By Neil Cosgrove
Some weeks ago, a letter-to-the-editor appeared in the Pittsburgh Post-Gazette attempting to debunk the claim “that only rich people and corporations benefit from a healthy stock market.” The writer asked readers to recognize the value of IRAs and pension funds that supplement Social Security for “working class and blue-collar workers.”
“Shame on you,” the writer went on, if you are a worker not putting money into a retirement fund, as “a lot of companies” will contribute a percentage to your fund.
Well, even the writer was clearly conscious that “a lot” doesn’t mean “all” or the ‘”great majority” of companies. Still, the letter is representative of an unconscious position of privilege and perhaps is best answered by a careful review of facts that call into question his assumptions about the current access “blue-collar” and “working class” workers have to an undefined “healthy stock market.”
•As of March, 2017, according to the Bureau of Labor Statistics, 70% of civilian workers had access to retirement benefits in their jobs. That percentage is skewed upward by the 94% of union workers with such access. For non-union workers, the percentage is 66%.
•The availability of “defined benefit” plans, in which the employer invests pension funds for employees, and guarantees what the retiree will receive, has declined precipitously over the past 20 years. Forbes reports that only 16% of workers with access to an employer-sponsored plan have a defined benefit plan, 63% have defined contribution plans, usually involving both employer and employee contributing to a tax-delayed 401(k) plan. Around 20% don’t participate at all, including those not eligible because they haven’t been in the job long enough, or are part-time, or under 25.
•Those with high participation rates, Forbes further observes, are union workers, employees in the public sector, and employees at large firms with workforces over 1,000. Those with low participation include employees at small firms and in the personal services industry, construction workers, non-citizens, and Hispanics.
•Monique Morrissey of the Economic Policy Institute says that among those with 401(k) plans “the typical household approaching retirement has less than two years worth of income saved in those accounts.” High-wage and heavily unionized states like Massachusetts and Virginia have the lowest percentage of “near-retirement residents” at risk of poverty or near-poverty, reports Forbes, while Florida, North Carolina and Texas have the highest percentages at risk.
•People the letter-writer shames for not putting money in retirement accounts are also people who don’t have money left over from their paychecks to do so, and also people who must pay higher percentages of their income for health insurance premiums. The Bureau of Labor Statistics says that workers in the lowest 10% wage category pay about 40% of their premiums for family health coverage, while those in the highest 10% category pay 25% of their premiums.
•While workers in pension plans of any kind benefit some from a rising stock market, and also feel the greatest pain when the market drops, since such a high percentage of their assets are in stocks, the Washington Post points out that 40% of all stock is owned by the wealthiest one percent, and 70% is owned by the wealthiest five percent. “The bottom 80%,” observes Paul Krugman of the New York Times, own just seven percent of all stock.
Whether an economy so focused on stock values is good for the vast majority of Americans is highly debatable. The wealthiest among us purchase large amounts of stock in a company and then root for layoffs and suppressed wages that will increase the company’s profit margins. Unemployment, even if temporary, and low wages do not lead to “healthy” retirement savings for “working class and blue-collar workers.” What the facts truly suggest is that the best way to guarantee that workers have comfortable retirements is to give them living wages, often guaranteed through collective bargaining by unions. Those good wages result in higher Social Security payouts and more savings to invest.
Neil Cosgrove is a member of the NewPeople editorial collective and the Merton Center board.