Blame it on galloping insecurity

Robert Kuttner

September 28, 1992|By Robert Kuttner

PRESIDENT Bush has been wondering aloud why the voters seem to think economic conditions are worse than they actually are. Let me offer one explanation: galloping insecurity.

There was a time in America when a job -- blue collar or white -- normally meant a stable career. General Motors, Eastern Airlines, CBS, the phone company, the local public school, the library, the bank, the bus line all tended to stay put; a loyal employee could expect to stay put, too. Even in highly cyclical industries, most workers who were occasionally laid off would be recalled when orders picked up.

With steady career patterns came "fringe benefits," notably health care and pensions. I put the term in quotes because a fringe benefit wrongly implies mere frosting. In fact, employer-provided health and pension benefits are part of the basic household cake.

In recent years, the cake has begun to crumble. And the recession has revealed the whole system's underlying fragility.

Today, nobody has reliable job security -- not IBM engineers, not civil servants, not bankers, not tenured college professors, not unionized factory workers. That is bad enough when times are good and job-shifting produces economic gains. But it is devastating when new jobs are not to be had.

Research by Harvard economist James Medoff shows that the white collar share of unemployment in this recession -- about 40 percent -- is nearly double that of the downturns of 1973 and 1982. The Congressional Joint Economic Committee (JEC) reports that, unlike in a typical recession, a majority of workers being laid off will not be rehired for their old jobs.

Thanks to deregulation, global competition and the corporate takeover game, there is no social contract left between employer and employee. Some high rollers may find this kind of life-on-the-edge exhilarating. But most ordinary souls find it terrifying. So while "only" 7.5 percent of the labor force is out of work (the JEC says the real figure is 11 percent when you count those who've given up looking), even those with jobs are without job security.

Beyond unemployment rates, one of the most telling indicators of rising insecurity is declining pension and health insurance benefits. In the boom years, large corporations rewarded loyal, long-tenure workers with excellent health and retirement plans. But as the pressure to shave costs has intensified, these benefits have been tossed overboard.

Pension coverage, after gradually increasing since 1945, has been declining since the early 1980s. More and more employers have either scrapped pension plans, or changed the terms so that workers no longer are guaranteed a specified retirement benefit.

During the 1980s, some six million workers lost their pension coverage. Today, about 39 percent of workers are enrolled in a company-run pension plan, down from 48 percent in the late '70s. According to the American Academy of Actuaries, some 42,000 employers, large and small, simply terminated their pension plans between 1989 and 1991. The Pension Benefit Guarantee Corporation considers another $40 billion worth of pension plans underfunded.

Employer-provided health care, likewise, is becoming ever less reliable. In 1990, employer shifting of health costs to workers was the main issue in 83 percent of labor negotiations and 78 percent of strikes, according to the AFL-CIO.

Beyond the issue of cost-shifting, many employers have begun self-insuring in order to escape fringe-benefit regulation under the Employee Retirement Income Security Act (ERISA). Until the 1980s, virtually all employees who were members of company health plans automatically qualified for insurance when they were hired. There was practically no screening ("medical underwriting") of individuals intended to reject in advance those who might have the effrontery to get sick.

But lately, more and more company health plans refuse to insure individuals or their family members who are at medical risk. And if you lose your job, or change jobs, there is an even greater risk that a "pre-existing condition" will preclude you from getting insurance at an affordable price, or at all.

So, Mr. President, it is small wonder that people feel economically vulnerable.

For the foreseeable future we are likely to see more economic turbulence. That turbulence will be individually bearable only if high growth creates new job opportunities, and government helps to ease necessary transitions. But as unemployment benefits, retraining programs and economic development outlays have all been cut back, few such policies are currently in effect.

Some of this uncertainty is a necessary byproduct of economic innovation. But much of the sheer chaos in such industries as banking and airlines reflects excessive deregulation.

Moreover, the linkage of health and pension benefits to employment perhaps made sense back when companies stayed put. But in today's economy, where employers and their benefit plans are here today and gone tomorrow, there is no substitute for pension and health benefits based on citizenship, and not on the caprices of the marketplace.

The economic policies of the 1980s have blown away the predictability that ordinary people require, and President Bush is reaping the whirlwind.

Robert Kuttner writes a column on economic matters.

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