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December 11, 2006
D-Day?
The media landscape is far more crowded than it was 30 years ago.
CLEAVING TO THE PAST?
The Newspaper Guild and Philadelphia Media Holdings representatives will sit down again today to address the final remaining issue in their protracted contract negotiations: the pension.
The two sides reached an impasse on the subject last week, almost provoking the Guild representing nearly 1,000 of the company’s 2,600 employees to go on strike. After an appeal from the federal mediator aiding the talks, the two sides have agreed to meet again today at 10:00 a.m., continuing a negotiation that may, in some respects, symbolize the last stand of print as American journalism’s dominant form.
It is a battle that is taking place perhaps five to 10 years after the war was already decided, long after cable television and the Internet began eroding print’s audience and advertising base.
The Inquirer and Daily News won what staff members acknowledge to be an advantageous deal in the 1970s. Back then, in the post-Watergate era of ambitious journalism, money flowed freely—particularly at the Inquirer, where long and expensive narratives covering such non-local topics as life aboard an aircraft carrier and dispatches from Lebanon, Sarajevo, Angola, Cambodia, Afghanistan and East Timor were supported and encouraged.
Salaries and benefit perks—including a generous pension check—increased along with the expense budget. But today, in an increasingly crowded and fragmented media landscape, it seems unlikely that any daily newspaper outside the media epicenters of Washington or New York will pursue such national and international stories. Salaries, too, are trending downward. And generous pension funds seem almost entirely absent from American business—let alone newspapers.
Last week, Brian Tierney, the Philadelphia papers’ publisher and CEO, issued a two-page memo to his employees, declaring the days that produced the current pension plan a “bygone era.”
He’s right. Throughout the nation, print reporters are far more likely to get laid off than get a raise. They are also increasingly being asked to develop new skill sets, like writing for the web or podcasting, and at no extra pay.
The image of Tierney as a process server, trying to deliver paperwork to Inquirer and Daily News staffers that they don’t want to read, is impossible to avoid. It is also probably the image Tierney would most like to project. But after interviewing pension experts, something else becomes clear:
Symbolism aside, this is a fight typical of management and labor—and though pension funds and pension law are both incredibly complicated, heartbreak and low bank balances are not.
WHAT’S AT STAKE?
Philadelphia Media Holdings is seeking to freeze the current defined-benefit plan, which calls for the company to contribute a little more than six percent of each employee’s salary to the fund.
The freeze would save management about $4 million per year.
The Guild says this would cause its members, particularly those closer to retirement, a lot of pain.
According to an analysis Inquirer business writer Jeff Brown conducted for the Guild, “the $75,000-a-year employee who worked for 20 years prior to the freeze would get a pension of $24,000 a year. If he or she worked an additional 10 years after the freeze, the pension would still be $24,000. Without a freeze, it would be $36,000.”
It’s that financial whack the Guild is trying to avoid, particularly on behalf of its older employees.
“What’s happening there is happening or has happened everywhere,” says Lynn Dudley, vice president for retirement policy at the American Benefits Council, which advocates employer-sponsored benefit programs in Washington, D.C.. “I’m talking about the move from a defined-benefit plan to a contribution plan. I wish it would trend back the other way.”
Dudley says that private industry’s embrace of the 401K was in part dictated to them.
“Before [anyone] jumps to the conclusion that [business] is evil,” she says, “you need to understand they are responding to their competition and to the government, which isn’t encouraging these kinds of plans anymore. The government gives incentives for defined-contribution plans—and they tightened the funding on defined-benefit plans, so the incentive to have them is less than it was.”
The 401K program that Inquirer and DN staffers would be left with is certainly far less lucrative for employees. And according to the Guild, management’s most recent proposal doesn’t offer employees any matching funds for their contributions.
Plus, there is another issue, and that is who controls the pension fund.
WHO’S IN CHARGE?
Currently, three union and three management representatives sit on the pension board, giving the Guild an equal say in anything that happens to the money. Management has asked for full control of the fund.
This, too, is not unusual. “The legal obligation to pay the plan falls on the employer,” says Steven Sass, Associate Director for Research, at the Center for Retirement Research at Boston College. “So the employer bears the risk, and that’s why they want to control the assets. That’s common.”
All the experts we spoke to agreed that fears the company might somehow use the fund for some purpose other than its employees’ retirements are unfounded. The laws and oversight are just too stringent to permit it.
Both Dudley and Sass also say employer-administered funds tend to perform better. “Outside the Inquirer’s single-employer plan universe, they have a one-percent better rate of return than employee-administrated plans,” says Sass.
In his recent memo, Tierney said they wanted control of the fund to maximize returns. Because Philadelphia Media Holdings is on the hook to pay the benefits, they want to make sure the money is there to do exactly that.
The Guild says the current system works just fine. “For the year ended Sept. 30, the return was 7.68 percent—just shy of the 8 percent in the plan's long-term projections,” reads a recent Guild memo. “For the two years ending Sept 30 the fund returned 8.8 percent a year. For the past four years it averaged 11.19 percent a year.”
Another expert at Boston College’s Center for Retirement Research says he understands why the union would be loathe to give up its voice.
“I would want to continue with the same representation I had before,” says Francis M. Vitagliano, Director of Retirement Education and Visiting Scholar. “This is the equivalent of a marriage, and there are changes afoot. You wouldn’t want to give complete control of your bank account to your wife or husband. You’d want equal representation. ‘How are we going to spend our money?’ They each have three representatives right now—that is a reasonable and straight forward approach.”
The Guild also notes that crucial decisions loom ahead. “Additionally, [management] wants the SOLE AUTHORITY to decide at the end of 2007 whether the Guild Pension Fund should be TERMINATED and/or MERGED with a multi-employer pension fund,” reads a recent union letter.
This impasse won't be easily overcome.
Imagine, for a moment, being Guild President Henry Holcomb. How do you look a dues-paying member in the eye and tell them the retirement they thought they had coming in 10 years or so is gone—and that what they’re left with is a far leaner, harder life?
Imagine being Tierney or any of his other investors, assuming hundreds of millions of dollars in debt to acquire two properties that are earning far less revenue with every passing year. Such huge debt is what drives men to squeeze every nickel until it screams. And the recent drop in national advertising, which hit the entire industry, is forcing their hand.
These two sides are meeting again today. But there’s no guarantee they will really do all that much talking when they see each other, face to face.
Posted by steve at December 11, 2006 08:38 AM
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