Next week’s Democratic National Convention will celebrate organized labor, crucial to Democratic electoral success. Then, on September 1, Americans will celebrate Labor Day, the holiday in honor of organized labor.

Private sector union membership peaked in the 1950s at 36% of the workforce. Now, only 7.5% of private sector workers belong to unions. Yet the DNC will pay homage to the union agenda, including removing the right to a secret ballot for workers voting on whether or not to join unions, higher minimum wages, higher taxes, and extending mandated benefits, such as paid leave, to even the smallest employers.

Such policies would drive some companies out of business and encourage others to move offshore, reducing the numbers of jobs in America, opportunities for entry into the workforce, and upward mobility.

But even as unions promote counterproductive economic policies, and push for legislation allowing them to essentially force more workers into their ranks, a look at union finances shows that many unions aren’t looking after the members they already have — especially their retirement plans.

The Sheet Metal Workers International Union says prominently on its Web site that “Union Members Have Strong Retirement Plans.”

But it turns out — as disclosed in unions’ mandatory annual financial reports to the Labor Department — that the Sheet Metal workers’ union pension plan is underfunded and so risks the future pensions promised to its members. Many other union pension plans are in similar straits.

The histories of several union pension funds demonstrate why they are in poor financial condition:

• In 2008 the significant liabilities of the Sheet Metal workers pension plan required it to negotiate combinations of increased contributions and decreased benefits.
• The Teamsters implemented only modest reforms of their pension plans, too late to forestall automatic penalties.
• The Plumbers and Pipefitters Union lost millions to former trustees, who made investments favoring family members that yielded low returns.
• A bookkeeper of the Laborers’ pension fund embezzled hundreds of thousands of dollars in contributions.

Adding insult to injury, many union plans for union officers and staff are more generously funded than plans for the rank-and-file.

Consider these facts about the Sheet Metal Workers Union: At the end of 2006, the latest year for which pension plan filings have been made public to the Labor Department, the union’s retirement plan covered more than 136,000 people.

The plan “guaranteed” $7.45 billion in benefits to active and former workers. But it had accumulated only $3.1 billion in assets — less than 42% of the amount needed to pay workers all promised benefits.

Accounting rules in force before enactment of the Pension Protection Act of 2006 had allowed the union and its counterpart employers to pay less than nominally-required sums by virtue of earlier overpayments. Consequently, despite earlier credits, the fund fell behind on its payments and the coverage ratio declined.

Even though the union lauded its pension fund for regularly earning a return of 8.5%, liabilities were $4.3 billion greater than assets.

One of the reasons the plan was in trouble was that it offered a generous cost-of-living adjustment, a 13th monthly pension payment to beneficiaries each year, amounting to an 8% bonus. This piece of generosity cost the fund heavily.

After implementation of the Pension Protection Act of 2006, fund managers developed two recovery options for each union branch and employer to bring the fund into balance, both eliminating the cost-of-living adjustment. In 2008, participating employers will be asked to contribute an extra 10% to the pension fund in 2008, followed by rising additional sums over the next nine years, at a cost of approximately $168 million.

If the union cannot win such additional sums from employers, benefits would have to be cut, with workers paid smaller pensions than they originally were promised.

But the president of the sheet metal workers’ union, Michael Sullivan, will do fine. The union’s own plan for its employees was funded more than 10 times more generously than the collectively bargained plan for rank-and-file members.

In 2006, Mr. Sullivan received, in addition to his $263,092 salary and $125,734 expense account, $133,198 from employer and employee rank-and-file benefit plan contributions. The union staff plan, covering 250 people (69 active workers), had in 2005 $57 million in assets, and was 81% funded. It held an average of $230,848 for each of its participants, compared with $22,879 a person in the fund that covers the rank-and-file.

While the rank-and-file saw cost of living benefits disappear, the union staff plan’s cost of living fund more than tripled in 2006, entirely due to employer contributions. These employer contributions would have been better used to stabilize the financial condition of the rank-and-file pension plan.

Next week, barring any surprises, Senator Obama will be nominated as the Democratic Party’s candidate for president. He will pledge to move forward the union agenda. But American workers won’t be the beneficiaries.

Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.