Abstract: Neoliberalism from Below: Evidence from the Rise of 401(k)s

Michael McCarthy


This article considers the rise of defined-contribution (DC) pensions (such as 401(k) plans) for the debate about neoliberal policy change in America. In contrast to the widespread notion that neoliberal policies develop from the ''top-down,'' being both enacted and managed by state agencies, it argues that the development of the employer-based pension system between 1970 and 1995 is an instance of ''neoliberalism from below.'' Unions supported a torrent of regulations that were passed between 1974 and the late 1980s, which were intended to make the traditional system of defined-benefit (DB) pensioning more secure for workers. However, this legislation had the unintended consequence of triggering a business shift to much riskier DC plans. The legislation worked in such a counterintuitive way because of three nested factors related to changes in ''the balance of class forces'' in American society: 1) new laws increased costs for businesses, especially small businesses; 2) employment in the manufacturing sector, labor's traditional stronghold, declined as a share of total employment; and 3) because unions were unable or unwilling to unionize emergent sectors of the economy, new businesses in them were not compelled to negotiate DB plans. In such a context, growing regulatory costs pushed many firms to adopt DC pensions for their employees. The outcome was a major policy shift, considered by some to be a defining feature of the neoliberal era.