The American Way of Poverty: How the Other Half Still Lives (47 page)

Over the years, Jones said, he’d put through the program people who had come to him from devastated neighborhoods, lacking even high school diplomas, some with prison terms behind them. And they had ended up getting bachelor’s degrees from the University of Michigan, followed by good, secure employment. “Career-sustaining wages, family-sustaining wages. Not simply a job,” explained Jones. “We believe in the redemptive powers of education, training. When you believe in people, you can encourage them to believe in themselves. We don’t take shortcuts here. A lot of us in the senior management
team have been in industry before. We know what it takes in order to be successful.”

What made Focus: HOPE stand out was its holistic approach. Trainees were given enviable access to state-of-the-art machining equipment, laboratories, and computers. Also, the program had contracts both with car manufacturers and with defense industry contractors to produce precision parts. But none of that would have worked without the support infrastructure. On the sprawling campus was a food pantry, in an old industrial building that was several blocks long. It was one of the biggest in the city, storing thousands of tons of food, and feeding 40,000 locals. There were education classes, and the program went out of its way to cultivate relations with nearby schools. There were basic training programs in CPR and customer service skills, all designed to make the young adults who came through more attractive to employers. Childcare services were offered, and transportation vouchers were given out to make attendance more affordable—after all, said Jones, some of the students were homeless, and many of them traveled by bus two hours each way just to get to the center. Social workers were available to counsel trainees if they were having a bad day.

There was even the Hope Village initiative, designed to turn the hundred square blocks surrounding the campus into a more vibrant community. Students were trained in crime prevention; they held regular block meetings, staffed arts programs for residents, and distributed school supplies to neighborhood kids. And, to round out the circle, Focus: HOPE had recently sold some of its buildings to manufacturing companies that had come into the area and in exchange hired on Focus: HOPE graduates. Step by step, a part of the city long given up on by the powers-that-be was coming back to life.

Around the country, businesses were being developed with precisely this sort of community-building raison d’être. Increasingly,
they were codifying these missions, using so-called Benefit Corporation Statutes—as of mid-2012 on the books in Illinois, Louisiana, Maryland, New Jersey, Vermont, and Virginia, and talked about in several other states. What are these statutes? They are essentially state laws that protect businesses with a proven commitment to social justice—to environmental sensitivity in their practices, to decent pay for workers, to the provision of affordable housing, and to concern for the communities in which they operate—from being sued for not maximizing their profits. Why is that important? Because, absent such laws, the legal assumption is that companies are obligated to maximize the bang they provide for their shareholders’ bucks. Pay workers more than your competitors and lower your profits, there’s a chance you’ll be sued by an irate investor. Accept a buyout offer from a company offering less than a rival but guaranteeing to, say, keep your workers’ pensions and other benefits intact; again, there’s always that risk the courts will find you liable for your investors’ losses.

Write a social justice mission into your business’s articles of incorporation, however; qualify it as a benefit corporation; submit to third-party evaluation from the Pennsylvania-based B Lab nonprofit organization episodically to make sure your company is maintaining its progressive commitments; and that risk dissipates. Put simply, it gives businesses, otherwise operating in a cutthroat economic environment, legal cover to do the right thing. That’s why National People’s Action and other activist groups have championed these laws. And it’s why expanding the number of states using such legislation ought to be a core part of our expanded War on Poverty.

As of September 2012, B Lab listed 603 benefit corporations nationwide, with total revenues of more than $4 billion.
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That was, however, just the tip of the iceberg. A couple months earlier,
Forbes
magazine had estimated that there were at least 50,000 companies nationwide with the sorts of social justice commitments protected by the statutes.
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Harness that energy, provide the companies with legal protections behind which they can pursue goals other than simply maximizing their profits, and you fill in one more gigantic piece in the anti-poverty puzzle. You also go a long way toward redefining value and recalibrating workplace priorities.

KEEPING THE WELL FROM RUNNING DRY

If enough effort were put into all of these changes—to how we pay workers, how we protect workers’ jobs during down times, and how we use the power of government to boost the income of the most insecure parts of the labor force—America would look very different from how it does now.

Yet, while all of these reforms are important, none of them will be enough if, at the end of the day, elderly Americans, after a lifetime of hard work, are then left to fend for themselves.

And so we come to the final great challenge.

The three major reforms of the twentieth century that limited the poverty of America’s elderly were the creation of Social Security and Medicare and the rise of defined benefit company pensions. As a result, the percentage of the elderly population living in poverty declined from upward of one-third of the population in the post–World War II period to roughly 10 percent a few decades later. Yet in recent years, most defined pensions—the sort that give you a monthly payment, based on a formula that factors in how long you worked and how much you earned, from the day you retire until the day you die—have gone the way of the dodo. Using Department of Labor data, Alicia Munnell, director of the Center for Retirement Research at Boston College, calculated that in 1980 six in ten private employees who had a pension coming their way had defined benefits awaiting them upon retirement, and another 23 percent had a mixture of a traditional pension alongside a 401(k). In other words, more than eight out of every ten private-sector workers who
qualified for a pension a generation ago had at least a modicum of financial predictability and stability awaiting them in their golden years. Fast-forward a quarter-century: In 2006, Munnell calculated, only one in ten had pensions entirely based around defined benefits, and slightly under a quarter had a combination of defined benefits and 401(k)s.
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In the public sector, one city and state after another was rethinking the pensions that they offered new employees, replacing defined benefits with 401(k)s, or making employees pick up more of the tab for the annual retirement contributions. Firefighters, police officers, correctional staff, teachers, and civil servants all saw their pensions attacked by legislators desperate to save scarce dollars from beleaguered budgets.

Making matters worse, where once already-promised pensions were considered a sacred bargain, increasingly companies are heading to bankruptcy court to argue their need to renege on promises made to their workers and to reduce the amounts they will pay retirees down the road. Such has been the fate in recent years of pension promises at United Airlines, Bethlehem Steel, Delphi—which manufactured electronic systems for GM cars—and many other major companies. Bankrupt, these giants turned over their pension obligations to the government-run Pension Benefit Guarantee Corporation (PBGC), which pays out only a small portion of the value of the original pension—enough to keep retirees from ending up homeless, but not nearly enough to maintain the quality of life they had assumed their pensions would allow them to have. The bankrupt companies also ended their health and life insurance coverage for ex-workers.

In 2011, American Airlines also went to bankruptcy court to argue its right to dump its pension obligations. In a scathing response, the PBGC reminded the company that it had successfully lobbied Congress to allow it to defer paying contributions into its pension fund for several years, thus saving AMR, the parent company of the airline, more than $2 billion over the six years leading up to its bankruptcy filing.

Were the company to shed its pensions, the PBGC warned, retirees stood to lose all their healthcare benefits as well as $1 billion worth of pension payments.
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Many of them would, as a result, end up no better off than the people I had interviewed around the country who lived paycheck to paycheck and couldn’t imagine ever having the option of retiring. For example, the ex-aluminum workers in Longview, Washington, whose company had gone into bankruptcy and left large numbers of workers in their late ’50s and early ’60s without healthcare and too young to qualify for Medicare.
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Also, the erstwhile middle-class men and women who had lost their jobs and burned through their IRAs and 401(k)s.

“I honestly see myself working till at least 73, 75 years old,” Luann Prokop, the onetime accountant in rural Pennsylvania averred at the end of our conversation. She no longer had retirement savings and no income that could come close to replenishing what she had lost. “I just get up every day and keep going. And try to stay focused.”

Remember Hacker’s theory about the Great Risk Shift? In no aspect of our lives has that shift occurred faster, and with more ferocity, than it has around retirement. Start early; invest well; have decades of good luck both in terms of individual affluence and in terms of avoiding macro-crises such as stock market collapses; and if you’re an average earner, you may just about be okay once you’re too old to work. Wait a few years to begin saving, though, make a few mistakes in how you invest your money, or simply have the bad luck to live through a couple big economic meltdowns, and chances are your retirement won’t be nearly as comfortable as was that of your parents.

If you’re counting on state-paid benefits to make up the shortfall, don’t get too comfortable. Unlike in Great Britain, say, there is no baseline, universal old-age pension in America. Many workers, including hundreds of thousands of government employees who were promised good, reliable retirement packages, have not had Social
Security taxes deducted from their paychecks over the decades and thus qualify for no Social Security at the end of their careers. Take away their pensions, and they have nothing. There
is
Supplemental Security Income (SSI) for old people who don’t qualify for Social Security or whose Social Security checks are miniscule and would otherwise be destitute. But the amount SSI gives to individuals tops out at a few hundred dollars a month—providing recipients with income well below that needed even to get near the poverty line.
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And, to qualify for that top-up, you have to prove your destitution through a series of means tests. Have any assets, and you’re not going to get that particular government check.

As for the vast trust funds administering the broader Social Security and Medicare systems, there’s an all-too-real risk of them coming apart at the seams. Both face daunting odds as their yearly numbers worsen in the face of increased longevity; an explosion in the cost of medical care; and above all, a national reluctance to increase taxes enough to improve these programs’ financial footing.

By some calculations, without additional revenues and reforms around what services are covered and how they are paid for, the Medicare Trust Fund will run dry as early as 2016. Others estimate the problem can be kicked down the road a few more years, perhaps until 2024. At that point, having burned through its assets, it would have only enough money on hand from existing taxes to pay about 87 percent of its obligations. And, from that point on, its annual situation would only worsen.
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