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The Pension Fund Was Just Sitting There

Gentle Readers who care about library stuff have probably seen this or are deliberately ignoring it after half-a-dozen people sent it, but not all y’all are so much library people, so I may as well rant to you about the NYT article Anger as a Private Company Takes Over Libraries. If you don’t want to click through, essentially there is a company that is working as a hatchet man for cities who want to fire their union librarians (and other library workers). The city has made promises to these people, and doesn’t want to fulfill them, so they hand over the library to this company (Library Systems & Services), then the private company reneges on its promises, then (this is the best part), the city can get control of the library back in three or five years, without all that pension stuff hanging over them. It’s a win-win situation! Except for the workers, of course, who lose.

And integrity, if that matters.

Look, I don’t want to get all whatsit, here, but let’s be clear: lots of times, in lots of places, in lots of the country, management has made deals that say: I’ll give you this much money now, and this much money when you retire. The people who have done the work took the jobs on that understanding: we get this much now, and this much when we retire. Then, when unemployment is high and management thinks they can get away with it, they break that promise.

There’s no real difference here between what the cities are doing to their library workers and a homeowner who agrees to pay a housepainter half up front and half when the painting is done, and when the house is freshly painted, tells the housepainter to fuck off. Oh, there is a difference legally, but not morally.

This isn’t really about libraries. Oh, the David Streitfield of the New York Times seems to think it’s about libraries, but it isn’t. For grocery store workers, poor saps, Shaw’s and the A&P just pulled out of Connecticut, their storefronts being taken over by PriceRight and the Big Y. Union workers getting fired, and even if the new workplace gets organized, everybody has lost their seniority. Their pensions are disrupted, and for some of them, their pensions will just disappear. Yes, it was a promise made as a condition of employment, but nobody says they have to keep that promise.

This isn’t about libraries. It’s about the fundamental relationship of employer to employee, and what is in place to protect the employee from getting squeezed. The answer? Well, the answer for the last hundred years or so has been unions, but this is a smooth move around that. And, frankly, the moves don’t need to be smooth. There’s next to no enforcement of the labor laws, when the actions are in violation, and (as with the case here) there’s often a way to break the promise that doesn’t break the law.

If you have a job working for someone, you can get screwed. You may think your boss would never screw you, but (a) lots of people have been wrong about that before, and (2) your boss may not always have any choice in the matter, or you may walk in to work tomorrow and discover your boss won’t be your boss anymore.

If you have employees, and are not planning to screw them—this is bad for you, too, as when the industry norm is screwing the employees, fulfilling your promises is an added cost that will come out of your pocket. Your competitors aren’t paying that. You may find yourself making the choice between screwing your workers or going under—or selling out to the guys who will screw your workers.

If you have employees and are planning to screw them—then this is bad for you because, frankly, it is bad for people to behave badly. It’s bad for your self. And it will ultimately be bad for you to live in a world with cutthroat and dishonest social norms.

And if you are self-employed, a freelancer, a contractor, any of that stuff—well, almost anything will be bad for you, won’t it? But you should still be outraged, because when you are on your own, you shouldn’t really be on your own. There should be something on your side, whether it’s the law or some institutional protection or just a belief that people shouldn’t break promises.

Why is YHB ranting about this now? Well, other than that the article just came out this week, there’s this: if we don’t rant about this now, when there unemployment is up and jobs are scarce, when employees are at their most vulnerable, we aren’t going to remember to rant about it later, when the shoe is on the other proverbial. And employers will make more promises to pay later.

Tolerabimus quod tolerare debemus,


My people used to have blood feuds for generations over just this sort of thing. Any time someone can say that, we're probably firmly in bad territory.


I was pretty frustrated about this a while back when my wife's employer decided to screw their employees out of a year's worth of promised future pay. It's made me appreciate the change in state law here that required employers to pay their workers at least every 2 weeks, rather than less often. You can only get screwed out of 2 weeks' pay then rather than a month's pay before you realize you've been screwed.

Well, 2 weeks' pay, and all of your retirement contributions, and your FSA contributions, and your access to health care, and a variety of other benefits. Hey, remember when salary was a bigger deal than the rest of it?

The housepainter situation is somewhat inapt, because it's more like you promise to pay the painter the other half in thirty years, and there are lots of reasons why you might legitimately be unable to make good on that promise, which you couldn't reasonably predict with any certainty thirty years ahead of time.

I know no one will like this comment, but I really think this is a problem with defined-benefit plans. The benefits are "guaranteed", unlike defined-contribution plans, but only if the payer is still around to pay them. Whether they vanish because they're a bunch of immoral shits, or because the economy tanks and they go out of business, or because they didn't accurately project what would be happening in thirty years and made an honest mistake, doesn't really matter to the workers. Betting your future on a defined-benefit plan is a big risk -- and it's a risk that you don't have any control over.

Betting your future on a defined-contribution plan also has risks, but the one big advantage is that *you* can decide if you want to gamble your retirement savings on the lottery, or the stock market, or government bonds, or money market funds, or FDIC-insured savings accounts, or whatever, instead of your employer (or whoever runs your defined-benefit plan) making that decision for you.

Life is risky, and it keeps on being risky as long as you keep on living. Your wealth may vanish, your income may dry up, and anyone who tells you that they can guarantee that none of those things will happen, for twenty or thirty or fifty or eighty years, is just plain up to something.

Honestly, I do like irilyth's comment. Nothing is going to "keep you safe" or "provide for your security." It's comforting to think that it's possible, but it's not. Police officers will not prevent your home from being robbed; they might catch the person who robbed you. Social Security will not provide you with a safety net after you retire; it might help you out with a small check every month. Even the most golden of parachutes will not catch you if there is massive market failure; even the most sturdy of homes will not stand up to a nuclear blast. Skyscrapers fall down when airplanes hit them.

I'm a teacher now and a union member, and I've got a pension plan through VA. I would far rather shove the pension plan up the union's ass and take double pay now, handling saving on my own. My family is good at saving money. History has shown with bleak clarity and minimal variation that government is lousy at saving money.

Sadly, most other people are also lousy at saving money, so we're stuck with imaginary safety nets.


Well, and it's true that if you don't get paid what you are owed, it doesn't pay for groceries to know whether the defaulter has deliberately screwed you or has himself been screwed, what you are missing (irilyth) is that if we allow people to deliberately screw workers out of money they are owed, then it will happen more often than your description of life-is-risky requires. After all, the most likely reason you don't collect on your retirement fund is that you die in harness, and then you'll look silly with all that money you could have spent on hookers and blow.

But you seem to be reacting to the increasing frequency of pension-welshing (and general contract-welshing) by shrugging that life is risky. Yes, life is risky. But driving is risky—and we don't think that roads should have hidden pits and fire spouts. We cannot eradicate risk, but that doesn't mean we need to accept the current level of risk, or accept when that level increases.

And Matt—I don't know your particular union situation (AFT does have a few crazy ideas), but if the union could get a contract for double wages and no pension contribution, then they should take it and shove the pension plan up the district's ass. I doubt they turned that deal down. I doubt they got a chance to turn that deal down. It's possible—sometimes one party to a negotiation will get hooked on what the last deal was, and taking away any part of it makes them dig in their heels even if the return is a better offer. Heck, the union could (and sometimes does) take the extra money and run their own damn pension, if the members want some help saving (and scale does come into effect, of course, so that the pension fund can get often a better return than individuals—although that is less true now, I think, than it used to be). But the pension is a deal, and whether you think that the people who made the deal were smart to make it or dumb to make it, that doesn't give the guys who owe the money the right to keep it.

The point about the housepainter is—yes, the housepainter, even being paid on completion of the job, runs a risk. The owner could die or go into hospital and then bankrupt. The house could burn down when the job is seven-eighths complete. The painter could die. The dollar could go into hyper-inflation and become nearly useless overnight. Or the owner could be a dick and just refuse to pay.

And if the housepainter, for whatever reason, did make a contract with the homeowner to be paid in thirty years, and now it's thirty years later, and the owner is refusing to pay—why is it at all relevant that all those things could have happened over the years? They didn't. If the owner won't pay, that's a Bad Thing, and if we shrug our shoulders and say life is risky then life will get worse in all those ways I was talking about up there. And that's true whether the owner is stealing a defined-benefit plan or a defined-contribution plan (and those are surprisingly easy for employers to steal as well) or not paying for a job around the house.


True. If there's a contract in place, and if that contract is broken, and if the contract-breaker wins in litigation, then the laws aren't working. My personal feeling that Pensions Bankrupt Governments and Companies has nothing to do with the fact that laws aren't working.

But pensions really do bankrupt governments and companies. Workers entering into a pension agreement are hurting themselves as well as the government or company because if the government or company can't sustain itself, the worker has no recourse. Pensions suck. It's only better to have a pension than not to have a pension if the host body survives the cost of offering pensions. That doesn't happen often, though.


Pensions really do bankrupt governments and companies.

Yes, indeed. But I think vardibidian's point is that pensions were the governments' and companies' idea in the first place. It wasn't labor that came up with the idea of pensions; companies devised them, along with employer-provided health insurance, as an alternative to giving workers what they really wanted, namely higher wages now. Companies gambled that it would be easier to find the money later, or that most workers would die before collecting those pensions, or whatever, and now they're crying because the gamble didn't pay off. Labor was perhaps foolish for taking, and then getting to like, that deal, but the fault is not theirs to begin with.

Okay, but that doesn't mean that there's money available to pay them. If the companies pay the pensions, they go out of business. If the companies don't pay them, they break contracts and get sued, but maybe they don't go out of business. If you're a company, stop paying. If you're a worker, sue. Who wins?


That is an important part of my point, mostly to back up another part of it--when an government or a company is 'bankrupted' it is usually from a variety of mistakes or miscalculations (unlike individual and family bankruptcies, which are most often from catastrophic circumstance that could not have been prepared for). Somehow, it seems to me, when a city or a company goes broke, the blame goes to the pensions and the unions that negotiated them. The debt is debt—we should hold the pension debt to the same standard as what they owe to their vendors and to the financial institutions that lent them money. In fact, I would rather have an auto company default on a bank loan than 'renegotiate' a pension, because the bank loan was made (one hopes, it being their business) after careful assessment of risk, and the risk was part of the deal in the first place. Now, you can argue (and above was a good example) that the union negotiator's job was to assess that risk in the first place as well, and that's a good point. But that would only put the pension as equal to the other creditors, and not, as has been presented in the news, as the worst and most heinous of them. And given that the pension is the most directly involved in people's lives, that the relationship of employer to employee ought to be taken seriously and honestly, and (if nothing else) that the paying out of owed pensions to pensioners is better for the economy than the repaying of loans to financial institutions, that should be first.

But what the article is talking about, and what has happened with the grocery store chains in Connecticut, is worse than that, to me. It's the employer finding a legal way to shrug off the responsibilities of employment. These stores aren't seeking bankruptcy protection, they're just trading stores to knock back the prospects of the employees. I am disgusted by it. Similarly, a town that hands over the management of a local library to a for-profit hatchet company is abandoning its dignity and its honesty. And should be called on it. And a society that encourages that, that says that we can cut loose the workers but must pay the banks, well, that society is abandoning its dignity and its honesty and should be called on it, too.


I definitely agree that if someone screws you over, you should go after them, and not just say "oh well, life is risky like that". What I'm mostly saying is that it makes sense to be somewhat risk-averse when you're talking about your life savings, and that defined-benefit plans are very risky -- but are often presented as being very safe, because the benefit is guaranteed after all.

I don't actually know whether defined-benefit pensions were a corporate idea or a union idea. I had always assumed they were a union thing.

Verily, it is shitty.


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