CHAPTER VIII

INDIVIDUAL SAVINGS AND INDUSTRIAL PENSIONS

The obligation of the State to take care of the indigent aged has been partially recognized by the establishment of almshouses, and county infirmaries, and by the granting of outdoor relief. The Elizabethan Poor Law was instituted for the purpose of relieving the tremendous distress and poverty which resulted from the enclosures of great agricultural estates for purposes of sheep grazing, an act which caused great unemployment and distress among the labouring classes of England. The Poor Law System has since continued and assumes to take care of those who have no other alternative than to accept the stigma and disgrace attached to our poorhouses. Such a fate, however, is dreaded and feared by most persons. To avoid such an end there have, therefore, been developed a number of methods by means of which some of the more fortunate among the labouring classes strive to avoid a pauper’s grave. These methods range in character from individual savings and insurance, to mutual, industrial, government and fraternal insurance systems. The methods and extent of relief in operation today as well as the degree of their efficacy in solving the problem of dependent old age is the task set for presentation in the next three chapters.

INDIVIDUAL SAVINGS

To provide for old age is a fundamental desire common to most human beings. The motive of accumulating a sum sufficient for old age, or for the protection of their wives and children after their death prompts most working men as well as business and professional men to work harder and longer during their productive years. The instinct of protection against dependency is no less impelling in one class of society than in another, and is as common among the working class as among the middle and employing classes. The problem of saving for old age is most serious not on account of the lack of habits of thrift, but largely because, as has been shown in the earlier, chapters, the great mass of wage-earners in this country lead continuously a precarious and hand-to-mouth existence. With a wage that rarely reaches, according to government reports, the minimum standard of subsistence necessary to maintain a family of five, how can a wage-earner save at all, and especially for old age? “Thrift” as stated by Professor Miller, “is a desirable habit for those who receive a wage that makes saving a possibility, but thrift becomes a mockery in the homes of the poor and ‘saving’ an economic falsehood.”[190]

The difficulties confronting wage-earners who desire to save have already been alluded to. Even if a workman is fortunate enough to receive a fairly high wage, and by economy and self-denial succeeds in setting aside a small part of his earnings, it not infrequently happens that serious illness besets the family and the entire savings are wiped out after the payment of the doctor and the druggist’s bills. Even though there may be no sickness, unemployment may deplete the worker’s reserve.[191] The worker may be even forced to leave town in order to seek employment. By the time he has transferred his family and settled it in the new place, his accumulations will have vanished. Usually the first savings of a worker are made for the purchase of a home, and this is the first to go when employment has to be sought in another place. On the other hand, if a worker is free from the above misfortunes, his very anxiety to secure an economic competence, frequently leads him because of inexperience and credulity, into foolish investment ventures and get-rich-quick schemes which may sweep away his entire earnings. The recent “Ponzi” episode illustrates this point clearly.

The aggregate amount of savings by those who actually toil for their daily bread is, of course, impossible to ascertain. The number of depositors and amounts per account in the different savings banks varies considerably from time to time and cannot be accurately ascertained. On June 30, 1820, the total savings deposits, or deposits in interest or in saving departments in 22,108 State, savings, private banks, and loan and trust companies including Hawaii, Porto Rico, and the Philippines amounted to $7,483,015,000.[192] On the same date 8,025 national banks reported $10,215,575,000 demand deposits and $3,484,881,000 time deposits.[193]

A statement issued to the press by the Savings Banks Association of the State of New York showed that the total deposits on December 31, 1820, in 58 of the 58 savings banks in Greater New York amounted to $1,832,132,834.02. The number of depositors was 2,558,840, making an average of $715.68 per depositor.

Savings banks, however, are largely patronized by professional men, small business men and the more prosperous among the working people, and can hardly be termed “workingmen’s banks.” A more representative workingman’s bank may be considered the U. S. Postal Savings, in which practically all deposits are those of wage-earners. The number of depositors and amounts deposited in the Postal Savings System may perhaps be taken as fairly indicative of the extent of savings among the great mass of wage-earners in this country. According to the annual report of the Postmaster-General[194] during the fiscal year ending June 30, 1818, the deposits in the Postal Savings System increased from $148,471,488 to $167,323,260, a gain of $18,851,761, or 12.70 per cent. The number of depositors however decreased during the same year from 612,188 to 565,508, a loss of 46,678, or 7.62 per cent. The average principal per depositor during the same year increased from $242.53 to $285.88, a gain of $53.35 or 22 per cent. The figures in this report may be taken perhaps as fairly suggestive of the entire problem of savings for wage-earners. As the wages paid during this period were highest, a number who were earning fairly high wages were able to increase their savings, but nearly 50,000 of those who had deposits the year before were apparently compelled by the increased cost of living to withdraw even the meagre savings which they had succeeded in accumulating. The decrease in the number of depositors could not be ascribed to the withdrawal of deposits by many immigrants, as the emigration during that year was not considerable. Of the more than 110,000,000 persons and 40,000,000 wage-earners in the United States thus only 565,508 or approximately one among 80 wage-earners had a savings account in the Postal Savings System—the most representative workingmen’s bank. While it is true that many workers had during this period made investments in war bonds, and thrift stamps, the average such investment was inconsiderable. The inadequacy of $285 to take care of old age needs no comment. And this negligible average sum per deposit or after Congress in July, 1818, had increased the amount that a depositor may have at credit from $1,000 to $2,500!

According to the Report on Productive Industries (p 845) recently published by the Department of Internal Affairs of the Commonwealth of Pennsylvania, the per capita savings in that State on January 1, 1820, amounted to $125.10.

In her study of 100 old persons in Greenwich Village in 1815, Miss Nassau states:

“I neglected to ask twenty-one women and eight men if they had had savings but of the rest five women and five men had savings—that is, ten out of seventy-one had savings. The savings of the five women were partly left to them by someone else, and, except in one case, could not last long. Of the five men, two were bachelors and could thus save fairly easily; one had savings sufficient for one year only, another’s savings were fast diminishing. So that the savings counted for little. The reason I neglected to ask the twenty-nine people if they had savings was, usually, that they so obviously had nothing.”[195]

The lack of savings or property income among aged persons, as found by the different State Old Age Pension Commissions, has already been pointed out. Indeed, what are the prospects for saving to most of the wage-earners who by skimping and exceptional management could lay aside a little? Why should the average worker scrape and deprive himself and his family of the necessities of life in order to save for old age? What are his chances of success in this respect? Why should the worker deny himself the satisfaction of present needs in order to store up something for the remote future, when he sees day by day the little savings of his neighbour swept away through illness, unemployment, or in some business venture; why should he save when it seems apparent that the chances of being relieved from beggary and pauperism are slim?

Why saving for old age is especially difficult for workingmen and can never be relied upon as an effective method of relief for the problem of aged dependency is succinctly summarized by Rubinow as follows:

“1. The amount necessary is evidently greater, for old age is not a brief transitory condition, such as sickness or unemployment may be. It would require a continuous saving for a great many years.

“2. The amount necessary is uncertain. There is, after all, the even or more than even chance of early death before old age may be reached. And in addition, the wage-worker has no means at all to know how much he would have to save, nor whether his savings will prove sufficient.

“3. It is the final emergency, which in the natural course of events must be preceded by all other emergencies of a workingman’s existence. Inevitably the fund of savings would have to be used to meet all these emergencies.

“4. The remoteness of the emergency would prevent necessary savings at a time when such savings would be easiest, that is in earliest years.

“5. To assume that under these conditions all workingmen could save sufficient to provide them against old age, would be to disregard all real conditions of the wage-worker’s existence. Even in the most saving of our States, the average amounts held per depositor in the savings banks are ridiculously small as compared to the amounts needed for a sufficient income at old age.

“6. Finally special savings for old age would only be possible through a persistent, systematic, and obstinate disregard of the needs of the workingman’s family, which would make the preaching of such special savings a decidedly immoral force.”[196]

Savings by means of insurance protection has increased considerably during the past few years. The increase however has been largely in industrial insurance. It is estimated that there are more than 20,000,000 policies in this country, which consist chiefly of small amounts upon the lives of wage-earners or of members of their immediate families paid for at weekly or frequent interval. The amounts of these policies in the majority of cases are for no more than $100 or $200 which is commonly used for burial expenses. In 1808 the Massachusetts Commission found only 15.8 per cent. of the “non-dependent” aged poor investigated who carried life insurance policies of any kind.[197] In 1818 in Hamilton, Ohio, it was found that:

“Of the 1,432 cases studied 783 or 55.4 per cent. were carrying life insurance in one form or another. In 387 or nearly half of the cases the amount of the policy was less than $200, while only 168 or approximately one person in five carried policies of $100 or more. Two hundred and nine of the 416 persons studied in Cincinnati carried life insurance in some form.”[198]

While old-age insurance may be secured at a reasonable rate if begun early in life, it is hardly to be expected that any considerable number of young men at twenty to twenty-five will think of providing for the remote contingency of old age. At an advanced age the insurance is quite high and the great mass of wage-earners cannot afford it. The best illustration of the gross lack of provision of old-age insurance in the United States is the experience of the Massachusetts Savings Bank System where the State sells old-age annuities at greatly reduced premiums and where, in spite of this, there were at the end of 1818, after practically twelve years’ existence of the fund, only about 300 persons who had taken out these annuities.

PENSION SYSTEMS OF INDUSTRIAL CONCERNS

It is frequently asserted that but a small number of workers are discharged by their employers after long service, because it is assumed that “sentiment or appreciation” on the part of the employer as a result of long acquaintance inclines him to retain the aged employé on so-called pension jobs long past the period of full efficiency. Furthermore, the establishment of a pension system for old employés is acknowledged by all industrial leaders to be “good business policy.” It is claimed by many employers that “the pension attaches the employés to the service and thus decreases the liability to strike,” reduces the labour turnover, attracts a superior type of employé, and is generally doing much to reconcile capital and labour. A pension system, furthermore, enables employers to dispense with the less efficient and elderly workers thus doing much to eliminate waste and demoralization as a result of the continued employment of men who have long outlived their usefulness. The prospect of a pension also operates as an incentive to hold men past middle age whose acquired experience and skill often become invaluable to the employers. Generally, the employés accept such a system with favour and it is claimed by some that industrial discontent is greatly reduced, as the expectation of a pension in old age cultivates a feeling of loyalty and a recognition of a mutual interest.[199]

In view of the above considerations, the number of industrial concerns in the United States that have established such systems for their superannuated employés is amazingly small. A letter addressed by the Pennsylvania Commission on Old Age Pensions, to all concerns in Pennsylvania, outside of railroads, employing 500 or more workers in regard to their pension systems brought nearly 200 replies. Of these, 35 had established regular pension schemes or were associated with one; 48 had no regular system but stated that it was their policy to aid their aged employés by giving them either light work or so-called pension jobs, while 101 industrial concerns stated that they had no pension system of any kind and had never given the problem consideration.

A special committee of the Merchants’ Association of New York in a report on Industrial Pensions[200] states that there are probably between 150 and 200 private industrial pension systems. The Committee finds that practically without exceptions these systems have been adopted by very large corporations. Besides railroads, the distribution is as follows:

(1) Public Utilities 48 (2) Manufacturing and Commercial Concerns 45 (3) Banks 24 (4) Insurance Companies 5 (5) Miscellaneous 20 Total 142

The number of employés actually in the receipt of industrial pensions is small. The pensioners of 20 leading Pennsylvania concerns in 1818, as furnished to the Old Age Pension Commission totalled only 2,138. Of the several hundred thousand employés of the U. S. Steel Corporation and subsidiary concerns throughout the country, there were on December 31, 1818, only 2,436 pensioners on the active list. Similarly negligible numbers were found in all other concerns.

The absence of more widespread pension plans cannot be attributed solely to the cost involved. Of the systems examined, the proportion of the total amounts spent on pensions to the total annual pay-roll was rarely found to exceed one per cent. and in the majority of cases the amounts spent on pensions were less than one-half of one per cent. of the total annual pay-roll. The main reasons for the absence of such plans may be attributed to the following: (1) The belief of many employers that it is more advantageous for them to deal with the individual employé as “it gives the opportunity to reward real merit.” (2) Pension systems are frequently not established because of the large labour turnover experienced by many concerns. The number of workers who serve sufficiently long periods with one employer as to be entitled to a pension is very small. (3) Although it has been suggested that any business which cannot stand an increase of one per cent. in expenses “is so unstable as to be a menace, not only to its proprietor, but also to society,” there are nevertheless a number of concerns who claim that they cannot afford this additional expenditure.

The incentives for the inauguration of industrial pensions on the part of employers are many and varied. A few are, doubtless, inspired by humanitarian or philanthropic considerations. In the majority of cases, however, the economic motives play the leading part. Definite pension systems are used not only “as a reward for faithful and most efficient service,” and “appreciation of the fidelity and honest service of the employé,” but also, “as an incentive to further service” on the part of the younger workers, as is explicitly stated in the by-laws of many corporations. And the latter purpose could not be achieved when the old and decrepit are scrapped indiscriminately. It is perhaps not correct to state that one of the chief purposes, as has been advanced by several students, in establishing a regular pension system, is to lessen the attractiveness of labour unions, and make men loyal to their employers rather than to any labour organization. An examination of the industries having established pension systems discloses the fact, however, that very little trade union organization exists in most of them. Again, Miles M. Dawson, a well-known actuary, relates an instance when “A Canadian railway company which had not engaged to pay pensions, except at its pleasure, recalled retired employés to its service upon the occasion of a strike, on penalty of forfeiting their pensions. This involved depriving an old employé of the reward of a lifetime of service unless ready to dishonour himself by betraying a Brotherhood of which he had been a member for a quarter century or longer.”[201] Reverend Father John O’Grady also declared:

“I have known a case recently in which a large organization in this country notified all its old men that if they did not return to work in the event of a strike they would lose their pensions.”[202] During the so-called “outlaw” strike of railroad workers early in 1820, many newspapers reported pensioners who were compelled to work in order to break the strike.

The Special Committee on Industrial Pensions of the New York Merchants’ Association frankly states the motives underlying industrial pensions:

“In addition to the desire to reward faithfulness or to fulfill a duty, there is usually in the mind of the employer the hope of attaining definite beneficial effects on the efficiency and prosperity of the business. Most prominent among these effects are: increased loyalty of employés and development of their personal interest in the success of the business, which are exceedingly valuable assets to an employer; increased efficiency of individual employés; reduction of labour turnover; attraction of a superior type of employé; decrease—or even elimination—of labour troubles; and increase in thrift of individual employés,—all of which are more or less related effects.[203]

The principal features of industrial pension systems may be summarized briefly as follows: (a) Industrial pensions in this country are of comparatively recent origin, and many of them are still in the experimental stage. (b) With few exceptions, industrial pension systems are straight service pensions financed by the employer and without contributions by the employés. (c) The employés are given no representation in the administration or management of these funds. (d) Membership is not compulsory and the pension allowance, ordinarily, applies to all employés.

AGE OF RETIREMENT

The general age period for compulsory retirement of male employés is set at 70 years of age, although, practically all provide that employés may retire at 65 at their own request or at the discretion of the company. Sixty years of age is generally the age period set for the retirement of female workers, although a number have more liberal provisions and permit the retirement of women workers at 55. Age is rarely required for total disability allowances. These usually depend on length of service.

YEARS OF SERVICE

The period of service required for the retirement upon an industrial pension varies’ between 10 and 25 years. The length of service required is less uniform than the age requirements. Continuous service is required in considering the period of employment, and leave of absence, suspension, or lay-off for a period longer than six months, in the majority of cases, constitutes a break in the service, and employés lose all credit for previous employment.

PENSION AMOUNT

The amount of the pension is generally computed upon a certain percentage of the employé’s wages, usually by taking one per cent. of the average wages of the employé for the last ten years and multiplying it by the number of years of service. Some corporations, however, pay a straight sum of about $15, or $20 a month. In granting pensions, concerns are explicit against any inference of vested rights or privileges granted employés, and usually reserve the right to discharge an employé or terminate a pension for violation of any of the company laws or gross misconduct, etc.

The regular rates of pensions are in many cases limited by maximum or minimum yearly pensions or both. The report of the New York Merchants’ Association, already referred to, states that:

“In industrial establishments the maximum limits vary from $500 to $5,000 per year, and the minimum limits vary from $144 to $244 per year. In banks the maximum limits vary from $1,800 to $6,000 per year. In some cases the limit is a maximum salary upon which a pension is computed. In other cases it is a maximum per cent. of highest salary, in which case the figure is usually from 60 to 75 per cent. so that few employers are actually affected by it, because even under a three per cent. rate, more than a 20-year period of service at least is necessary to reach the maximum rate.[204]

The granting of a pension ordinarily does not debar the pensioner from engaging in any other business. But in a few cases the amount of annuity varies inversely with the income from other sources. That it would, however, be practically impossible for any employé to follow the line of work he could do best and to which he was accustomed, is obvious from the provision made by practically all concerns that he cannot engage in any other business which may be prejudicial to the company’s interest. Nor may he be further engaged by the same company.

Objections to industrial pensions are based on the following grounds:

(1) They are generally opposed by organized labour because it is said they are established largely for the purpose of lessening the attractiveness of labour unions and make men more loyal to their employers rather than to one another.

(2) Industrial pensions, it is also argued, are merely deferred wages, and it is commonly known that wages are frequently found to be lower in those industries which have the best pension schemes. The Illinois Pension Laws Commission concluded in its 1816 report that:

“Whether the contribution to a pension fund be taken wholly from the employé’s wages or salary, or be paid wholly by the employer, or be derived in part from each, these contributions are in all three cases to be regarded as in reality a deduction from wages and salary. The existence of a pension system in connection with any position or employment is taken into account by both parties to the contract of employment, and broadly speaking, wages and salaries actually paid are in due course reduced below what they otherwise would be by the amount of the total contributions from both the employer and employé to a pension fund. The employé will thus pay for his pension by deductions from his wages or salary, whether he is conscious of it or not. Indeed it is quite possible that with a sound fund in existence the reduction in wages and salaries may in time materially exceed the amount of the total contributions owing to the advantages of such a fund to the employé under present economic conditions. This consideration further emphasizes the advantage to the employer of having such a fund established.”[205]

Professor de Rode also declared:[206]

“In order to get a full understanding of the old-age and service pensions, they should be considered as a part of the real wages of a workman. There is a tendency to speak of these pensions as being paid by the company, or, in cases where the employé contributes a portion, as being paid partly by the employer and partly by the employé. In a certain sense, of course, this may be correct, but it leads to confusion. A pension system considered as part of the real wages of an employé is really paid by the employé, not perhaps in money, but in the foregoing of an increase in wages which he might obtain except for the establishment of a pension system.... It seems to me on the whole that most of the pension systems adopted by private employers are merely very shrewd bits of wage bargaining. The absence of any contractual right and the lack of assurance that a pension will be paid upon fulfilling the conditions, gives merely the shadow of provision for old age and not the substance.”

(3) Industrial pension systems prevent the mobility of labour, often to the detriment of both the individual and the community, and offer opportunities for arbitrary discriminations against workers. The administration of these funds is in most cases in the hands of the employer. As a result, notwithstanding the definite regulations provided for the granting of a pension, the latter is always contingent upon the nature and loyalty of services rendered and the opportunities in the hands of the employer for discriminations are evident. For, while the employer is left free to discharge him, cut down his wages or discriminate against him generally, the worker must remain loyal at all times. He must not, for instance, take part in any movement which the employer may consider detrimental to his interests, such as associating himself with his fellow workers, in order to increase their wages or improve their working conditions generally. He not only can do little to better his own conditions and those of his fellow workers, but he cannot even leave his employment in order to seek more suitable work, as it means losing his pension privileges for which he has laboured many years. That it is undesirable and even socially harmful to tie a man to his job and discourage him from changing from one employer to another is generally recognized and need not be emphasized in this connection.

(4) Industrial pensions are also objected to because the age for retirement is generally too high and the pension too low.

(5) In the case of many concerns there is no guarantee that the pension promised will be lasting and permanent, even if all requirements are lived up to, as practically all concerns reserve the right to either reduce the pension rate when the demands are in excess of the sums fixed, or discontinue the entire fund “without vesting any rights to such a pension to any individual member.”

The Committee of the New York Merchants’ Association, it is worthy to note, points out that pension systems that may at any time be discontinued are immoral. It says:

“Even if the pensions are apparently the free gift of the corporation, and the economic possibility of this for a considerable period is doubtful, the employé is entitled to look forward with assurance to the pension promise. A pension promise that is not certain involves an uncertain morality.... To provide, as is often done, that the corporation may wind up the pension plan at any time without fulfilling the promises already made, and then to expect employés to look forward with confidence and order their lives upon the strength of these promises, is certainly inconsistent. When the economic aspect of pensions is considered, such retroactive power of revocation can hardly be considered as moral.”[207]

While it is true that the very large industrial concerns are not likely to terminate their pension systems without sufficient notice there are nevertheless many of the smaller concerns which are continuously facing such emergencies. A large industrial concern in Pennsylvania in 1818 wrote to the Old Age Pension Commission of that State:

“We have for many years paid pensions to a few of our employés who had served long periods with our concern. We have no regular system for this, however, and during the business depression prior to the war, which hit us severely, we had to suspend payment of these in some cases.”

That this situation is fraught with the greatest danger is obvious. Mr. L. W. Squier addressed a letter to a corporation reliably reported as having a pension plan in operation and it was returned unopened and stamped “Firm Dissolved.” He comments

“The question naturally comes to the mind of the thinking working man: What is the measure of the disappointment of the scores, perhaps hundreds, of employés of the corporation who were looking forward to pensions for the support of old age and are now helpless and unprovided for? Such a condition is analogous to that of the crew of a vessel who, after a long hard voyage over dangerous seas with food exhausted, nerves racked and strength almost gone, have only one hope left,—that of speedily making an hospitable harbour; but alas, find themselves shipwrecked upon a barren island.”[208]

(6) Industrial pensions are also objected to by some, on the ground that they have a depressing effect upon wages, due to the competition of returned pensioners who accept jobs for less money because added to their pension their needs are more readily satisfied. This objection, however, has little basis of fact, as it is common knowledge that with most industrial pensioners their life power had been already spent before retiring. Indeed of the number retired on pensions by the United States Steel and Carnegie Pension Fund in 1817, 15 per cent. had died in the same year “indicating,” as commented on by the manager of the Fund, “that they had given their full measure of loyalty to the service.” At any rate, the fact of receiving a pension would hardly make one a more dangerous competitor in the labour market. One would certainly display keener competition were he left starving at the age of 60 or 70, and still able to perform some useful labour.

Other objections to these pensions are as follows: (7) They generally make no provision for cases of total disability when an employé has not served the required time. (8) Only corporations employing wage-earners on a large scale can afford to establish well defined systems of retirement. (8) Some companies provide that the employés forfeit claim to pensions when leaving service, under strike orders. (10) Generally before a pension is granted, one must have lived up to the most stringent requirements and provisions.

RAILROAD PENSION SYSTEMS

The railroads were the first in this country to establish retirement systems for their employés. This is, doubtless, explained by the fact that railroad employés are very often required to be under the most prolonged tension of both mind and body. Men in modern transportation systems are subject to greater hazards and wear out more rapidly than in many other branches of industry. With the rapid and unprecedented development of the American railroads, the problem of what to do with the superannuated worker loomed up earlier in this industry than in any other. Railroads in this country thus began to establish private retirement systems about the same time that European governments first engaged in instituting systems of public pensions and insurance.

The main development in railroad pensions did not begin until the early days of the present century. The Baltimore and Ohio Railroad has the distinction of introducing the industrial private pension system in this country.[209] Its pension fund was established in 1888—the same year in which the government pension scheme was adopted by Germany. More than a decade passed before the next railroad—the Pennsylvania—saw the necessity of following the example. The great majority of the railroads have established a regular system of pensioning since 1800.

What is true of the pension plans of the industrial concerns is, in a descriptive sense, true of all the railroads, namely: the administration of these funds is either by the direct control of the board of directors of the various companies, or by a board appointed by them, or by the president of the railroad. The only exception to this is the Baltimore and Ohio Fund, which requires four years’ membership in the Relief Fund for eligibility and which is controlled by the same executive committee as administers the latter department. Such absolute control is readily explained by the fact that excepting the Baltimore and Ohio Fund the employés make no contributions to any fund. The payments are entirely gratuitous on the part of the company “as a reward for faithful services rendered,” and the funds are therefore controlled by them.

As is the case of the industrial pension plans, a compulsory and voluntary age of retirement is provided also in the transportation systems. With very few exceptions the former is set at seventy years. The period of service required before an employé can retire on a pension differs. It ranges from ten years to thirty years. Where the shorter period of service is specified, however, it is generally provided that no person is eligible to a pension who enters the service after 40 or 45 years of age. In a few cases the age of eligibility to service is as low as 35 years. That the longer period of service is thus necessary before a pension can actually be secured is obvious.

In the majority of railroad pension establishments, the difference between the age when one is compelled to retire and the period when one may retire voluntarily on account of physical incapacity, amounts only to five years. Seventy being the age of compulsory retirement, it is usually provided that an employé may retire on account of physical incapacity between the ages of 65 and 68. A few corporations, however, provide for no set age or service but leave it to the discretion of the Board of Directors to decide upon the merits of the individual case.

The differences in the terms of service required for the granting of a pension by the industrial concerns and the various railroads are significant. Twenty-five years of service is the maximum set by the different industrial establishments. Many require twenty or fifteen years of service and a few require only ten years of service. In the case of railroad pensions, however, twenty-five and thirty years of service is generally specified or implied. This difference may be explained by the fact that the labour turnover is much greater in the case of industrial firms and also because railroad lines are more anxious and better adapted to retain employés for longer periods.

With the exception of the Baltimore and Ohio Railroad, practically all the railroads have an identical method of computing the annuities awarded. Most railroads provide for a pension computed upon the basis of one per cent. of the average monthly wages for the ten years next preceding retirement, multiplied by the number of years of service. Incapacity annuities whenever provided are computed in the same manner. Although a great number of establishments do not provide for either maximum or minimum pensions, two hundred and fifty dollars per month seems to be the highest limit set, while five dollars per month is generally the lowest.

Only few railroads make provisions, by means of pensions, for employés who have been injured and have become totally disabled while performing their duties. These few concerns state that an employé, in case of injury or total disability, may be pensioned regardless of his age or length of service. The majority of companies, however, make no provisions for such employés before they have completed the required period of service.

The transportation companies, as was indicated in the case of the industrial concerns, generally specify that the granting of a pension does not debar any employé from engaging in any other business, but state that he cannot re-enter the service of the company. The pension funds of the great majority of railroads are fixed at a certain amount. It is also provided by practically all of these concerns that “when basis of pension allowance shall create demands in excess of the sums fixed, a new basis, ratably reducing the pension allowances may be established.”

Additional characteristics generally typical of these pension systems may be summarized as follows: In computing the length of service it is usually specified that “leave of absence, suspension or dismissal followed by re-instatement within one year or temporary lay-off is not to be considered a break in the continuity of service.” Practically all companies “reserve the right to terminate pensions for gross misconduct” and “reserve the right and privilege to discharge from service at any time any employé without liability to a pension.” Some provide that “employés who are dismissed from or voluntarily leave the service of the company for any cause whatsoever relinquish all claims to consideration or pension allowances.” Others specify further that “employés’ forfeit claim to pensions when leaving service under strike orders.” The objections offered against the pension systems of industrial concerns are of course applicable also to railroad pensions.

The efficiency of railroad pensions in the relief of the problem of aged dependency among railroad employés may be judged from the following figures which need no further comment. The Pennsylvania Railroad with its nearly 300,000 employés had retired on pensions from January 1, 1800, the time of the inauguration of the plan, to December 31, 1818, a total of 8,128 employés. The Philadelphia and Reading Railway Company pensioned from 1802 to 1820, a total of 876 employés. The New York Central, and all its associated railroads, pensioned 2,828 employés during the first ten years’ existence of the fund—1810–1820. From October, 1884, to March, 1820, a period of 36 years, the Baltimore and Ohio Railroad retired on pensions only 2,758 of its employés.