Burruel and the 4,000 members of his Cleveland Iron Workers Local 17 pension plan are the canaries in the coal mine as far as pension cutbacks go. At least 50 Midwestern pension plans -- mostly the kind jointly administered by trustees for a labor union and a group of employers -- are in this decrepit condition. Several plan sponsors have already applied to the Treasury Department to cut back retirees' allotments. . . .When people such as Burruel retired, fewer workers in fewer jobs were available to contribute to the pension plan. That created a lopsided and unsustainable equation. Low interest rates made matters worse. The area economy was yet another factor. Although things improved economically on both coasts, the Ohio region where Larry and his fellow workers lived remained depressed. When companies there failed, they couldn't continue to pay pension benefits and, in some instances, declared bankruptcy.
For the first time in years, pay for the lowest-income Americans is rising faster than for other groups. Weekly pay for full-time earners at the lowest 10th percentile of the wage scale rose at a faster rate last quarter, year-to-year, than for any other group measured by the U.S. Labor Department—including those at the top of the income scales who earn five times as much. The shift for low-income workers—including restaurant workers and retail cashiers—who make about $10.75 an hour, is a sign that a tightening labor market is delivering better pay to workers who largely haven’t shared in gains since the recession ended eight years ago, according to economists and government data. Last quarter marked the first time since late 2010 that this earning group’s gains outpaced all others, including the 90th, 75th, 50th and 25th percentiles.
Wage gains have fallen far behind skyrocketing costs for housing, a gap that’s emerged despite a robust job market in recent years, according to an unsettling report released Monday. The housing-wage gap highlighted by the report from the Silicon Valley Institute for Regional Studies suggests that it is becoming increasingly difficult for residents in the Bay Area to keep up with the cost of owning or renting a home. Over the five years that ended in 2016, wages in the Santa Clara County, San Mateo County and San Francisco areas have risen by an average of 2.8 percent a year. Over the same stretch, the cost of rental housing has jumped by an average of roughly 9 percent annually, the report by the Silicon Valley Institute stated. In aggregate, from 2011 to 2016, the median wage in the three counties rose 14 percent, while the median apartment rent rose by a cumulative 45.2 percent, reported the regional institute, a unit of Joint Venture Silicon Valley.
The California Public Employees’ Retirement System rode a strong year in the stock market and private equity investments to earn a return rate of 11.2 percent for the fiscal year that ended June 30, the pension fund announced Friday morning. That’s about double what CalPERS had expected to earn this year. It’s also a marked improvement over the previous year, when CalPERS’ investment return rate was .61 percent. In the budget year that ended in June 2015, CalPERS’ investment return rate was 2.4 percent.
When we split obligations into how much California owes to those who have already retired and current employees, a startling fact emerges. The assets California governments have now aren’t even enough to cover what it owes to current retirees. For all employees combined, retirees are owed $134.5 billion as compared to $112.6 billion in total assets. California governments do not have enough money to pay what they owe retirees, and they have nothing at all set aside for current employees. Every year, employees have funds deducted from their paychecks to go into the pension funds. Those funds will go to retirees. By the time it’s their turn, there will be no money left for current employees. Current employees are forced to pay into a retirement system that may be bankrupt when they retire.