Delanceyplace.com 09/13/06-Pensions and Health Benefits

In today's excerpt, Malcolm Gladwell argues that
collectivization of pensions and health benefits would
help businesses:




"... in 1949 the head of the local United Auto
Workers, Richard Grosser, came up with a proposal. The workers of Toledo needed pensions. But, he said, the pension plan should be regional, spread across the many small auto-parts makers, electrical appliance manufacturers, and plastics shops in the Toledo area. That way, if workers switched jobs they could take their pension credits with them, and if a company went bankrupt its workers' retirement would be safe. ...



"[President of General Motors] Charlie Wilson, on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners [and] ... companies themselves ought to assume the risks of providing insurance. ...



"The most influential management theorist of the
twentieth century ... Peter Drucker ... [writing in
1950] simply couldn't see how the pension plans on
the table at companies like G.M. could ever
work. 'For such a plan to give real security, the
financial strength of the company and its economic
success must be reasonably secure for the next forty years ... but is there any one company ... whose future can be predicted with certainty for even ten years ahead?' ...



"Bethlehem [Steel] had a hundred and sixty-four
thousand workers in 1957. By the mid-to-late
nineteen-eighties, it was down to thirty-five
thousand workers ... in 2001, Bethlehem, just shy of
its hundredth birthday, declared bankruptcy. It had
twelve thousand active employees and ninety
thousand retirees and their spouses drawing benefits. It had reached what might be a record-setting dependency ratio of 7.5 pensioners for every worker. ...



"Wilbur Ross acted quickly [to buy the company out
of bankruptcy and] ... put in place a new 401(k)
savings plan ... within about six months, Bethlehem
was profitable.  The main problem with the American steel business wasn't the steel business, Ross showed.  It was all the things that had nothing to do with the steel business. ...



"In 1962, G.M. had four hundred and sixty-four
thousand U.S. employees and was paying benefits to forty thousand retirees and their spouses, for a dependency ratio of one pensioner to 11.6
employees. Last year, it had a hundred and forty-one thousand workers and paid benefits to four hundred and fifty-three thousand retirees, for a dependency ratio of 3.2 to 1. ... "



Malcolm Gladwell, "The Risk Pool," The New
Yorker, Aug. 28, 2006, pp. 30-35.

_______________________________________________________

Barclays
www.barclaycardus.com
_______________________________________________________

This e-mail and any files transmitted with it may contain confidential and/or proprietary information. It is intended solely for the use of the individual or entity who is the intended recipient. Unauthorized use of this information is prohibited. If you have received this in error, please contact the sender by replying to this message and delete this material from any system it may be on.