Monday, February 23, 2009

Social Security fix?

The barganing power of labor in this country has been substantially weakened over the last 30 years. I attribute it largely to free trade with countries where workers are paid very little (in contrast to a free trade environment where there are "local advantages" of geography and infrastructure, but where a "unit" of work is compensated at a rate that's about the same for each trading partner.*).

This reduction of labor's bargaining power has led to:
  • Weaker unions (and less union membership).
  • Corporations being able to shed pension obligations and put the burden on the individual via 401Ks.
  • Cut backs in health care coverage by employers.
  • The failure of labor to share in the productivity gains over the last three decades. (Instead, those gains go to executives or shareholders.)
Anyway, with that last point in mind, here's Robert Kuttner in the Washington Post: (emp add)
Social Security is financed by taxes on wages -- and since the mid-1970s, wage growth has stagnated. If median wages rose with productivity growth, as they did during the first three decades after World War II, Social Security would enjoy a big surplus.
We've got to get back into some sort of balance where corporations and labor share the benefits of productivity growth. Not only would it help Social Security, but it would mean that the consumer would actually be spending his or her own money, instead of borrowing. And savings would return to a healthy level (approx 4%).

* this topic is full of detail that can't be expanded upon in this blog post.


Post a Comment