Katherine Newman, the interim chancellor of the University of Massachusetts Boston, has devoted much of her career to documenting conditions facing poor and working-class Americans. Her new book, Downhill From Here, Retirement Insecurity in the Age of Inequality, examines the perilous state of retirement in the United States. Gerontology Institute Director Len Fishman recently talked with Newman about the dangers facing the pension system, Social Security and other forms of economic support for Americans as they grow older. The following is an edited version of their conversation.
Len Fishman: Your book reads in part like a post-mortem of the defined benefit pension system. Defined benefits provide a fixed pre-established benefit for employees at retirement, usually based on length of service and salary. They hit their high-water mark in 1980 and then plummeted. What happened?
Katherine Newman: Union density began to decline sharply at the same point. The defined benefit pension system is very much a creature of the collective bargaining power of unions. That’s why defined benefit systems tended to exist mainly where there were unionized workers. And as union density slipped — in part because of deregulation and industry competition – the strength behind the defined benefits began to shrink. Today, a very small minority of Americans have what we would call true pensions – 401(k) plans are definitely not pensions in terms of security and employer responsibility for investment.
LF: The pension benefits some workers counted on have been affected by plans that ran into trouble because employers stopped contributing, investment losses created financial instability, business went bankrupt or other problems. You believe broken promises like these have had a larger impact beyond retirement security. You say they’ve eroded people’s faith in democratic institutions.
KN: The pension system was one of the most durable promises we ever made to anyone about anything, second only maybe to marriage. People have been working for forty years and told this is what you will have at the end of those years. When that ends without warning, who is there to take care of the obligations and responsibilities that were guaranteed to working people? I’m afraid the answer is nobody, from their point of view. This has led to massive mistrust, a lack of faith in the ability to trust anybody or anything outside of your own family and immediate friends. That is a terrible state of affairs for any democracy.
LF: There’s been a dramatic increase in the percentage of people working past retirement age – the “gray labor force,” as you call it – some out of enjoyment but many out of necessity. What’s driving the increase?
KN: Several things. One is that we are living longer, and the replacement value of social security, as a result, is going down. People are finding the resources that they thought they would have in retirement are not sufficient.
LF: And that has led to changing work patterns?
KN: This is a problem the labor force is in a sense designed to solve – people either going back to work after the age of 65 or just not leaving in the first place. For those who are well-educated and whose jobs have been pretty kind to their bodies – like our jobs – this may not be such a hardship, though they will probably not get the kind of job they had in their prime working years, in terms of income or status. But for people who had jobs that really punished their bodies, the likelihood that you can find a job when you’re physically disabled goes way, way down. And then your options are much more limited.
LF: Other than physical challenges, how does a person’s work history affect his or her employment opportunities after retirement age?
KN: Dynamics that affect people in their prime work years affect them in retirement as well. There are good jobs and bad jobs. There are bad wages and good wages. That history follows you into retirement. If you had a working-class job or something closer to a minimum wage job during your prime working years, you’re not likely to find a job in retirement that’s better than that. You will be at the mercy of a really irregular gig economy, most likely. If you are well-educated, skilled and have a long track record, you can hold onto the job you had or you’re more likely to find a job that’s reasonable – though probably not as good as the one you had before.
LF: You also write about how older employees feel they are perceived at work?
KN: For many of the gray labor force workers we interviewed, a sense of disrespect came along with this. It’s not just working conditions and wages, it’s also whether or not employers see them as worthy of the same respect that younger workers have. We did hear a lot of complaints from people who felt that being an older worker was an invitation to disrespect. This, I think, was more troubling than almost anything to them.
LF: You cite the Melbourne Mercer Global Index, which scores the retirement systems of developed countries according to adequacy, sustainability, and integrity. The U.S. is 17thout of 30. And then you examine the top three: Denmark, the Netherlands, and Australia as models that we might learn from. Two things they have in common is high taxes and contribution rates. Do you think there might be an opening in the United States for a more radical approach to funding retirement?
KN: I don’t think anybody really likes paying more taxes. But look at the rising appeal of Medicare for All, and the fact that 50 percent of Gen X is completely okay with the rise of socialism. One wonders whether we’re not seeing the birth of a set of conditions that are severe enough to spark a change. What I think is difficult for Americans to realize is those high taxes paid in the social democracies buys incredible peace of mind. I don’t think we can imagine what it would be like not to have to worry about childcare or elder care or a college education or access to healthcare or any of the many things Americans constantly worry about unless they are among the top 1 percent.
LF:What are the practical things we should be doing to shore up our existing retirement system?
KN:The first thing I think we should be doing is lifting the income cap on Social Security tax [$132,900 in 2019]. If we used the same rates and made all the rest of that income subject to the tax, we probably would shore up Social Security from here to eternity. Raising taxes is never really simple but I think fairness arguments would probably carry the idea.
LF: What about private pensions?
KN: We need to do more to create a truly robust [government-sponsored] insurance system standing behind the private pension system. I also believe that we could do more to control the obligations of companies to feed the retirement systems they are responsible for because they started raiding those funds when it was convenient for them.
LF: What else?
KN: We are probably going to have to devote more of our general tax revenue to social security and retirement. We probably are all going to have to work longer. But I’m really sure a voluntary savings plan managed by the individual, such as the 401(k) system, is not a solution. It was never meant to be a retirement system, it was just a supplement. Now we’re relying on it as if it’s the be-all and end-all. And it clearly isn’t working and it will not work.
LF: As bad as the situation is for baby boomers, you expect matters to get worse for future generations.
KN: Conditions baby boomers face are just the tip of this ice burg. What’s coming behind us is a generation that didn’t get into the labor market as early or as smoothly. They were slower to gain access to housing, which is a primary means of building up equity. The defined benefit pension is gone, 401(k) contributions are meager, healthcare benefits are starting to disappear. The only thing worse than that is what’s coming for the generation behind Generation X, where the gig economy has interrupted the relationship between work and benefits almost entirely. They have no sick pay, no retirement benefits, nothing. I expect it to turn around to some degree with the small generation coming up now because small generations generally have more bargaining power. But this is a very long period of difficulty.
LF: You’ve been documenting the struggles of poor, working-class Americans, especially people of color, your whole career. How does this inform the way you approach your job at UMass Boston, a university that serves many students from these backgrounds?
KN: It’s absolutely crucial to the way I think about the task of being the chancellor here and to the investments I hope we can make in the future for these folks. Because I’ve been writing about them for 30, 35 years, in one form or another, and I recognize how important education is to the security of our students going forward. I see UMass Boston as an incredibly important avenue of upward mobility for the most deserving of students who are working so hard to gain a foothold in the middle class. This is one of the most important avenues we can provide, so I’m very committed to the moral mission of this campus.