delanceyplace.com 09/13/06 - pension and health benefits

In today's excerpt - Malcolm Gladwell argues that collectivization of pensions and health benefits would help businesses:

"... in 1949, the head of the Toledo, Ohio, local United Auto Workers, Richard Grosser, came up with a proposal. The workers of Toledo needed pensions. But, he said, the pension plan should be regional, spread across the many small auto-parts makers, electrical appliance manufacturers, and plastics shops in the Toledo area. That way, if workers switched jobs they could take their pension credits with them, and if a company went bankrupt its workers' retirement would be safe. ...

"[President of General Motors] Charlie Wilson, on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners ... Companies themselves ought to assume the risks of providing insurance. ...

"The most influential management theorist of the twentieth century ... Peter Drucker ... [writing in 1950] simply couldn't see how the pension plans on the table at companies like G.M. could ever work. 'For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years ... But is there any one company ... whose future can be predicted with certainty for even ten years ahead?' ...

"Bethlehem [Steel] had a hundred and sixty-four thousand workers in 1957. By the mid-to-late nineteen-eighties, it was down to thirty-five thousand workers ... In 2001, Bethlehem, just shy of its hundredth birthday, declared bankruptcy. It had twelve thousand active employees, and ninety thousand retirees and their spouses drawing benefits. It had reached what might be a record-setting dependency ratio of 7.5 pensioners for every worker. ...

"Wilbur Ross acted quickly [to buy the company out of bankruptcy and] ... put in place a new 401(k) savings plan ... within about six months [Bethlehem] was profitable. The main problem with the American steel business wasn't the steel business, Ross showed. It was all the things that had nothing to do with the steel business. ...

"In 1962, G.M. had four hundred and sixty-four thousand U.S. employees, and was paying benefits to forty thousand retirees and their spouses, for a dependency ratio of one pensioner to 11.6 employees. Last year, it had a hundred and forty-one thousand workers and paid benefits to four hundred and fifty-three thousand retirees, for a dependency ratio of 3.2 to 1. ... "


author:

Malcolm Gladwell

title:

'The Risk Pool'

publisher:

The New Yorker

date:

August 28, 2006

pages:

30-35
amazon.com
barns and noble booksellers
walmart
Support Independent Bookstores - Visit IndieBound.org


COMMENTS (0)

Sign in or create an account to comment