What Do These Protesters Augur for Jobs and Benefits?

Photo: Dan Macy

Last week I caught wind that some protesters were causing a street closure at the corner of 16^th and I Streets, N.W., in Washington, D.C., a block from the White House and, as luck would have it, a block — in the other direction — from the editorial offices of Thompson Publishing Group. I grabbed my camera and headed out the door, expecting to find an offshoot of the Occupy Wall Street demonstrators in New York (and maybe some colorful photo ops).

I found exactly that. One woman held a sign that read, “Our problems stem from our acceptance of this filthy, rotten system,” attributing it to Dorothy Day.

I write about “the system” — that is, financial markets (and at times, their impact on retirement plans), and about fringe benefit taxes. What is the “system” to which this protester was referring today, in quoting an early 20^th-century social activist? Perhaps more importantly for this blog, why should employers care about what is going on in the streets of New York, Washington and a growing list of cities?

Photo: Dan Macy

One of the complaints to come out of the “Occupy” demonstrations is a lack of jobs. Jobs mean benefits, and this is a benefits blog. Benefits are part of the “system.” Moreover, a common theme of the demonstrators has been the financial system. The financial markets directly affect benefits — how much insurance costs, how much a pension fund will be worth in 10 years, 15 years, a half-century; what kind of benefits might be politically unpopular. (On that last one, think flights on the corporate jet, the payment of club membership dues, corporate housing, chauffeured cars, to name a few. More about some of those perks later.) Compounding the problem of benefits, questions about “the system” lead to more questions about the future of benefits — which ones will be standards in the job market five years from now? Which benefits are funded by investments in securities and derivatives and will have to be funded more because the value of those investments went down, or hopefully less because the value went back up? (Hint: it’s more than just retirement plans.) What role will labor unions play?

So, what effect might the protests have on these benefits?

Photo: Dan Macy

Maybe, none. On the other hand, the protesters could give political cover to politicians who have tried before to make laws that would either do away with benefits or add them. In the past, we have published articles about lawmakers that wanted to change the tax code to encourage or discourage one benefit or another. We have written about President Obama deriding some common fringe benefits, declaring, “you can’t get corporate jets, you can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime,” referring to banking companies that took TARP — or “bailout” — funds. Yes, high-level banking executives have perks, but so do most employees. Perks can include a job uniform; or a company-provided cell phone; payment for a ride home after dark for an employee who worked overtime; a hotel room for a traveling employee, or a meal at the company cafeteria. Each of these enjoys a tax break, because that’s part of our system.

A vital part of our system is to reward employees with benefits that will extend beyond their employment: retirement plans. It is compensation deferred. Many of those benefits, especially pensions, of which there are still many, are funded with stock in the employer’s company and a mix of stocks in other employers’ companies. Insurance reserves against future employee disability cases are also funded with securities. The direction of interest rates dictates how much those reserves will be worth in the future and whether they will be adequate to cover the risks that employers (and their actuaries) have forecast. The financial markets play a vital and direct role in employer-provided benefits, and the financial markets lie at the heart of what the protesters are calling out with their posters and chants. What are they demanding? The protesters speak with many voices about a broad range of claims. But employers should be taking interest in how politicians might react to the protesters, if at all.