While public workers are fighting to keep their right to negotiate benefits and pensions, private sector workers are … screwed.
The 401(k) generation is beginning to retire, and it isn’t a pretty sight.
The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.
The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.
Corporate profits are up! Also, executive pay is up! There is no economic reason why workers are less compensated than they used to be.
Obviously, the public workers’ unions have to be brought down. They might give the sheep the crazy idea that we all need pensions.
Also: Here’s the Republican jobs program — they’ll be hiring uterus police.
Frontline did a story on this a few years ago. It is nauseating. The switch from pensions to employee 401Ks but without the increase in salary screwed many, many people. This is why we as a country need a nation wide retirement system that is reasonable and a nation wide health care system that works, you know, kinda like Medicare. If you did this many of the angst and concerns of the middle class would be addressed. I believe it would help the free market system because people would be more free to move and switch according to the market. I am looking at moving to Oregon with all of the upheaval (read: idiot Nazi governor) here in WI. I have many more things to consider other than just picking up and moving my talents to a new area. If those weren’t concerns, I could respond to the demands of the market, and maybe switch careers and allow a younger person to take over my spot. But the way it is, no way, I am hemmed in with what I have.
Nod. You’re right, there’s no reason that businesses and corporations *can’t* pay as much as they used to. But “economics” can also be viewed as the study of how people make economic decision, and “econ” does dictate that workers will be paid less.
Why? Well, with a low marginal tax rate, the cost of paying workers increases.
If you’re a business owner and your marginal rate is 35%, then paying out $100,000 in wages costs you $65,000 (salaries paid to workers are deductible). On the other hand, if your marginal rate is 70%, then the cost is more-than-halved – it’s only $30,000. So, from an Econ perspective, it’s not at all surprising that workers are taking a big hit. The cost is much higher than it was pre-Reagan.
When you look at pensions, it’s even worse. If you put that money into a pension plan, well, a lot of pensions were created so that they’d put a lot of money in for the top dog, and just enough for the other employees to keep them in line with government requirements for a tax deduction. $100,000 in pension contributions might be $60k to the owner of the business, and $40k to the other employees.
What’s the cost at a 35% marginal rate? $65,000 – it’s actually cutting in to take home pay to make the pension contribution!
What’s the cost at a 70% marginal rate? $30k – making the contribution to the pension plan is a really good deal. The owner gets a big contribution, the employees get a decent contribution (probably a good deal, as a percentage of salary), and all because the tax rate makes the deduction that much more valuable.
The changes in the tax rates during the Reagan years really caused a lot of damage.
Aw, come on…those sheep don’t need pensions. They don’t even need social security. Their well-planned retirements will include vast stores of cat food and Ramen noodles.
I read at HuffPo where some Dems in Congress were retaliating with “Where are the jobs?” since the house majority went to the GOP. Clearly that’s rhetorical because anyone with a pulse knows the GOP is exploiting the current situation without any real expectation of creating jobs…despite what they might say at times.
So in a political environment where many have drank the Kool-aid informing them that it’s not government’s job to help it is legitimate to ask “what will help?” and also why the only remedy available to the GOP (after possibly drowning government in the bathtub), corporate America, is not helping either.
Isn’t it kind of strange this isn’t asked more? Good of you to point is out. Maybe it will catch on. Maybe the Dem leadership will start to play offense for the first time.
Many say that the sheeple never turn their attention to the elite because they someday dream of joining the upper class. The sheeple would rather smack down the ones one rung higher on the ladder than move up themselves. That looks more like they’ve concluded reaching the upper class is an unattainable dream and they’re just spiteful. Clearly they trust the hand that feeds them poorly more than those who say they can change the hand that feeds.
They can’t seem to get their heads around how it is exactly the corporate failure to help them that has made the corporate successes possible.
I didn’t see that addressed, actually. When I first saw the story, it was my first question: was the loss pension contributions compensated by an increase in salary or in some other benefit? I don’t *think* we’ve seen that question addressed.
Over their working lives, lots of these folks bought into the Republican line and they still do, given the fact that old people voted overwhelmingly Republican in the last election. They elected Reagan, both Bushes and a slew of new Republicans just last November. They have fully supported the assault on working people over the last thirty plus years.
They watch Fox News and love Sean Hannity. They hate the “libs”, unions, health care and Democrats. They are about to reap what they have sewn. Enjoy!
What a bunch of suckers.
America:
Where most of us are called upon to share the responsibility and share the burdon, but only a few get to share in the profits.
If you live on this planet, you might have noticed that the answer is no. Real wages for American workers peaked about 1972 and have been falling since. I thought everyone knew that.
Righto, Gulag.
If I were a suspicious person, I’d say the elimination of unions is all part of the Corporate/ Republican plan to level the playing field, so Americans can compete on equal footing with workers in third world countries*.
(*I was going to say Chinese workers, but they get too many bennies.)
Muldoon,
People say the Republicans have no job plan.
That’s not true!
Republicans are trying to create jobs here by lowering our salaries and benefits to the point where other countries will outsource their jobs here because of our minimal wages and desperate workforce.
USA! USA!! USA!!!
It was Robert Kiyosaki (of Rich Dad, Poor Dad fame), who pointed out that when Do-It-Yourself pension plans – 401ks – were created, no one thought to educate people how to invest. An entire industry of “investment advisors” sprang up in their wake, but how is the average person going to recognize good advice from bad, let alone the sheep from the wolves. He recognized years ago that this was a disaster waiting to happen.
The rise of the 401k in the 1970s was one of the first steps in shedding corporate America’s responsibilities toward its workers.
Sure looks that way to me, too, Gulag.
Eliminate Social Security, unions, corporate taxes, public schools, environmental regulations, minimum wage, child labor laws, government health care programs, and “drown government in a bathtub”–all Republican proposals (yeah, even the child labor law one–I forget the loon who proposed it). And just replace it all with a theocratic–Do as I say God says– government. Certainly looks like a third world blueprint to me.
I’d be willing to bet ol’ Georgia state Rep. Bobby Franklin, is a closeted gay man who spends most of his free time cruising rest stops on Georgia’s freeways!
Pingback: Tweets that mention The Mahablog » More Private Sector Failures -- Topsy.com
He wasn’t the person to point it out; it was a long known fear in the pension industry. One of the problems with self-directed 401(k) plans is that there is supposed to be fiduciary responsibility. You can’t just hand the money off to any bozo to invest it; you’re supposed to have it handled according to the Prudent Expert standard.
But a self-directed 401(k) is cheaper to administer, and remember, plan expenses are tax deductible, but tax deductions aren’t all that valuable any more. And the fears of lawsuits alleging a breach of fiduciary responsibility would be far in the future.
The bigger problems is that 401(k) plans are just barely pension plans at all. Technically, they are “employer” contributions (made in lieu of salary), but they’re nothing at all like the standard defined benefit, or earlier defined contribution, plans where contributions are made over and above salary.
But, again, the tax deduction was the big issue for pension plans. When tax rates maxed at 70%, people found tax shelters and a good pension plan was a good tax shelter. You could legally try to build a pension intended to pay a percentage of salary, and since the top employees have the highest salaries (and tend to be older), the tax deduction can make it cheaper than salary increases. That’s no longer the case.
“If I were a suspicious person, I’d say the elimination of unions is all part of the Corporate/ Republican plan to level the playing field, so Americans can compete on equal footing with workers in third world countries*.”
Seriously Muldoon. I think you are not far off. These global corps and banks have no particular reason to fight for the US. Easier to bring us into line. People better wake up.
The Big Lie of the 401k promoters was based on the Dow 36,000 assumptions of the late 90’s, namely that the markets would continue to go up and up and up, so that by the time you retired, you’d be a millionaire. Needless to say, it didn’t work out quite that way. Since 2000, there have been two major market downturns, where 401k shares bought when the Dow was in the low teen-thousands were suddenly worth half of what they were sold for. Instead of stocks gaining ten percent a year like the financial managers were claiming, the market has ben yo-yoing up and down for the last ten years, and the people who were expecting to retire to a life of leisure on their 401ks are discovering there ain’t much there beyond the principal they contributed. Tough shit.