Summary
The Big Squeeze by Steven Greenhouse focuses on how American workers have earned less income despite their hard work (Greenhouse, 2008). In the book, the author illustrates how employers in the last three years have benefited at the expense of their workers. Equally, the author analyses several case studies to demonstrate how inappropriate tax policies and overseas competition have worsened the situation.
In chapter 15, the author illustrates several challenges faced by individuals at their retirement age (Greenhouse, 2008). According to the author, in the past three decades, many American workers have continued to work past their retirement age to solve the problem of their insufficient retirement incomes. The author asserts that in the past several companies have gone bankrupt because of pension burdens.
With this, the author argues that several companies are now reviewing their pension schemes to ensure that they do not undermine their operating budgets. Through these plans, workers’ pension has been cut forcing them to work past their retirement age.
In chapter 16, the author focuses on what the current government and relevant stakeholders should do to ensure that low-income, middle-income, and wealthy Americans enjoy equal income growth rates. The author argues that when President John F. Kennedy was in power, income rates in America increased at an equal rate regardless of the social classes of the time.
According to the author, the current wealthy Americans’ incomes and profits have increased tremendously while the middle-income and low-income earnings have stagnated. Throughout the chapter, Greenhouse provides several options that should be adopted to end the situation. These options are fighting wage situation, cracking down on wage theft, safeguarding the safety net, curing an unhealthy health care system, and increasing retirement security.
What is 401k plan and how does it work?
401k is an American pension plan passed into law in the year 1978. American employers sponsor the plan. In chapter 15, Greenhouse argues that 401k plan is an individual investment account that allows companies to provide matches for employee contributions in the form of company stocks (Greenhouse, 2008). Through this plan, workers are able to invest and save part of their incomes before being taxed.
To illustrate how these plans function, the author provides a simple math used by companies. The author illustrates that big corporation reimburses an average of 8% of their workers’ wages into conventional retirement fund programs.
On the other hand, the author asserts that these companies can equally allocate 3% of their workers’ salary into the 401k plan. Through this illustration, the author argues that companies would save substantial funds by switching from traditional pension schemes to 401k plans.
In the USA, several corporations have adopted 401k plans. During the early 1980s, the numbers of employer-sponsored plans were estimated at 14 million. Currently, the numbers have risen to 50 million.
In chapter 15, the author has attributed this increase to smaller cost burden on organizations and self-reliance associated with the 401k plans (Greenhouse, 2008). It should be noted that 401k plans are effective for employers but not to the employees. As such, the plans are far less effective and reliable than traditional pension schemes in assuring employees’ retirement security.
Through these plans, employees are given savings that they must manage. It is disappointing to note that most employees are not good investors. In the end, little of their savings survive to support them in their retirement ages. Similarly, when some workers change their jobs they withdraw the savings in the 401k plans. When these workers reach their retirement age, they would be left with little or no savings to sustain them.
How can we increase the low-class and the middle-class’ wages?
For the last three decades, the low-income and middle-class wages have stagnated (Greenhouse, 2008). Despite the growth in economic growth, corporate profits, and worker productivity, it is disappointing to note that worker wages have stagnated.
To ensure that worker wages continue to grow as it did during the 1970s, the government and corporations should work hard to address the challenge of languishing salaries. Several strategies should be adopted to fight wage stagnation. These strategies are increasing minimum standardized wage, ensuring continuous productivity growth, and reducing unemployment rates.
In the recent past, the government reports indicated that up to 13.5 million Americans live below the poverty line (Greenhouse, 2008). This implies that these individuals cannot meet their basic needs. Therefore, the government and the relevant organizations should move swiftly to ensure that appropriate minimum wages are formulated to ensure that individuals’ basic needs are met.
To achieve this, the government should appoint a partisan committee that would determine the income needed to meet individuals’ basic needs.
This committee’s recommendations should be adopted to end the escalating poverty. Equally, relevant macroeconomic policies should be formulated and implemented. Through this, issues of unemployment would be tackled. Similarly, these policies would enhance equitable income growth rate for all American workers regardless of their race, ethnicity, or social class.
Reference
Greenhouse, S. (2008). The big squeeze: tough times for the American worker. New York : Alfred A. Knopf.