Living

Autoworker benefits set pace for U.S. pension experience

WASHINGTON — The pension debts befuddling carmakers and autoworker unions in the United States and Canada were a long time coming. For much of the 20th century, the deals struck in the auto sector influenced trends across the greater North American workforce.

"Pensions created long-term obligations that could outlast even their prosperity," author Roger Lowenstein wrote in his 2008 history of U.S. and auto industry pensions, titled "While America Aged."

Here's a rough timeline from that book of how pensions came to be and how both auto manufacturers and the United Auto Workers union set forces in motion that eventually led to today's pension crisis in the United States and Canada.

  • In 1935 amid the Great Depression, the Roosevelt administration enacts Social Security, providing government support for retired workers via contributions from active workers. It lacks its original goal of a national health care component and excludes farm workers, most of whom were African American.
  • Spring 1937, UAW organizer Walter Reuther, later to become a larger-than-life UAW president, is severely beaten in Detroit by goons sent by General Motors president Alfred Sloan. The so-called Battle of the Overpass rallies public sympathy and support behind auto unions.
  • By 1941, Ford Motor Co. yields to pressure after years of resistance and allows government-supervised union elections. The UAW almost immediately turns attention to pension plans.
  • During World War II, pensions flourish amid wage controls as a means of rewarding employees. Employer-sponsored medical insurance also gets its start in the war period. Pensions are largely limited to salaried, rather than hourly, workers, but the trend of substituting benefits for wage gains is launched.
  • In 1947, Ford offers workers a small pension to which they must contribute in order to receive it. That same year, President Harry Truman promises a national healthcare program, the first of many such unmet promises by his successors.
  • In 1949, the UAW demands Ford provide a $100 per-worker pension. An eventual compromise results in the company paying that as a defined-benefit pension, subtracting from it what a worker was due from Social Security. This sets in motion defined-benefit pensions.
  • In 1950, Chrysler is struck by the UAW for refusing to guarantee that its pensions will be funded. Months later, in what historians call The Treaty of Detroit, both Chrysler and GM expand pensions to $125 a month minus Social Security payment, and medical insurance is extended at half price to workers.
  • By 1955, GM becomes the first American company to earn more than $1 billion, and the UAW negotiates a 75 percent increase in pensions, three weeks paid annual vacation and seven paid holidays. Laid-off workers collect 95 percent of last pay for six months. These generous benefits become set in stone.
  • In 1960, just a decade after the Treaty of Detroit, about 40 percent of all U.S. workers, union or otherwise, are vested in a pension plan.
  • In 1964, amid a continuing sales and profits boom, carmakers agree to pay 100 percent of UAW members' medical insurance. This completes the circle, giving unionized autoworkers the full health and pension benefits that later proved unsustainable and created a decades-long funding challenge that severely weakened the Big Three automakers.
  • From the mid-1960s on, the costs of the benefit programs begin to erode U.S. automakers' competitiveness. Other industries later move to have employees contribute to their own retirement accounts, often matched by employers, through tax-deferred investment funds in what now is known as a defined-contribution plan.
  • More from McClatchy:

    To ask a question about this story or any economic question, go to McClatchy's economy Q&A

    Obama urges patience, lower expectations on economy

    Paraguayan president's affair: She was 16; he was a bishop

    Economy making stay-at-home dads more common

    Related stories from Columbus Ledger-Enquirer

      Comments