The traditional view of pensions held by generations past was that support was due only to those workers who reached old age and were no longer able to earn their living. The first company pension plan established in 1875 provided benefits only to permanently incapacitated workers over age 60 with at least 20 years of service.
The modern view is of an expected reward for service, often for a specified number of years and not necessarily related to old age. Early retirement on full pension has become as American as the two-car garage. So, too, have thousands of double-dippers, millions over 65 living in poverty, and billions in unfunded liabilities.
Over the short haul, increasing Social Security taxes and benefits, cracking down on multiple pensions and improving the EMploye Retirement Income Security Act can keep the system functioning. Yet, the awful realization that the American way of life is threatened by two seemingly inexorable forces, demographics and inflation, has led a growing number of scholars, economists and social scientists to reexamine long-term implications. The problem is that by the end of this century there will be too many old people and not enough working people to pay for them. The solution raises many fundamental questions:
Is early retirement still socially and economically desirable both for the individual and for the country? Because people now live longer, should they be required to work longer if physically able to receive full benefits? Should the Social Security tax burden be redistributed through the use of general revenues? Should Social Security be made universal for all senior citizens? Should the private pension system be more highly integrated with Social Security?
Last spring Joseph Califano, Secretary of Health, Education and Welfare, sent up a trial balloon bearing the ensign of a universal government pension program. In a speech before the American Academy of Political and Social Science and again at a summer hearing of the Select Committee on Aging, he asked rhetorically. "Are we comfortable with a system in which some retirees pile up the maximum Social Security benefits on top of generous pensions, while other retirees have no pension income and find Social Security barely enough to get by on? Or would it make more sense to recoup those tax benefits and apply them to more generous and widespread Social Security coverage?
"Private pensions have spread, so that they now cover about 45 percent of the work force," the secretary continued, "but that growth was in a period when persistent inflation was simply not around . . . If private pension plans appear unlikely to assume a major role in providing retirement income, do we wish to continue to encourage the creation of this layer on top of Social Security?"
His sentiments were echoed in September by Howard Young, special consultant to Douglas A. Fraser, president of the United Auto Workers, for years a leader in union pension policy. Young emphasized that Social Security should provide the total amount of what is considered an acceptable amount of a worker's final wages. Private pensions, which give higher benefits to higher paid employes, should merely supplement a worker's benefits.
Califano's balloon was quickly shot down by Sen. Jacob Javits (R.N.Y.), one of the primary backers of private pension reform. He declared that a move merging public and private pensions systems "would, in my opinion, be a terrible mistake . . . To establish one, colossal, federal retirement program with Social Security as its cornerstone would be jumping from the frying pan into the fire." The private system, he said, looked "extraordinarily healthy" compared to the financing problems of Social Security.
Pensions & Investments magazine pointed out in an editorial that $200 billion in private pension unfunded liabilities is as meaningless as the unpaid portion of a home mortgage, which is designed to be paid over time. Put to the wall, it said, the average company could pay off the unfunded liability of itspension fund with just three months' pre-tax earnings. Moreover, whereas Social Security does not add to the nation's wealth and may indeed contribute to inflation, private pension funds help to finance investment in new plants and equipment.
Another proponent of universal coverage is A. Haeworth Robertson, former chief actuary of the Social Security Administration and now with an employe benefit consulting firm.Robertson proposes phasing in over a generation the appropriate benefit age to 70. In exchange for working longer if physically able, a worker, once retired, would receive a monthly benefit of a uniform amount," payable to each resident of the country regardless of his type of employment, earnings history, marital status, financial need, or any other factor." Its purpose, Roberston declared, "would not be to sustain varying pre-retirement standards of living, but rather to provide a minimum level of support, adjusted for inflation according to a special cost-of-living index for the elderly.
To soften this Calvinistic approach, Robertson calls for significant social changes, including more meaningful and satisfying jobs, more part-time jobs for older people and retraining to enable them to have "not just second careers, but third and fourth careers." Robertson concedes keeping people on the job until age 70 might have a damaging effect now on youth unemployment, but not by the end of the century when there will be far fewer younger workers proportionally.
Opposition to raising the minimum age for receiving benefits comes from industry, labor, and groups representing the elderly. On the eve of his retirement, Rep. John Dent (D.Pa.), 70, a prime mover in pension legislation, told Pensions & Investment that allowing people to work longer could have deleterious effects on the pension system. "They expect to maintain the stability of the pension system and Social Security system by hoping people will die before they can collect their benefits. Instead of moving upward, we should be going backward, and have people retire at the age of 60, or earlier."
Nelson H. Cruikshank, 76, chairman of the Federal Council on Aging, calls raising the retirement age to 68 in order to share the tax burden more evenly a "quick fix" that would result in young workers losing or not being able to find jobs in times of high unemployment like today. Cruikshank favors a universal Social Security system but feels it will never come to pass "because we have a pluralistic society."
In the 1970s, Social Security, which pays an average of $392 a month in benefits to the married retiree, is still regarded by the middle class as a supplement to corporate pensions, in West Germany the opposite is true. Government administered pensions are not considered insurance but deferred wages, designed to retain a person's status in old age. As such, 90 percent of the population is covered. In 1977 the level of pensions of blue and white collar workers exceeded 74 percent of average net earnings. The average manual laborer draws $600 a month while a white collar worker gets $800 a month tax free. One third of all pensioners get more than $1,000 a month. This does not include additional company and occupational pensions.
In Sweden, which has the highest old population of any country - 15 percent are over 65 - the national pension system includes a basic pension payable at age 65 regardless of whether the person ever worked, a supplementary pension based on income from gainful employment and a partial pension that makes it possible for an employe aged 60 to 65 to combine part-time work with a pension.
In Denmark, the country's largest employer, retail and supermarket chain called Co-Op Denmark, "derecruits" older middle and top managers and assigns them to lower-level jobs starting at age 60. Pay is cut by one third to one half.