The Retirement Crisis Gets Worse

What about housing wealth?


As the stock market gains, so does the retirement crisis.

The latest evidence comes from a new study from CareerBuilder and Harris polls, which shows that almost 8 out of 10 American workers live paycheck to paycheck to make ends meet.

This is an increase of  5% to 78% in 2017. (The Harris Poll surveyed nearly 2,400 hiring and human resource managers and 3,500 adult employees who worked full-time in May and June.)

The great disparity continues

Based on the Bureau of Labor Statistics of about 122 million people who are full-time workers in the U.S., the poll suggests that 95 million of those adults could be living paycheck to paycheck.

This includes blue-collar workers, plus one in ten who earn six-figure incomes.

So, what are the reasons for this continued financial demise of working Americans?

The usual suspects are stagnant wages, and households still earning 2.4% less than what they were earning when their income peaked in 1999. Simultaneously, food, fuel, tuition, housing, and other expenses have increased.

This means there is less opportunity for people to build retirement savings.

Time for Corporations to Look for New Answers

Corporate HR and retirement industry responses suggest that people should save more and reduce their lifestyle expenses. But that is an old, tired excuse.

When the CEOs of some of the nation’s largest corporations quit the Trump corporate advisory councils recently, they showed they could make a unified statement on racism, white supremacy, and Trump’s confused leadership.

CEOs should now take those same positions against wage stagnation and income and wage inequality.

Is this a pie-in-the-sky request?

Not really. In the 1930s, when the nation was preparing to enter the Great Recession and was wracked by labor turmoil and a growth in political parties that were pushing for very new answers to wage inequality, some of the nation’s most prominent CEOs, primarily those in manufacturing, pushed for wage increases and even the strengthening of labor unions.

As noted in my book (How 401(k) Fees Destroy Wealth), some of the nation’s largest corporations initially introduced and advanced the idea of providing pensions in the U.S. in the 1920s and 1930s. Companies, such as Standard Oil of New Jersey, General Electric, and Metropolitan Life, advanced pensions to build labor-management relationships and prevent strikes. According to Professor G. William Domhoff, moderate executives at corporations supported pensions from the 1930s to the 1970s to attract and maintain motivated and engaged workers.

The nation’s most significant industrial leaders, such as John D. Rockefeller, Jr., began to see the importance of company-level, old-age pension plans. To examine the issue, Rockefeller created the Industrial Relations Counselors, which promoted better labor relations, especially in the companies he controlled, and prevented the formation of unions. This effort produced “employee representation plans” that relied on managers inside the plants to meet with employee representatives elected by plant workers. There, they could discuss work-related issues, although they were not allowed to discuss topics concerning unions and wages.

The popularity of pensions was accelerated by the introduction of accident insurance, or workman’s compensation benefits, at the state level in the early 1900s. These plans relied on private insurance companies to provide the insurance, and corporate leaders thought insurance companies could also manage their pension plans. According to Professor Domhoff, Equitable Life and Metropolitan Life, which shared many directors in common with central banks and corporations, began conducting the analysis necessary to offer group life insurance programs and group old-age pension programs to corporations. Insurance companies soon realized they could do a better job with private pensions than individual corporations if companies and their employees contributed.

Time To Raise the Tide

So what does this do with wage stagnation and people living paycheck-to-paycheck?

It is in corporations’ interest to increase wages and have workers who can buy their products and pay taxes. If more corporations paid taxes, that would even add to the positive impact on the economy.

The corporations that recently quit Trump’s advisory councils and earlier voiced their support of the Paris Climate Accords agreement showed exceptional fortitude by publicly showing they stood by American values and in support of most of their respective employees.

Now, it is time for major corporations to become more political and make that same stand to raise the minimum wage for the nation’s workers. That is what was meant decades ago when some economists said, “A rising tide lifts all boats.”


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