Evening star., 1949-11-08

SuIe 10 Lose employees
Due to High Fixed Costs
With Pension Plans
By Dapid Laurence
Somehow or other nearly every
pressure exerted by the big labor
unions tends to favor the large
sized business and hurt the
smaller ones.
When Phil Murray of the CIO
declares publicly that an employ
er who cannot afford a pension
plan ought not to be in business,
he is, in effect, saying that the
smaller businesses should be
merged with or swallowed up by
the larger businesses.
For not only can the smaller
businesses not afford pension
plans such as the big corporations
are now giving in answer to union
demands, but there are many
smaller businesses which will lose
employees because they cannot
compete with the higher compen-
sation thus offered.
What is even more dangerous
Is the hazard that will be created
for those marginal businesses
which introduce pension plans
and then run into a deficit. The
pensions can be terminated at the
end of yearly contracts. This
means that employees will tend
to desert the companies which en-
counter financial difficulty and
they will be Immediately apprised
of that fact when pension plans
. are affected.
Answer Usually Heard.
It has been estimated that the
fixed charges for pensions will be
such a big item that the weaker
companies will avoid pension
plans. -.
What is the answer then If
competition is to be maintained
and America is not to find itself
with many small businesses un-
able to function and new busl-
nesses discouraged from starting?
The answer usually heard is
Federal old-age insurance. to
which both employees and en-
ployers contribute. In such a plan
the employees participating are so
numerous as a whole that the
Government can spread the actu-
aria1 risks over the larger number
and bring the cost down.
Already the social security sys-
tenn in effect today is built upon
both employer and employe con-
tributions. The private pension
plans now being negotiated be-
tween unions and employers grew
primarily out of the fact that in
adequate or no pensions at all
have been the rule. If the social
security system were broadened to
take care of the pension problem,
the financial burden could be
spread widely.
In anticipation of such devel-
opment, the pension plans being
worked out between the steel COM
panies and the union provide that.
when the Government broadens
social security. the companies will
be permitted to reduce their costs
accordingly.
One of the difficulties with the
private pension plans is that not
all employees wish to participate in
the contributions. Only a small
fraction of the total number of
persons employed today are COW
cred by pension plans.
With a Government plan. the
coverage of all persons who work
would be automatic. 1t would
cover persons in unincorporated
as we'll as incorporated businesses.
Relation To Prices.
Fewer than 3 per cent of all
active corporations have pension
plans. A vast number of workers
would never be covered If reliance
were placed on private plans.
This is not because of any lack of
generosity on the part of employ
ers or willingness on the part of
employees but because. in smaller
concerns, the costs of the past
service and the building up of
a liability for future service are
just too large to handle.
One factor that has been to
some extent overlooked is the re-
lationship of pension plan costs
to current prices. Already there
Is talk of an increase in the price
of steel by SO per ton. Only a
few months ago. it was being de-
manded that prices come down.
Now it looks as if prices will start
upward again. The smaller steel
companies, forced by the union
to increase their costs with COM
pany- financed pension plans, will
be the ones to start the price
spiral upward. Many of them
will be unable to continue in busi-
ness without raising prices.
Thus America is witnessing an
other example of how imitation is
virtually imposed on an economic
system through pressure groups.
The fact-f1nding report by the
Presidents board in the steel in
dustry specifically warned against
applying any uniform pattern in
that industry and recommended
that each company be treated
separately. But evidently the
smaller companies are going to
be squeezed anyway. So, in the
end, the big businesses grow big
ger and the smaller ones disap-
pear This is not liberalism. It's
the road to cartels.
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