Defeat of Social Security Accounts Will Speed Up the Decline of Organized Labor

Labor unions must be feeling pretty good about themselves these days given their apparent success in defeating President Bush’s proposed private retirement accounts, the centerpiece of his Social Security reform plan.

However, victory could prove to be more damaging to the interests of organized labor in the long run. While Union bosses may oppose individual retirement accounts, rank-and-file union members support them.

In mid-June, a coalition of labor and liberal groups called Americans United to Protect Social Security, which includes the AFL-CIO and the American Federation of State, County and Municipal Employees, announced a summer campaign to kill Bush’s Social Security proposals once and for all in the House Ways and Means Committee. The coalition plans to stage a series of town meetings, district office vigils and other activities in congressional districts of targeted GOP members of the committee. Brimming with confidence that they can “administer the coup de grace” to private accounts, the coalition asserts “we have them on the run.”

Before exchanging “high fives,” the unions should seriously ponder recent polls that show that union members disagree with their leadership on individual retirement accounts.

A poll conducted in late May by John Zogby and the Cato Project on Social Security Choice found that 53 percent of union workers support personal retirement accounts. An earlier poll by Ayres, McHenry & Associates showed that 62 percent of union members thought personal retirement accounts “is a good idea.”

The reason is that members trust themselves more than their unions to manage their retirement savings. According to the poll, 72 percent of members want to run their own accounts compared to only 13 percent who trust their union more.

This sharp difference of opinion between union bosses and members on the merits of private accounts is not hard to understand. The leadership of organized labor is corrupt. And nowhere is this more apparent than in their systematic abuse of members’ pension funds, currently worth about $400 billion.

The U.S. Department of Labor reports that between October 2003 and September 2004 it had 359 pending labor racketeering investigations. Nearly 50 percent of these investigations involve pensions and employee welfare benefit plans. The fact that the pension plans under investigation represent more than $1 billion in assets indicates the huge risk that union corruption poses to members’ retirement savings. The Labor Department’s Office of Inspector General says that pensions will continue to be a strong focus of its investigations because they remain especially “vulnerable to corrupt union officials and organized crime influence.”

Recent examples of union corruption abound:

  • In January 2005, a union official pled guilty to embezzling, over a four-year period, more than $1 million from the Hudson County (NJ) District Council of Laborers and its benefit funds.
  • In November 2004, a New York Gambino Crime Family associate pled guilty to defrauding the Carpenter’s Union and the Laborer’s Union benefit funds of more than $7 million.
  • In January 2003, a trustee of Local 1969 of the International Longshoremen’s Association in Portage, Indiana was convicted of stealing $2 million from the Local’s pension and benefit plan.  The criminal activity was only exposed after union members who retired found that there was no money in their retirement plans.

Abuse of pension plans for personal gain is often as callous as it is brazen. Last year, the head of the Machinery Movers, Riggers & Erectors Local 136 in Chicago was indicted for embezzling from the pension fund. Several members testified that misuse of the union’s benefit and health plans by the hierarchy had been rampant in recent years. One member said that union officials refused to extend the health coverage of his niece who was dying of cancer and desperately needed treatment. However, the bosses readily approved payment for a union official to get a penis implant. In a similar case, the Treasurer of Local 9 of the Policemen’s Benevolent Association in Hackensack, New Jersey admitted to stealing $180,000 from the Local, mostly from a benefit fund to help the families of deceased officers.

It is no surprise that union members support private retirement accounts and want to give the boot to the corrupt union middleman.

Union bosses may succeed in defeating private accounts, but it would be a hollow victory. Already reeling from a 50-year-long decline in membership, organized labor will slide into irrelevancy as workers, disgusted by the systematic pilfering of their pensions, continue to abandon it in droves.