Benefits Gap Burdens the Working Poor

Maybe you’ve heard people griping about the split economy, the upper class prospering with fast-climbing salaries and stock options, the middle muddling through on barely adequate wage hikes, and the poor falling behind each year.

With all the focus on pay, it’s easy to forget that lack of benefits is yet another form of inequality to burden the working class and the poor. Many of the same people whose salaries can’t keep pace with the cost of living suffer a triple whammy: They also go without health insurance, and they won’t get a corporate pension when they retire.

“There is not just a wage gap, but also a health gap and a pension gap,” Robert B. Reich, the departing secretary of Labor, said in one of his last interviews before leaving Washington for Boston.

“If high school graduates once had health care on the job, they don’t anymore,” said Reich. “People with less education and fewer skills are less and less in demand. Their wages are dropping and their benefits are vanishing.”

Reich, the most liberal cabinet secretary in the Clinton administration, has attempted to jawbone American corporations to exercise greater moral conscience in their treatment of low-income workers.

Reich, who has often wielded articulate and sometimes sharp rhetoric on behalf of the poor, is leaving his job disappointed with the persistence of the decline in crucial benefits.

In 1988, about 70% of people under the age of 65 had health insurance through a business, as a worker or as a member of the worker’s family. Coverage shrank to 64% by 1994, according to the Employee Benefit Research Institute, a Washington organization that studies the work force.

At the lower rungs of the income ladder, the coverage is even thinner. Among workers earning more than $50,000 a year, 80% have health insurance at work. By contrast, coverage is a minimal 16% for those earning less than $10,000, and 52% when incomes range between $10,000 and $20,000 a year, according to EBRI.

Participation in corporate pension plans, which peaked at 46% of the work force in 1979, has dipped to 43%. But the real impact is much greater than the overall figure would suggest.

Pension coverage is a hefty 81% for workers earning between $50,000 and $75,000 a year, compared with 27% for employees with incomes between $15,000 and $20,000.

The boom in pension assets in recent years has come in voluntary retirement savings plans, such as the popular 401(k) programs. Higher-income employees are pouring money into the plans, with the company matching a portion of the worker’s contribution. But many of their lower-paid colleagues don’t enroll at all.

When a company sponsors a salary set-aside program, only 10% of the workers making between $10,000 a year and $15,000 enroll, compared with a 56% rate for workers making more than $50,000 a year, according to EBRI research.

A survey of workers who didn’t enroll cited these factors: can’t afford to contribute; difficult to withdraw funds; saving money to buy a house; and saving money for college for children.

A plentiful menu of benefits once was the pride of workers at Fortune 500 companies, the industrial giants that dominated the economy in the 1950s, ‘60s and ‘70s.

“A high school dropout or someone with only a high school degree could join the labor force and be relatively assured of getting a decent wage along with increasingly generous benefits,” Reich said. “Labor unions were at the center of the picture--their contracts established prevailing wages and benefits in key industries.”

In today’s economy, automation and robotics have supplanted the skilled blue-collar work force of the past, leaving millions of contingent workers going from one short-term job to another.

Fewer workers belong to unions, and the giant companies have been steadily downsizing and outsourcing. They have smaller payrolls, and much work is done elsewhere by subcontractors or temporary employees who don’t enjoy the good wages or expansive benefits now increasingly limited to a lucky, elite group.

The gaps in our society are likely to widen even more. Although 43% of all workers are enrolled in pension plans, the figure is to 39% for women and 38% for blacks.

Those without health coverage are most likely to be working in low-paid service jobs, light manufacturing industries such as the garment trade, or at small companies where owners feel they can’t afford insurance. And in California, these categories of companies are the fastest growing.

Reich fears the cuts in private industry benefits are happening at the worst possible time for workers. “Ironically, we are downsizing government and in danger of slashing social insurance such as Social Security and health care for the poor and elderly at precisely the same time that the private safety net has unraveled,” he said.

The electorate is increasingly conservative. A balanced budget is the top political objective for both President Clinton and the Republican Congress. Not even the most liberal dreamers among Democratics members of the House and Senate can foresee any expanded government role in health or pension benefits.

The only recourse for someone like Reich, therefore, is to raise the issue as a public concern, hoping to appeal to the corporate conscience.

The best businesses will cement their ties to workers by providing good benefits, he argues. “I’m not talking about [a] Cadillac or gold-plated benefits, but a Chevrolet standard, a modest package of benefits,” according to Reich.

“The best companies understand that employees are their most important assets, not just those at the top of the firm, but all employees,” he said hopefully.

As Reich leaves the federal government, America’s low-income workers are losing their most ardent supporter at the highest levels of the government. It is hard to see who will take his place.