Good morning.  On behalf of the 57 affiliate unions and 11.5 million members of the AFL-CIO, I am very pleased to be here supporting the Retirement USA Initiative.  I’d like to begin my remarks with a recent observation by Richard Leone, President of the Century Foundation: “Some day, looking back, this period will be recalled as part of a great transformation in American life.  The watershed represented by the aging of 76 million baby boomers will transform our politics and reshape the economy.” [1]  While this remark prefaced a book on health care reform -- and our health care crisis is now dominating the national stage -- it could easily precede a book on another crisis.  A crisis which threatens American workers with yet another painful consequence of the “you’re on your own” social and economic model of the last thirty years.  That is the retirement security crisis.  We once had a system of retirement security in which responsibility was shared among government, employers and individuals.  However, that system is rapidly being displaced by the illusion that individuals can provide for themselves, by themselves.  We have little time left for further illusion.  We need to move as a nation to provide real retirement security for America’s workers.  Keeping the promise of retirement must be part of a great transformation in American life.       

The daily headlines are about how Americans are being decimated by the current economic crisis.  Unemployment numbers are high and climbing.  Long-time businesses are closing their doors.  Hard working families cannot pay their mortgages or their health care bills.  And while attention has been given to plummeting 401(k) account balances, there has been remarkably little focus on the fundamental deficiencies in our so-called retirement system that the current economy has exposed.  It is those fundamental deficiencies that have spurred Retirement-USA supporters to come together.  I say “system” cautiously because achieving retirement security in this country is now anything but systematic.  It is something workers must patch together as best they’re able -- and the patches are fraying.

Only 13% of today’s workers say they are very confident about having enough money for a comfortable retirement  -- the lowest level in sixteen years.  Only 20% of retirees express confidence in their financial future.  And, as you have heard from previous speakers, this lack of confidence is well justified.  The majority of America’s workers will face retirement with far less security than their parents.

 I am proud to say that organized labor created retirement in the United States.  Before the rise of the labor movement in the 1930s and 40s, elderly Americans were the most impoverished age group in our society, and only a privileged few received government or employer pensions.  After Social Security and union negotiated pensions, elderly Americans were the least impoverished age group. 

After the New Deal, it was collective bargaining that set the pattern for labor markets, not just for workers covered by union contracts, but for large employers overall. These were the years that produced the notion of the three-tiered American retirement system:  Government provided a foundation with Social Security, employers provided defined-benefit pensions and individuals saved for their retirement 

In 1955, the first action of the newly merged AFL-CIO regarding a unified bargaining agenda was in the area of pensions.   Our federation developed a bargaining guide about the role of private social insurance and government programs.  Our goals are as relevant today, as they were then.  They included cost-of living protection; employer contributions; disability and spousal benefits; and credit for all years worked.

As a result of these efforts, our parents could retire after a career of hard work, confident of a stable income they would not outlive.  They could sleep at night knowing that, should they die, their spouse would continue to have a dependable income.  For millions of Americans – teachers and bus drivers, factory workers and flight attendants, construction workers and nurses --these reliable, employer-funded pensions made their lives immeasurably better.

This was the world I grew up in back in Nemacolin, Pennsylvania.  A world where working people had real pensions they had won at the bargaining table and on the picket line.  A world where retirement, which had been a dream only realized by bosses, had become a reality for tens of millions thanks to Social Security and collective bargaining.      

Today -- in a new economy and with changed demographics -- the three-tiered American retirement system is collapsing.  Social Security is under attack, employers are increasingly walking away from real pensions and workers, with stagnant incomes are unable to save.    

Defined benefit pension plans are the soundest vehicles for building and safeguarding retirement income security.  They have professional asset managers, lower investment fees, and better returns than individual accounts.  If you are lucky to have a union, there is a good chance that you have a pension plan.  Sixty-eight percent of union workers, as opposed to only 16% of non-union workers, have the benefits of a pension.  But unions are under increasing pressure at the bargaining table to cut or eliminate this benefit.

 The funding rules for single employer pension plans in the Pension Protection Act of 2008, coupled with new accounting standards, have contributed to an environment in which even healthy companies are freezing their pension plans entirely or closing them to new hires.  Our current economic downturn has only made this much worse. 

State and local government workers are four times more likely than private sector workers to have defined benefit plan coverage.  Their plans, however, are under attack through legislation and ballot initiatives.   

During the past few years, we have seen many employers abandon their real pensions for 401(k) plans.  While different reasons are given for this shift, there is one key factor to remember.  There are no explicit standards for employer responsibility when it comes to workers’ retirement.    Our current system lets employers off the hook.  They can refuse to provide any benefits at all. 

If there ever was an implicit social contract, it has largely eroded.  Employers have lowered workers’ expectations significantly by cutting and eliminating benefits over time. The mainstream media tell us global competition means we cannot have pensions.  Policy makers demand little, if anything, from employers. 

Retirement USA is a bold initiative marked by its vision.  The focus of policy makers, in both political parties, and the Administration, thus far, has been on incremental reforms to address the shortcomings of the 401(k) system.  But tinkering with 401(k) plans by adding new plan features -- whether automatic enrollment or a requirement that companies let workers contribute to an IRA by paycheck deduction --- will not bring about necessary change.

As you’ve heard this morning, there is no way that 401(k) plans can adequately substitute for the loss of a guaranteed lifetime benefit.[2] Time magazine’s cover story this month on the failure of 401(k) plans about sums it up:  “This isn’t how retirement was supposed to be.”         The recent census data brings this point home.  U.S. median household income fell 3.6% from 2007 to 2008.  Last year, the poverty rate jumped to 13.2% -- up from 12.5% in 2007.  39.8 million Americans live in poverty.  Workers can barely meet day-to-day expenses.  American workers are taking on second and third jobs to stay afloat.  How much then can they save on their own for retirement? 

 If all we do are 401(k) plan fixes, workers will still bear all the financial risk and responsibility.  They may outlive their savings.  A retirement system based primarily on individual savings simply cannot meet workers’ needs for a lifetime retirement income that is adequate and secure. 

For those without a pension, Social Security is the only reliable and guaranteed benefit.  One third of Social Security beneficiaries receive more than 90% of their income from Social Security.  Two out of three depend on it for more than half of their income.  Social Security is the sole source of income for nearly one in five seniors.  This isn’t how retirement was supposed to be. 

Consider that the average Social Security benefit is just little more than a minimum wage income.  This means that a typical retiree needs almost twice the average monthly Social Security benefit for a reasonable standard of living.  How is it that the income replacement rate of today’s Social Security benefits is lower than that of most other OECD countries?  You know, a representative of the Australian labor movement was in our offices last week talking about retirement security.  We asked him, “What is the replacement rate of your federal pension—not the Superannuation Funds some of us are interested in, but your Social Security equivalent?”  Seemingly embarrassed, he said it is very low -- ”only 40%.”

   And if that’s not bad enough, growing Medicare cost-sharing obligations mean that our seniors will be requiring higher benefits just to maintain the replacement rate of the past 25 years.  This isn’t how retirement was supposed to be.

But having said this, I want to make it plain that the AFL-CIO, like the other  Retirement -USA organizations, stands in strong support of Social Security and believe that it can be restored to long-range balance without radical changes.  Social Security is the most important family income protection program and the most effective anti-poverty program ever enacted in the United States.  In fact, Social Security’s design mirrors the principles of the Retirement USA Initiative.  At a minimum, the Initiative is based on the assumption that Social Security benefits continue to be at least as robust as they are today.  But in truth, nothing would be better right now for our economy and for our long -term ability to provide all Americans financial security in retirement than increasing the level of benefits paid by Social Security.

So, as a country, we have a clear question before us.  Do we want to protect retirement as an earned and valued life experience for most Americans?  Or are we resigned to return to the state of affairs that existed at the beginning of the last century?  The AFL-CIO and our fellow Retirement USA member organizations have answered that question.  We believe that after a lifetime of hard work, workers deserve to retire with dignity -- with the economic security they have earned. 

That is why we believe it is imperative that we work on two tracks.  We must vigorously strengthen and preserve what remains of the current pension system – through collective bargaining and legislation.  The AFL-CIO is fully engaged in the current debate on Capitol Hill about providing temporary funding relief for both single and multi-employer pension plans.  The last thing we should be doing right now is shutting down viable retirement vehicles – especially since no one is proposing any meaningful replacement.  Absent temporary funding relief to get them through the current economic downturn, some plan sponsors may have no alternative but to freeze viable pension plans, cutting retirement incomes just when our economy is most vulnerable to demand-side shocks. 

But it is equally imperative that we look ahead and begin to design a new system for future generations.  We have set out the principles that should guide us in developing this new system, which includes the key principle of shared responsibility.  Employers, through minimum funding obligations; workers, through contributions and savings; and government, through contributions for low-income workers.  All must participate.  We believe these principles will lead us to a system that reflects the American values that Nancy Altman – one of this afternoon’s presenters – has identified as underpinning Social Security.  Those values are:  reward for work, compassion, fairness, foresight and prudent conservative management.  There are many ways to design such a system, reflecting a variety of approaches.  I look forward to the afternoon panelists whose task it is to show us what retirement is supposed to be.    

And let us be clear.  There is no retirement security without money.  Real money.  As long as employers pump up their bottom lines by walking away from real pension funds with contribution rates of 7 and 8% of payroll to fund savings accounts with 3% of payroll, we will slip closer and closer to crisis, and to the return of poverty as the companion of old age.

Let us also be clear that portability is a must for the future.  We must build on what multi-employer funds have achieved in combining portability with the security that comes with defined benefits.

We are well aware that we will face daunting economic and political challenges as we move forward.  But we are not talking about a system for today or even for tomorrow.  Our intent is not to de-stabilize the current retirement security system, but to recognize that it is inadequate and to plan for the future. 

We have no choice but to begin this discussion.  Retirement security is not only a moral issue for our country, it is an economic necessity. 

If we do nothing, if we continue on our present course and present trends continue, the implications for the U.S. economy in the coming years are dire.  Low incomes for older workers will mean less aggregate demand.  Already, we are seeing an increase in baby boomers taking entry-level jobs.  This means diminished opportunities for younger workers in an already-tight job market.  Ensuring that older Americans have a secure retirement income can help relieve some of the enormous pressures on future federal, state and local budgets.  A report last summer from the National Institute on Retirement Security[3], concluded that, for just one year, 2006, public assistance expenditures would have increased by some $7.3 billion but for incomes from defined benefit pension plans.  

We are very aware that all meaningful social transformations have taken time.  In 1945, Harry Truman first asked Congress for legislation establishing a national health insurance plan.  Not until 1965 – twenty years later – was Medicare  signed into law.  And now, this year – forty-four years after that -- it looks like we will finally get the closest we have ever come to meeting President Truman’s call for universal healthcare.

Universal retirement security is our next hurdle. 

Thank you.

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