Much of the growth and decline of defined benefit pension plans in the United States can be attributed to the interests of management, government regulation and the power of unions.
As unions built up their muscle in the early 1900s, they inadvertently helped drive the creation of pension plans. Companies felt that such plans could help dissuade workers from joining unions, reduce labor turnover and provide more control over employee behavior. According to the CBO, employers were also using the plans as a “systematic, publicly acceptable way of moving elderly workers out of their jobs, while providing incentives for younger employees to stay with an employer throughout their working lives.”
Some companies, including the Ford Motor Co., began by offering profit sharing and overtime pay. John R. Lee, the company’s first personnel manager hired by Henry Ford to update the company’s labor policies in 1913, reported that, “We began to realize something of the value of men, mechanism and material in the threefold phase of manufacturing, so to speak.”
But while Ford was instrumental in changing pay scales, identifying job classifications and establishing requirements for promotions to prepare for a profit-sharing plan implemented in the early part of the 20th century, it wasn’t until 1950 that the automaker started offering hourly employees a pension plan.
Lisa Beyer is a Workforce Management contributing editor. To comment, email firstname.lastname@example.org.