Amid an ongoing strike, Boeing machinists are calling for the revival of traditional defined-benefit pension plans, a type of retirement benefit that has become increasingly rare in the private sector, the Washington Post reports.
With 64% of striking workers voting to continue their strike this week, the demand for a return to defined-benefit pensions highlights a renewed interest in a retirement structure that was common in the mid-20th century but has since been largely replaced by 401(k)s and other savings-driven plans.
Boeing ended defined-benefit pensions for its machinists a decade ago, following a trend that swept through the private sector as companies sought to reduce the unpredictable long-term costs of maintaining these plans. Today, just 15% of private-sector workers have a defined-benefit pension, compared to over 40% in the 1960s. As defined-contribution plans such as 401(k)s became the norm, companies offered workers individual savings accounts in which the company makes a regular contribution, but employees bear responsibility for investment choices and risk.
“For pensions to resurface as an issue, both in the autoworkers’ strike and at Boeing, shows there’s a desire among workers for these traditional plans, which are less common today,” said Alicia Munnell, director of the Center for Retirement Research at Boston College.
Although the recent autoworkers’ strike concluded without a return to pension benefits, the demand among Boeing machinists suggests a desire for fixed-income security that many feel has been lost with the shift to defined-contribution plans.
401(k)s were introduced in 1978 as an alternative for companies and workers alike, and they quickly gained popularity. These plans offer employees control over retirement investments and are portable, a benefit in today’s economy where workers frequently switch jobs. However, the shift to 401(k)s has left many workers facing greater financial uncertainty in retirement, according to analysts. For some, defined-contribution plans have also intensified racial and economic disparities. A 2013 study by the Economic Policy Institute found that retirement savings were disproportionately lacking in Hispanic and Black households compared to White households, partly due to lower participation rates in retirement savings plans.
While defined-contribution plans appeal to workers in more mobile jobs, experts note that the decline in pensions has had a significant impact on retirement stability. Data shows that many workers, particularly lower-income earners, struggle to build sufficient retirement funds through individual accounts and may make investment choices that reduce savings potential. A 2010 study for the National Bureau of Economic Research found that workers’ investment errors led to a 20% reduction in savings, while a 2016 study at the University of California, Berkeley, found that most public school teachers would have benefited more from a pension than a 401(k).
Although IBM recently reinstated a defined-benefit program for select employees, primarily for accounting reasons, experts believe it is unlikely that other major companies will follow suit. Aerospace manufacturer Boeing is closely watched due to its unique workforce and the strength of its union, which represents employees with specialized skills that are in high demand. Michael Graetz, an emeritus law professor at Columbia University, sees Boeing’s situation as unique.
“If Boeing machinists were to secure a return to pensions, it wouldn’t signal a broader trend toward defined-benefit plans,” he said.
Graetz noted that Boeing’s position in a specialized industry is uncommon among large corporations.
