Just over two years into his presidency, Donald Trump is basking in the glow of good economic news for the U.S.
The economy has added nearly five million net new jobs since Trump took office in January 2017. After falling for years, labor force participation for prime-aged adults (aged 25-54) is rising, and is now back to where it was in April 2010. Nominal hourly earnings rose by 3.2 percent over the past 12 months, more than they have in roughly a decade and well over 2018’s 1.9 percent annual inflation rate.
But despite these welcome developments, there is trouble ahead. The President and his administration, along with other policymakers in Washington, D.C., must soon decide what to do about a number of seemingly intractable problems. And one of the thorniest of all is what to do about an estimated $600 billion or more in unfunded promises made by “multiemployer” pension plans. These are private retirement funds that are controlled by Big Labor in partnership with unionized companies.
Hundreds of the roughly 1,400 multiemployer pension plans across the country are now in deep trouble primarily for one reason: The contributions going into these funds, in amounts determined through union monopoly bargaining, were never sufficient to pay for the pensions that union bosses and their agents told workers they would provide.
Emblematic of the multiemployer pension crisis is the Teamsters 400,000-participant Central State Pension Fund. It is funded at a level of 28 percent to 38 percent, depending on the assumption you make about future investment performance, and is headed towards insolvency in 2025.
A number of smaller Big Labor-controlled funds have already slashed benefits, without ever having to file for bankruptcy, with the help of the so-called “Multi-Employer Pension Reform Act” (MPRA) of 2014. The MPRA was championed in a lame-duck Congress by soon-to-be ex-Senate Majority Leader Harry Reid (D-Nev.) and signed into law by Barack Obama.
Under the MPRA, multiemployer plans that are classified as “critical and declining” may potentially cut benefits by nearly a third or more than half, while remaining open and promising new benefits. At this time, for example, the Western Pennsylvania Teamsters and Employers Pension Fund is seeking approval from the U.S. Treasury Department to cut benefits for 21,000 people in the Pittsburg region by 30 percent.
Well over a million other unionized active employees and retirees know their benefits could be targeted for major, MPRA-authorized reductions in the near future. They are naturally worried. Meanwhile, Big Labor is trying to deflect the blame for a huge problem it played a central role in creating by pointing a finger at President Trump and his allies in Congress.
Union-label politicians led by U.S. Sen. Sherrod Brown (D-Ohio) are loudly pressuring Trump and Capitol Hill Republicans to go along with a scheme to bail out multiemployer pensions, primarily through low-cost, subsidized government loans that are guaranteed by taxpayers. If they refuse, Brown and his cohorts falsely claim, they will be responsible for whatever happens after funds like Central States go bust.
Since many of the workers who now face steep pension cuts never even voluntarily joined the union whose officers are at fault for having mismanaged their benefit funds, legislation to help workers and family members who have counted on Big Labor-run pensions and now face grave financial hardship may be appropriate.
But it would be unforgivably reckless for Congress and the president to furnish such assistance without also holding union bosses and employers who colluded with them accountable for cheating workers out of their contracted compensation. This would only encourage Big Labor to continue to lure unsuspecting employees with nice-sounding pension promises, and to continue failing to find a way to fund those promises.
And ultimately, Congress must end the pro-union monopoly federal labor policies that are largely culpable for the pension shortfalls that will surely be faced by millions of additional unionized workers over the next two decades.
Stan Greer is senior research associate at the National Institute for Labor Relations Research. NILRR’s website is www.nilrr.org. He is also editor of the National Right to Work Committee’s newsletter.