The Employer-Based Social Safety Is a Disaster. We Can End It.
Business and labor are on the same side here.
Right now, more than 30,000 Boeing workers are in their third week of a strike. One of their central demands is the restoration of their defined benefit pensions, which the company forced them to give up a decade ago. It’s a common demand—defined benefit pensions are great for workers because they place the investment risk on the company, whereas 401(k) plans do the opposite. But I do not know of a single union that has resurrected a defined benefit pension for a large work force after it has been taken away. The reason is: companies can do math. They often dangle one-time payments as enticements for workers to switch their pensions to 401(k)s, knowing that a dazzling little pile of cash on the table is much cheaper for them than the long-term flow of cash for retirees that pensions demand. “Defined benefit plans are only available to about 8% of workers at US businesses today, according to data from the Employee Benefit Research Institute, down from 39% in 1980,” CNN reports. “The decline has greatly mirrored the decline in union membership at businesses, from about 17% in 1983 to 6% in 2023.”
Union negotiations are just structured and compelled versions of something that all companies, union or not, do constantly. All the demands that workers make in a contract—wages, health care, retirement, everything—gets added up into a total dollar figure. This is really what matters. This is what you are negotiating over. Everything else is details. A company is happy to give a wage bump if it can trade it for a competing demand that would actually cost more money in total. Classic defined benefit pensions are the single most costly benefit that employers traditionally provided, when you add up their total cost over the lifetime of workers. So, for more than 40 years, unionized companies have been absolutely cutthroat at the bargaining table in their determination to shift their workers into 401(k)s. Over the decades, in the private sector, pension after pension has fallen, each a lost battle in an economic war. Even the man who invented the 401(k) now acknowledges that this process has been a financial catastrophe for workers.
I am not bringing this up just to bemoan the fact that companies are greedy. Yes, companies are greedy, but that is because they are in essence machines programmed to maximize profits, so cursing them for being greedy is like yelling at a beaver for making a dam. That is what they do. Thinking about the widespread loss of pensions and how it has made life for the majority of working Americans inarguably worse is a good entry point to think more broadly about the insane, rickety, piecemeal, and counterproductive way that we have built our shitty, threadbare social safety net in this country. And also, a glimmer of a political path out of this mess.
Because really, what the fuck are we doing? This is all very dumb.
If America were a rational nation we would have sat down after WW2 and said, “Well, we rule the world and we are about to be so, so rich, we’d better just pass a sensible piece of legislation providing for health care and retirement and child care and other basic necessities for all, like a normal and reasonable country.” Of course we did not do that. Instead, deep in Cold War psychosis, we evolved our way into a system that provided health insurance for most people from the employers, which may be a crazy way to do it but is definitely NOT COMMUNIST. Then later we kind of grafted on Medicare to try to plug the hole for people left out of this system. The evolution of employer-provided benefits has continued for generations. But our original sin was allowing ourselves to be drawn into this plainly inferior system in the first place.
Not to get super technical here but, because private companies are constantly trying to maximize profits, they have an ENORMOUS and NEVER-ENDING incentive to chip away at the cost of employee benefits. So it is unsurprising that, over time, such benefits will be jettisoned by employers at the first possible opportunity. I know I am speaking in generalities here, but this pretty much captures the trap we have gotten into: 1) Tie necessary life-sustaining benefits to employment, rather than building a universal public government-funded safety net. 2) Erode the unions which are the only force that prevent companies from engaging in a race to the bottom on the quality of these benefits. 3) The benefits go away and people die. In a mature and serious country, “workplace benefits” would be things like, you know, “a variety of free bagels.” Not stuff like “your health insurance” or “your ability to avoid poverty in your old age.” Remarkably stupid system. Really idiotic.
The pandemic, obviously, was a gigantic national exposing of how awful this employment-based safety net really is, as tens of millions of workers scrambled desperately to survive while their faulty state unemployment insurance systems broke down. (Ultimately federal legislation saved the day, which is a clue to what we should have done in the first place a century ago.) As time goes on, I promise you, this crisis of the social safety net’s inadequacy will only get more extreme. The “gig economy” is, in aggregate, an attempt by capital to build a system of employment with no employees. Companies have realized that if you can turn every full-time employee into an independent contractor and every job into a gig, then you can escape the responsibility of paying benefits (and enjoy a work force that is legally unable to unionize). The gig economy is the arbitraging away of the employer-based social safety net. The savings go to the investment class. The model, as you can see, expands to the entire economy, sucking in not just Uber drivers but also adjunct professors. The root cause of this is that we have created an enormous financial incentive for companies to get out of playing the role of Real Employer, which comes with a host of demands for employee benefits. The people who designed this system should have seen this all coming. If they did, they didn’t care.
You can write books on this topic, of course, and many people have. (One I read recently is “Over Work” by Brigid Schulte, an interesting exploration of various often stymied attempts to make workplace benefits more humane.) Today, all I want to do is point out the fact that there is an escape route from all of this. This is an issue that presents the opportunity to create a natural alliance of convenience between business and workers. Not because business “cares” about human quality of life, but because business cares about itself.
If you open an ice cream shop, you want to sell ice cream. Do you want to be a health insurance provider? No. Do you want to be a life insurance provider? No. Do you want to be a retirement investment account provider? No. You want to be an ice cream provider. The absurd burden of making businesses into benefit providers weighs most heavily on small businesses, which are forced to pay to outsource this stuff to large firms. The system is predatory and confusing for employers and employees alike. Unfortunately, the logic of capitalism is simply for employers to try to escape their obligations to provide benefits, which leaves employees with nothing.
What needs to change is simply the calculation that employers make about what the path of least resistance is for their own operations. The rise of the gig economy is what happens when employers believe that their best option is just to pretend like none of this is their problem. Yet it is—in the long run, employers need a stable society that creates healthy working people who can survive and are not so desperate that they steal from their employer and also chop up the CEO and throw him in a river. Employer-based health insurance, a system hated by everyone that benefits nobody except health insurance companies, is probably the single most obvious issue upon which the AFL-CIO and the Chamber of Commerce should be on the same side. Business should be demanding Medicare For All as loudly as Bernie Sanders is! They don’t want to deal with this shit either! All of this is, by definition, a distraction from an employer’s core business, and a financial burden. The same goes for providing retirement benefits to workers. Adequate public health care and adequate Social Security that obviates the need for private health insurance and private retirement plans would be great for American business. It would leave them to just do the thing that they are in business to do.
I don’t want to sound like a naive moron here. In order for the business world writ large to come to this conclusion, the first thing we must do is to close off the easier possibility they now prefer, which is to escape their responsibilities altogether through subcontracting and pushing full time jobs off their books, or whittling down benefit costs to the smallest possible number by eradicating union power. That means that we need to regulate the gig economy out of existence, at least in the sense of requiring gig economy companies to treat their workers like employees rather than independent contractors. (This is a huge philosophical fight within organized labor, which I have written about a bit elsewhere.) It also means that we need to increase the power of labor by organizing millions of new union members, making it more difficult for companies to do things like, to use a relevant example, evaporate defined benefit pensions from the face of the earth. But shifting the political landscape at least modestly in the direction I am talking about is within the realm of possibility in the medium term. The balance of power between labor and corporate America is a fight that never stops. On this issue, we just need to focus our demands, when things tilt in our favor.
Building a public safety net would mean more taxes for businesses. But a government system would be more efficient, meaning the long term cost would be lower, and employers would also get the invaluable gift of never having to think about this shit again.
Cynicism about the bottomless pit of inhumanity that is the American system of capitalism is generally warranted. This, I think, is one place where there is reason for optimism. Providing a necessary social safety net to all citizens is properly the role of the state, not of private business. The very idea of outsourcing this role to private employers is plainly ludicrous. That we have done so for so long speaks to the dysfunction of our political system. But here is a chance to use that dysfunction for good. We have a political system that allows power to be bought with money. It allows companies, which care about nothing but profits, to steer politics in their own direction. It is possible right now, today, to build an alliance between labor and small business on this issue, and it is possible, by strengthening labor and making the current system more expensive for employers on a national scale, to bring big business on board as well. Unions plus Most Employers are a stronger political coalition than the health insurance lobby. In the same way that a minimum basic income would free working people to pursue their dreams, an adequate universal system of public health insurance and retirement would free American businesses to focus their attention on their business and stop engaging in labor fights and expensive lobbying and legal maneuvering to try to minimize the burden of being benefit providers on the side.
Soulless CEOs and heroic union leaders, standing shoulder to shoulder, ordering craven politicians to pass Medicare For All at once or suffer the wrath. It makes a lot of sense. It can happen. Think positive!
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Related reading: The Gig Economy Is a Vampire We Shouldn’t Make Peace With; Wage-Setting Algorithms Are an Abomination; Corporations Do Not Have Any Rights That We Don’t Give Them.
If you are into “podcasts,” you can hear me talking about class war on the most recent episode of the “Money With Katie” podcast, which appears to be sneakily radicalizing Americans under the veil of talking about personal finance. If you are in New York City, you can see me at the Brooklyn Book Festival tomorrow at 3 pm, in conversation with Astra Taylor, Deepak Bhargava, and Max Alvarez. If you want to organize your workplace, you can contact EWOC for help, and if you want to help other people organize their workplaces, you can donate to EWOC. If you would like to bring me to your city to talk about my book or the labor movement, you can email me.
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Hamilton Hambone--more genius and a great summation of what I have observed in my HR career! Single payer healthcare in the long-run is a savings for all businesseses, and levels the playing field for small and midsized businesses--which are more easily converted to worker ownership (or started as such).
Theres another line item that it would eliminate for businesses--the shadow healthcare system created by workers compensation insurance.
The "it's NOT COMMUNISM" line is one of the clearest explanations I've ever heard (duh) of how all these employer-provided benefits got established. How many of us have stayed in a soul-dead job longer than we wanted to "for the benefits"? Such as they were. Good piece.