if you’re a temporary worker because they think that you won’t be able to pay rent.”

 Last August, WWJ, a project of the United Electrical Workers (UE), published Bad Jobs in Goods Movement, a report on temporary work in the Chicago-area warehouses that included the results of its survey.

The report said that the increased use of temporary warehouse workers is the result of the way work in warehouses is structured. Big companies like Wal-Mart or Home Depot no longer manage their warehouses; instead, they use contractors who in turn hire subcontractors that mainly use temporary workers. 

Generally, temporary workers are only supposed to work for three months, but the WWJ survey found that 52 percent of those surveyed had worked more than three months, and 21 percent had worked more than a year.

The report says that most of the temporary workers are either African American or Latino. Of those surveyed, 48 percent were African American and 36 percent were Latino.

WWJ is asking community supporters like those in Joliet to help in its campaign to win changes to Illinois state law that will encourage warehouse owners to hire workers directly rather than rely on subcontractors, make these jobs permanent, enforce safety, anti-discrimination, and pay laws, and that will increase the penalties for temporary agencies guilty of labor abuse.  

What I’m campaigning for is simple, said Moore. “I want a permanent job at a living wage.”

“It can’t be only the workers who pay the bill”

“Always, it has been the workers paying for a crisis for which they are not responsible,” said Gracief Cruz, a Portuguese trade unionist. Cruz was explaining why hundreds of thousands of Portuguese workers joined a general strike today to protest government budget-cutting proposals that will erode the quality of life for Portuguese workers.

Last month, the Portuguese government announced a third round of budget cuts, called the Stability and Growth Program, that it hopes will reduce government debt and stave off a threat by bond traders to raise interest rates on government bonds.

Portugal’s debt grew when the economic recession caused by the 2008 financial crisis cut government revenue and increased the demand for government services.

In response to the proposed budget cuts, the two largest Portuguese unions, the General Confederation of Portuguese Workers (CGTP) and the General Union of Workers (UGT), called for a general strike that began last night.

At midnight, union members set up picket lines at work sites all over the country. “I’ve never seen so many people support and identify with the causes of a strike before,” said Manuel Carvalho da Silva, General Secretary of the CGTP.

The austerity budget proposed by the government will cut government worker pay by 5 percent, and as expected most of those supporting the general strike were public employees like rail, port, and postal workers.

But the austerity budget will hurt all workers, and plenty of private sector workers joined the strike, closing banks, media companies, and gas deliveries. Portugal’s largest exporter, Volkswagen Autoeuropa shut down production after less than 10 percent of its workforce showed up for work.

In addition to cutting government workers’ pay, the austerity budget will reduce pension contributions and freeze pensions for all retired workers, raise the Value Added Tax, a sales tax that hurts low-paid workers the most, and reduce or eliminate government subsidies for families with children, which will affect 1.5 million children in a country whose total population is 10.3 million.

The cuts will likely cause Portugal to sink into another recession. The International Monetary Fund forecasts that the government’s austerity measures will shrink the Portuguese economy by 1.4 percent in 2011, which will likely worsen Portugal’s already high unemployment rate of 10.9 percent.

“Unemployment will go up in 2011 as a consequence of austerity measures,” said political scientist Antonio Costa Pinto. “The austerity measures will make the recession worse.”

The unions didn’t just call the strike to oppose the austerity measures; they want to redefine government priorities and have proposed an alternative to the budget cuts that includes:

  • Reducing fraud and tax evasion by the rich,
  • Taxing large fortunes, stock market transactions, and luxury goods,
  • Investing more in public infrastructure,
  • Increasing the minimum wage to 500 euros a month, and
  • Enhancing the quality of public services.

“It’s indisputable that today we need to fight the deficit, . . . but it can’t be only the workers who pay the bill,” said Joao Proenca head of the UGT.

Economic disaster opens door for wage cuts and more job insecurity

Naomi Klein called it the Shock Doctrine: using disaster as an excuse to remake society in a way that benefits a privileged few at the expense of the rest of us. That seems to be what is happening in the US as working people continue to reel from the shock of the greatest economic disaster in 70 years, and employers take advantage of this shock to cut wages, increase their use of temporary workers, and squeeze more production out of workers.

Take for instance Harley Davidson. The iconic motorcycle company in September wrung concessions from the United Steel Workers and International Association of Machinist who represent workers at Harley plants in Wisconsin.

The unions agreed to a seven-year contract that freezes wages, eliminates about 25 percent of the jobs, and allows the company to use temporary workers, who will be paid about half the wages of permanent workers and receive no benefits.

Were these concessions needed to save a bankrupt company as one commenter on a forum discussion about the contract put it?

Hardly. Harley Davidson in October reported net profits $193.3 million for the first nine months of 2010 up 18.2 percent over the same period in 2009 when it reported net profits of $163.5 million. 

The company earned these profits under the old labor contract and while motorcycle sales dropped by about 22 percent between 2009 and 2010.

Harley was able to win these concession because the Wisconsin unemployment rate is 7.8 percent well below the national rate but still high by historical standards and because the company threatened to move the work out-of-state if the unions did not agree.

Other companies are cutting labor costs even as they enjoy ample profits. As reported earlier at Left Labor Reporter, GM recently won a concession from the United Auto Workers that will create a two-tier wage system at its Lake Orion, Michigan plant, which will make Chevrolet Aveos when it reopens.

The agreement allows 40 percent of the UAW members currently laid off at the plant to reclaim their jobs only if they accept a pay cut of about half of what they were making before the layoffs. During the first half of 2010, GM reported net profits of $2.2 billion.

The new contract by Harley and one recently signed by Mercury Marine in Wisconsin also call for a two-tier wage structure that will force workers who are laid off now to accept pay cuts of between $5 and $15 an hour if they want to reclaim their job.

Companies like GM used the economic crisis of the early 1980s to win a two-tiered wage system, but when unemployment sank to just over 3 percent in the late 1990s, most companies, including GM, were forced to abandoned it.

Now that unemployment is up and security down, more corporations are hoping to gain concessions like the two-tiered wage system and make them stick.

Workers feel the pain while corporations gain

Workers didn’t cause the financial crisis that led to the deepest economic slump in 70 years, but they’re bearing the brunt of the mayhem caused by it.

  • Business economists are predicting that the national unemployment rate will remain above 9 percent in 2011;
  • Congress recently failed to pass an extension of unemployment benefits for people who have been out of work for an extended period of time;
  • State governors from both parties are saying that they will  significantly cut state services and reduce state employee benefits to balance their budgets; and
  • Corporations are hoarding cash and cutting labor costs rather than making job-creating investments. 

Bloomberg News today reports that the results of a survey conducted by the National Association of Business Economist indicate that the unemployment rate will remain at or above 9.4 percent through the middle of 2011, and will likely remain above 9 percent through the end of the year.

That’s terrible news for the 14.8 million people in the US looking for jobs in an economy where there is only one job opening for every five job seekers. Before the recession, the jobs to jobless ratio was 1 to 1.8.

Many unemployed workers have been jobless for extended periods of time. The US Bureau of Labor Statistics reports the average duration of unemployment is 33.9 months, and more than 6 million have been unemployed for six months or more.

There’s more bad news for the long-term unemployed; in January, 6 million long-term unemployed workers could lose their unemployment benefits because Congress last week failed to extend long-term unemployed benefits

In the past, those who exhausted their unemployment could get help from their states’ welfare offices, but that help could be slashed soon. Bloomberg reports that state governors, including liberal Democratic governors like Andrew Cuomo of New York and Martin O’Malley of Maryland, are saying that they will balance their teetering state budgets with cuts to services  and employee benefits rather than tax increases.

But not everybody is feeling the pain of economic distress. Corporate after tax profits in the second quarter of 2010 reached $1.3 trillion , a 17 percent increase over the second quarter of 2008.

But rather than investing their profits to create jobs, corporations have stashed more than $1.8 trillion in their bank accounts. 

The New York Times last July quoted Ethan Harris of Bank of America Merrill Lynch as saying, “As long as corporations are reinvesting, the economy can grow, but if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”

“There’s no question that there is an income shift going on in the economy,” Mr. Harris added. “Companies are squeezing their labor costs to build profits.”

Budget cuts imperil progress at state home for disabled

Life can be dificult if you live in one of Texas’ 11 state supported living centers, where more than 4,000 Texans with mental disabilities reside. After investigating a Civil Rights complaint, the US Justice Department in 2006 found instances of neglect and lack of health care at the Lubbock State Supported Living Center in West Texas. Since then, the Lubbock center, according to court-appointed monitors, has made substantial progress. But Texas governor Rick Perry has ordered huge budget cuts that if enacted could imperil the progress at Lubbock and the state’s other supported living centers.

The Justice Department’s 2006 report led to a lawsuit that was settled in the summer of 2009. Both parties agreed that the state would improve its state supported living centers’ health care and do more to protect residents from harm.

Some disability advocates blamed workers for the Lubbock center’s short comings, but in its report, the Justice Department said that the Lubbock center was staffed predominately by “dedicated individuals. . . genuinely concerned with the well-being of those in their care.”

The report went on to say that many of the Lubbock center’s problems could be traced back to “dangerously low staffing levels.” 

This November, monitors appointed to oversee improvements at the Lubbock  center found “many positive changes (have) occurred. . . (which are) beginning to have a positive impact on the protections, supports, and services provided to individuals.” 

Among the positive changes, the report noted that the center had filled 88 percent of its nursing positions up from 57 percent in May. But the monitors cited shortcomings that still need to be addressed.

In the meantime, governor Perry has instructed state agencies to cut their budgets by 8 percent this fiscal year, which ends in August and by another 10 percent for the next two-year budget cycle.

The proposed budget cuts, will make correcting the shortcomings cited by the monitors difficult. At first glance, it appears that this may not be so. Services at the center are entitlements, and as such they “are not impacted by the budget reductions,” said Cecilia Federov, a spokeswoman for the Department of Disability and Aging Services (DADS), which oversees the state supported living centers.

And the budget for the next two-year funding cycle submitted by DADS maintains the current funding level for the Lubbock center.

But maintaining funding at the current level may not be enough to implement the improvements required by the agreement: improvements such as more staff training, more oversight, and higher staffing levels.

One of the shortcomings cited by the monitors that hasn’t yet been addressed is the 60 percent annual turnover rate of direct care workers at the Lubbock center. 

Direct care workers provide daily care to and have the most contact with the center’s residents. The work they do is challenging.  Of the 114 people admitted to the state’s supported living centers in 2009, 85.7 percent had behavioral health challenges in addition to their disability and 61 percent had severe or profound needs for behavior management services.

And the pay is low. Entry level pay for direct care work is $1,706 a month, and base pay for those with more experience and qualifications is $1,876 a month.

Low pay and challenging work are responsible for the 60 percent annual turnover rate. Management would like to correct this shortcoming, but will be hard-pressed to do so without more funding.

To make matters worse, a proposal on the table to make state workers pay more for their health care and contribute more to pension fund will shrink the already low take-home pay of living center workers and exacerbate the turnover problem. 

So far, Lubbock State Supported Living Center management and staff have made great strides to improve the quality of life for people living there. But these gains could be in jeopardy unless the center can reduce its turnover rate and retain an experienced, well-qualified staff, a task made much harder by the cuts that the governor wants.

Precarious work grows; job security declines

You can see them bright and early every morning lining up along the streets of Austin: outside the Home Depots, along Cesar Chavez Street in East Austin, close to homeless shelters near downtown.

They are mostly young men from Latin America. They wait for the pick up trucks of construction contractors, landscapers, and other employers who need day laborers to pick them up and take them to a job site.

On the surface, it may not look like it, but these day laborers have something in common with the graduate students who teach most of the undergraduate courses at the University of Texas.

The United Nations calls the kind of work that both perform “precarious work,” that is, work that is poorly paid, insecure, and unprotected.

Other kinds of precarious workers include temporary employees, contingent workers, home workers, domestic workers, migrant workers, part-time workers, and anyone who works in a non-standard job that differs from stable, full-time employment

Precarious workers comprise a large share of the workforce in the US. Estimates vary depending on who is classified as a precarious worker, but when temporary workers who have worked for an employer more than a year are included in the count, the precarious workforce in the US totals 29 percent of the entire workforce.

Precarious work was the dominant form of work in capitalist economies prior to the late 1930s. “Untill the end of the Great Depression in the United States, most jobs were precarious and most wages were unstable,” writes professor Arne Kalleberg of the University of North Carolina at Chapel Hill.

After World War II, work in the US became more stable, and the precarious workforce shrunk.

But that changed in the 1980s as “management’s attempts to achieve flexibility led to . . . corporate restructuring, which in turn led to the growth of precarious work.”

Kalleberg estimates that between 1975 and 1998 the temporary workforce, which doesn’t include all precarious workers, grew by over 700 percent.

The growth of the precarious workforce accelerated in the 1990s as demand for higher profits grew. 

Companies like Unilever, the world’s third largest manufacturer of food and home care products including Lipton, Slim-Fast, and Vaseline, promised investors 20 percent to 30 percent rates of return on investment.

To deliver on its promises, Unilever in the early 2000s reduced its permanent workforce from 300,000 to 148,000, replaced permanent workers with lowered-paid precarious workers, and outsourced between 15 percent and 25 percent of its production.

In Pakistan where the company packages its tea products, Unilever has a workforce of 7,000, but only 323 are full-time permanent employees.

Like its corporate counterparts, universities in the US rely more and more on precarious workers. In 2008, 68 percent of undergraduate teaching was done by non-tenure track instructors and part-time graduate students. 

In addition to being paid far less than tenured or tenure-track teachers, precarious instructors work from semester to semester on a contingency basis.

The growth of the precarious workforce has major consequences for all workers. “Precarious work has contributed to greater economic insecurity, and instability,” writes Kalleberg. “Economic inequality and insecurity threaten the very foundation of our middle-class society.”