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Posted: 27 February 2017 in Uncategorized
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Setting aside enough of the surplus to support workers who have retired is one of the basic tasks any society faces.

Clearly, the United States is failing at that one simple task.

Yes, Americans do have Social Security. But, at an average monthly payment of $1,360 in 2017, it’s obviously not enough.

That’s why American workers are forced to have the freedom to come up with their own savings for retirement. And most are finding it difficult, if not impossible.

Overall, only one-third of American workers are saving anything in a workplace retirement account.

One reason is because, according to a recent study, only 2 out of 5 employees with access to 401(k)s and other defined-contribution retirement saving plans are actually using them. They simply aren’t being paid enough to buy what they need for themselves and their families and, at the same time, to put away money for retirement.

It’s no coincidence that the Census analysis found Americans with higher incomes were more likely to be socking money away for their old age. That dovetails with other data, such as the Federal Reserve’s annual survey on household finances, which found that almost 9 out of 10 Americans with more than $100,000 in annual income have a 401(k), compared with just four out of 10 earning less than $40,000.

The other reason is only 14 percent of companies actually offer these types of retirement plans, far lower than previous estimates.

The low percentage of employers that offer 401(k)s was especially noteworthy, [retirement specialist Arielle] O’Shea said, since previous estimates pegged the number at about 40 percent. “That is a significant problem,” she said.

Yes, indeed, that is a problem. Fourteen percent instead of 40 percent.*

The combined effect is that two-thirds of American workers are simply unable to save enough to fund their own retirements. They will have spent most of their lives working—and then they will struggle to stop working and enjoy their retirement.

Contrary to the advice of countless retirement specialists and politicians, who exhort American workers to tighten their belts and increase their savings, they’re not the ones who have failed. It’s a system that keeps workers’ pay in check and yet relies on their finding a way to accumulate individual savings—it’s that system that has failed American workers.

As I see it, the system that relies on individual decisions to save for retirement can’t be saved. Instead, it should be retired. And then replaced by the obvious alternative: transferring a portion of the growing surplus to workers when they retire. Such a system would be able to provide more generous benefits, starting at an earlier age—exactly what is need right now.

We can even give that system a name. Let’s call it Social Security 2.0.

 

*Now, it’s true, larger employers are more likely to offer 401(k)-style plans than smaller ones. So, 79 percent of Americans do in fact work at places that sponsor retirement plans. The problem is just 41 percent of those workers are making contributions to such a plan—more than 20 points lower than previous estimates.

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In his Prison Notebooks, Antonio Gramsci wrote: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum morbid phenomena of the most varied kind come to pass.”*

The world is once again living an interregnum. It is poised between the failed economic model of recovery from the crash of 2007-08 and the birth of a new model, one that would actually work for the majority of Americans.**

Morbid symptoms abound, including slow economic growth, persistent poverty, and obscene levels of inequality. Perhaps even more significant, especially at this point in the so-called recovery, when according to mainstream economists and policymakers full employment has been achieved, workers’ wages are actually declining.

According to the latest release from the Bureau of Labor Statistics (pdf), both real average hourly and weekly earnings for production and nonsupervisory employees decreased 0.4 percent from December to January. And, over the course of the past year (January 2016 to January 2017), real average hourly earnings for all employees failed to increase (remaining at $10.65 (in constant 1982-1984 dollars) and real weekly earnings actually decreased by 0.4 percent (from $368.66 to $366.32).

That’s what happened under the last administration, based on an economic model that is dying. And there’s nothing in the new administration’s proposed economic policies that promise any better. In fact, the likelihood is that things will stay the same or get even worse for most American workers in the next four years.

Only large corporations and wealthy individuals will likely gain from promised changes in business regulations and tax policies.

That’s a scenario that pretty much guarantees the appearance of even more morbid symptoms in this interregnum.

 

*The passage is from Notebook 3 (pp. 32-33), written in 1930, which appears in the second volume of the English edition of the full Prison Notebooks, edited and translated by Joseph A. Buttigieg.

**Nicholas Eberstedt [ht: bg], of the American Enterprise Institute, argues the current model failed around the turn of the century, with warning signs even earlier: “For whatever reasons, the Great American Escalator, which had lifted successive generations of Americans to ever higher standards of living and levels of social well-being, broke down around then—and broke down very badly.” David Brooks, as it turns out, concurs.

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