Most important article of the year about pensions

[AngryAmish]

"The years just after the Second World War were a time of great industrial upheaval in the United States. Strikes were commonplace. Workers moved from one company to another. Runaway inflation was eroding the value of wages. In the uncertain nineteen-forties, in the wake of the Depression and the war, workers wanted security, and in 1949 the head of the Toledo, Ohio, local of the United Auto Workers, Richard Gosser, 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. Every company in the area, Gosser proposed, should pay ten cents an hour, per worker, into a centralized fund.

The business owners of Toledo reacted immediately. “They were terrified," ... snip

"America’s private pension system is now in crisis. Over the past few years, American taxpayers have been put at risk of assuming tens of billions of dollars of pension liabilities from once profitable companies."...snip

"The key to understanding the pension business is something called the “dependency ratio,” and dependency ratios are best understood in the context of countries. In the past two decades, for instance, Ireland has gone from being one of the most economically backward countries in Western Europe to being one of the strongest: its growth rate has been roughly double that of the rest of Europe. There is no shortage of conventional explanations. Ireland joined the European Union. It opened up its markets. It invested well in education and economic infrastructure. It’s a politically stable country with a sophisticated, mobile workforce.

But, as the Harvard economists David Bloom and David Canning suggest in their study of the “Celtic Tiger,” of greater importance may have been a singular demographic fact."

It is a long article but it argues that countries and companies do well because they have a good ratio of workers to dependants (duh). When there is a bad ratio then organizations do poorly.

Please read it and you will better understand why big airlines are doomed as they sit here today and why WalMart will never offer their employees an old-type pension.

[antigop]

1. WSJ pension article that tells the real story about pensions today

http://www.post-gazette.com/pg/06177/701286-28.stm

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To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force.

In its latest annual report, GM wrote: "Our extensive pension and (post-employment) obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers.


But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come.


Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives.
>>

[Nozebro]

2. GM, in typical corporate thinking, believes it's important to take care of

their executives and that the little people should be able to fend for themselves. After all, the little people aren't uncomfortable shopping at WalMart.