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> People will blame unions because the company had to fund pensions and health insurance. It likely will come back as a private company with lower pay, worse be
by bko 3y ago
> People will blame unions because the company had to fund pensions and health insurance. It likely will come back as a private company with lower pay, worse benefits, and maybe if people are lucky a 401k.
You can never compete if you have a pension liability from workers no longer there. A competitor can always come in without that liability and out compete you. It's not good for the business or the employees who will get screwed 30 years later. Why is this such a hard lesson to learn?
- darig 3y ago[dead]
- blitzar 3y agoYou can easily compete if you have a pension liability from workers no longer there by making provision for it at the time that the liability is created.
- hibikir 3y agoCan you? A defined benefit plan is ultimately involving someone taking a risk. One either makes the risk very small, and therefore being a very expensive benefit from the very beginning, or be aggressive, and risk being an underfunded benefit. Either way you slice it, someone providing defined contributions instead is far safer, and can safely outcompete the defined benefit company, as they aren't taking on either side of the risk: The employee is. Note that the costs of trucking are the same either way: Paying for the contribution later is precisely a way to be very competitive now, as the idea of a safe, defined pension that you self fund is much nicer until you see what it takes out of your paycheck.
- WkndTriathlete 3y ago> Can you? A defined benefit plan is ultimately involving someone taking a risk. Yup. No less than Warren Buffett, who spent literally his entire career performing risk analyses, could figure out a way to manage defined benefit plan risk, and stated as such in a (now famous) memo in the late 60s or early 70s. Couple that with the number of pension defaults and pension haircuts that have occurred and are likely to continue to occur and 401(k) plans look a lot more attractive, both to the employer and to the employee.
- eigenvalue 3y agoThe memo in question: https://davidcoveney.com/wp-content/uploads/2019/12/160301289-Warren-Buffett-Katharine-Graham-Letter.pdf https://davidcoveney.com/wp-content/uploads/2019/12/16030128... It helps a LOT if you also have an investing genius giving you tips on how to allocate the plan assets!
- nradov 3y agoIn theory it's possible to make defined benefit pension programs work. In practice they almost always eventually fall apart. The risk is large as to make them essentially financial malpractice. Defined contribution plans such as 401(k) are much safer for workers and taxpayers.
- bko 3y agoYou can't really provision a defined benefit 30 years from now. And i def wouldn't trust you to. Not only that you have to ensure that no one else comes along in the next thirty years and messes with it, or the company tanks or a million other things that could go wrong If you provision it you might as well give me a 401k where I have discretion over the funds. Or give me money I can use for my own healthcare in the future. The only people defined pension benefits is shady business managers that don't care and want to get away with cheaper labor costs at the expense of the future which he won't be around to see anyway
- chefandy 3y agoFrom the article: "Experts in the field said it was primarily an unaffordable amount of debt, more than the cost of the union contract, that did in Yellow. 'The Teamsters had made a series of painful concessions that brought them close to wage parity with nonunion carriers,' said Tom Nightingale, CEO of AFS Logistics, a third-party logistics firm that places about $11 billion worth of freight annually with different trucking companies on behalf of shippers. He said the company began taking on significant amount of debt 20 years ago in order to acquire other trucking companies." Sounds like it was just bad business strategy.