Yesterday I read on the San Jose Mercury News Website that wages rose for the quarter at just .04%, the lowest on record since the labor department started keeping the statistic in 1982. In an economy that has the chairman of the Federal Reserve shaking his head in wonderment and unemployment in a 29 year low this hardly seems like good moment for workers in history. I have to wonder if this is not connected to returns on capital that exceed the growth of the economy as a whole. Is there not some zero-sum game on claims to the GDP?
I too take exception with Joseph Marsden's apology for returning so much to many of the today's elderly than they ever put in to the system. This contributes to the weakness of the system's solvency. I do appreciate what the WW2 generation gave to this country. But I've taken to asking a question of them, "Did you ever think you would be so well off?" Many admit quite candidly that they never imagined it.
I recognize that seniors are an economically diverse group. But what is so terrible about asking those who by any measure have fared extremely well in their lives to give up some of their Social Security Pensions that are completely out of line with what they put into the system? This is means testing in conjunction with with an assessment of their return from Social Security. I'm bothered that even this seems so unthinkable to many.
I want to commend to participants Mr. Marsden's other comments on the nature of pension systems. They are extremely lucid and useful in thinking how such systems work and in crafting reform. Not having individual accounts doesn't preclude ownership stakes in proportion to contributions. It does however create a system of risk sharing where your retirement pension is greatly affected by the swings of the market. A similar risk reduction is garnered through annuitization. Old age is rightly a time when people become risk adverse.
I noticed with interest Mr. Archer's proposal that created a new benefit of bequeathable value for those who do not live live long enough to collect their pensions. I see this as a legitimate value judgement to consider but not one that comes at no cost. Annuitization is insurance for those who live the longest that is paid for by those who don't. Yet perhaps having a system where those who die early, having made significant contributions, have some of that passed to their heirs who after all have been denied the enjoyment and companionship that many of us have with their pension supported parents. There are two legitimate competing interests here.
I also share Mr. Marsden's concern with investing into a market that many serious observers consider overheated. Equities are not just ownership of some underlying productive capabilities but are commodities in themselves subject of imbalances of supply and demand. I would like the participants of this discussion group to consider if there are ways to help to make a large new pool of pension investments represent increases to the productive output of the economy and not a just an increased demand for existing assets.
