The proposed merger of the United Steelworkers of America, the United Auto Workers, and the International Association of Machinists and Aerospace Workers will bring together three strong supporters of defined benefit plans. The influence generated by their membership numbers alone could give a boost to the sagging defined benefit movement.
But the issue is whether such a superendorsement will be best for their members in the long run.
The unions should use the merger as an opportunity to rethink their pension approaches to improve coverage and security.
The three unions have eschewed or minimized defined contribution approaches to pension coverage. Yet in a dynamic economy, workers need more portability and thus more control over their pension benefits and tax-sheltered trust funds. Otherwise, they risk losing hard-earned benefits.
The unions should reconsider defined contribution plans, as well as other approaches.
The economy for which the defined benefit plans were built - that is, an economy of stable industries and long-term employment in a single company - no longer exists. It never really existed, although it was idealized as a model for employment. But that model no longer is ideal in an economy of dynamic competition and fast-changing technology. It may not meet the complex needs of working spouses and a better educated, more individualistic work force. Defined benefit plans, as they now exist, cannot meet these needs either.
The three unions haven't yet delved into pension and other issues of their proposed merger. So the merger's potential impact on union members, companies and public policy, including taxes, is speculative.
The unions have conflicting pension structures for their memberships, which could provoke ideas for changes. The risk is their separate experiences could saddle them with the weight of outmoded tradition.
The Steelworkers and Auto Workers endorsed single-company sponsored defined benefit plans. As a result, their membership is covered by pension plans sponsored individually by such companies as Inland Steel Co. and General Motors Corp.
While Machinists who work at large companies tend to belong to single-employer plans, many other members belong to a multiemployer defined benefit plan. Its major advantage is that benefits are portable from employer to employer. In addition it gives the membership, through union trustees, an equal say with management in running the fund. Of the three partners, the Machinists' multiemployer approach to pensions would serve as a better basis for the type of pension structure needed for the future.
The auto and steel unions deserve credit for helping to develop the modern corporate-sponsored pension system that became widespread in the economy during World War II and its aftermath.
But the legacy may be that both employers and employees and government, through tax policy, took the wrong path in providing retirement income. The system ties workers inexorably to their companies.
Today, the ideas of the pre-World War II old trade union leadership, which favored letting workers provide for their own retirement and opposing company- and government-sponsored schemes, have a fresh appeal. Re-examining those ideas may provide the best path for the future for the three unions.