Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States

By William Lazonick | Go to book overview

4
Pensions and Unions
in the New Economy

SECURITY THROUGH SENIORITY

The rise of NEBM and the demise of OEBM meant the end of employment relations based on careers with one company. In the post– World War II decades, such employment relations provided the fundamental foundation for stable and equitable growth in the U.S. economy. A “back-loaded” defined-benefit (DB) pension plan that rewarded years of service with the company ensured that the economic security enjoyed by “the organization man” would extend into one’s years of retirement as well. Given the cost of employee turnover in mass production industries as well as the presence of strong unions to protect the seniority rights of older workers, even so-called hourly workers could expect to spend a career with one company and have a DB pension at the end.

Since the 1980s, employer-sponsored DB pension plans have covered a steadily declining proportion of business-sector employees. In 1980, 35 percent of business-sector wage and salary workers were active participants in DB plans insured by the U.S. government’s Pension Benefit Guaranty Corporation. This proportion had fallen to 18 percent by 2004 (the latest year for which data are available). Even though the size of the U.S. business-sector labor force increased by 48 percent from 1980 to 2004, there were 6.6 million fewer workers active in an employer-sponsored DB plan in 2004 than in 1980 (Pension Benefit Guaranty Corporation 2007, Table S-33).

From 1985 to 2007, however, the assets in defined-contribution (DC) plans increased from 54 percent to 149 percent of the assets in DB plans. Over the past two decades, Individual Retirement Accounts (IRAs)—that is, nonemployer pensions—have become increasingly important as a form of retirement savings, rising from 20 percent of combined DB and DC assets in 1985 to 82 percent in 2007. In March 2008, 61 percent of all business-sector employees had access to one

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Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface xiii
  • 1 - What Is New, and Permanent, about the "New Economy"? 1
  • 2 - The Rise of the New Economy Business Model 39
  • 3 - The Demise of the Old Economy Business Model 81
  • 4 - Pensions and Unions in the New Economy 115
  • 5 - Globalization of the High-Tech Labor Force 149
  • 6 - The Quest for Shareholder Value 197
  • 7 - Prospects for Sustainable Prosperity 249
  • References 281
  • The Author 331
  • Index 333
  • About the Institute 357
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