Canada's richest 1% getting richer

[Shady]

Then the government can make it a 100% employee funded and managed plan. There is absolutely no justification for a plan backstopped by the taxpayer.

The shareholders liability is limited by the amount of money invested - if there is no money left in the company the employees pensions are cut. The taxpayer liability is unlimited. It is what would happen if owning shares meant you had to pay off company debts with your personal assets - it is unfair and unacceptable.

It is possible that the net public servant pension liability in Canada may be small. If that is the case then this discussion is academic but this is not true of other jurisdictions. It also does not change the principle that the government should get out of the business of funding employee pensions and leave that up to the employees.

Well said.

[Argus]

Then the government can make it a 100% employee funded and managed plan. There is absolutely no justification for a plan backstopped by the taxpayer.

I kind of get the theory behind your statements. Unfortunately, its one of those things, like Communism which sounds okay when you pronounce it with all due righteousness, but which, once employed, results in untold misery and poverty. The world where your theories were in effect would probably resemble Dickens' London. We'd have a small cadre of uber wealthy people with all the power, a tiny merchant class, and everyone else would basically be dirt poor. The further away from your beliefs one gets in this world, the better the place is to live. Witness the Scandinavian countries, Switzerland, Germany, etc.

[Bonam]

I kind of get the theory behind your statements. Unfortunately, its one of those things, like Communism which sounds okay when you pronounce it with all due righteousness, but which, once employed, results in untold misery and poverty. The world where your theories were in effect would probably resemble Dickens' London.

Really? Sustainable pension schemes run by the people that benefit from them instead of empty promises backed up by endless deficit spending would lead to a Dickensian dystopia? This is the kind of rhetoric that makes discussions on these topics go nowhere. TimG's ideas here are by no means radical. Self funded and self managed pensions are used in a lot of companies and organizations and work just fine.

On the most fundamental level, it all comes back to the same issue: some people want to take care of themselves and make sure it's done right, others want government/employers to manage their affairs for them and make sure they are taken care of in their old age.

But in general government pension schemes are a terrible terrible investment, and an individual can on average do much better. Consider social security in the US. The typical worker making 50k/year will contribute $240k to social security over a 40 working year career. If they retire at 67 (the age for full benefits) and live to 78 (the life expectancy), they'll collect ~$20k/year for 11 years, or $220k (all of those numbers being in constant dollars). That means that after saving for 40+ years, their investment actually decreased! In contrast, if they had used that $240k over their 40 year career to save and invest, they would have almost certainly had a much much larger return, at least doubling their investment, and more likely quintupling it or more, if they had done nothing but invest in conservative funds that track the stock market.

Government pension schemes are a disservice to society.

Edited February 5, 2013 by Bonam

[Shady]

I kind of get the theory behind your statements. Unfortunately, its one of those things, like Communism which sounds okay when you pronounce it with all due righteousness, but which, once employed, results in untold misery and poverty. The world where your theories were in effect would probably resemble Dickens' London. We'd have a small cadre of uber wealthy people with all the power, a tiny merchant class, and everyone else would basically be dirt poor. The further away from your beliefs one gets in this world, the better the place is to live. Witness the Scandinavian countries, Switzerland, Germany, etc.

Complete nonsense. Defined contribution pension plans are anything but Dickens' London. You sound like a crazy person. The further we get from your theories and defined benefit Ponzi schemes, the further away we get from becoming Greece, Spain, Italy and Portugal.

[Shady]

Government pension schemes are a disservice to society.

Exactly. They actually take money away from those most in need by squeezing public budgets. Him and his ilk like to use the less fortunate as shields for bigger and bigger meals at the public trough.

[Argus]

Really? Sustainable pension schemes run by the people that benefit from them instead of empty promises backed

At heart, this is a "every man for himself" scheme, which insists that if you're not smart enough or can't make enough money to save enough and run your own pension plan then that's just tough luck. It also, of course, frees up employers from making any contribution (which is why they love it).

Don't get me wrong. Some people would do okay under that sort of scheme. The majority would not. We saw just the other week that almost half of Canadians have no emergency savings at all. A third of middle aged Canadians still haven't opened an RRSP and only half contribute yearly. If it weren't for them being forced to save by CPP many Canadians would have nothing to retire on.

TimG's ideas here are by no means radical. Self funded and self managed pensions are used in a lot of companies and organizations and work just fine.

If you're an educated professional with a high income, the discipline to regularly make contributions, and no emergencies in your life, like divorces, which sap your ability to do so, then sure.

On the most fundamental level, it all comes back to the same issue: some people want to take care of themselves

Nope. That isn't the issue. The issue is some people want others to take care of themselves, whether they're capable of it or not. And feel no empathy for those who aren't capable.

Hell, you want to take care of yourself now? No problem! Tell your employer not to contribute anything to your pension because you want it be entirely self funded and managed. I'm sure they won't have a problem with that.

and make sure it's done right, others want government/employers to manage their affairs for them and make sure they are taken care of in their old age.

Your forgetting the part about employers contributing to the pension...

But in general government pension schemes are a terrible terrible investment, and an individual can on average do much better

Yeah.... that's complete horse shit, of course, but you keep up with your fantasy world where everyone is a stock market genius and has the discipline and disposable income to to accrue millions in savings.

. Consider social security in the US. The typical worker making 50k/year will contribute $240k to social security over a 40 working year career. If they retire at 67 (the age for full benefits) and live to 78 (the life expectancy), they'll collect ~$20k/year for 11 years, or $220k (all of those numbers being in constant dollars). That means that after saving for 40+ years, their investment actually decreased! In contrast, if they had used that $240k over their 40 year career to save and invest, they would have almost certainly had a much much larger return, at least doubling their investment, and more likely quintupling it or more, if they had done nothing but invest in conservative funds that track the stock market.

Right, assuming they had worked 40 years, which almost nobody does, and assuming that they didn't get wiped out in one of the numerous stock market bubbles and dives or didn't wind up getting ruined by investing in the wrong stocks (nortel anyone?). As someone who has been managing a portfolio for the last few years I can tell you that few people have the discipline and the fortitude to stick through such things as the 2008 crash. I don't know that I would, frankly. When even the banks are down by 50% and that's your entire retirement fund, well, let's just say we'll see an awful lot more destitute elderly under all these self administered, self funded plans.

And btw, if the pension funds take in so much and pay out so little then why the desperate desire of corporate America and its shills in the media to demonize and get rid of them? And why are all those states running such huge pension deficits?

[Argus]

Complete nonsense. Defined contribution pension plans are anything but Dickens' London. You sound like a crazy person. The further we get from your theories and defined benefit Ponzi schemes, the further away we get from becoming Greece, Spain, Italy and Portugal.

No, the further you get from Norway, Sweden, Denmark, Finland, Switzerland, and Germany.

Shady, you have no knowledge of economics that doesn't come out of FOX or Rush Limbaugh. So you really can't make any meaningful assessment.

Edited February 5, 2013 by Argus

[TimG]

Don't get me wrong. Some people would do okay under that sort of scheme. The majority would not.

You missed the entire point I was making. I am still talking about an employee run defined benefit pension and the employer would contribute at each paycheck but the employees would be entirely responsible for managing the fund, benefit exclusively from any surplus and be responsible for any deficit. This should give you everything you want except taxpayers would no longer be on the hook for plan deficits.

The only real problem with this scheme is union leaders would have to be honest with their membership about how much a pension plan costs. Right now the union benefits because it can pretend it got more money than it really did because of unrealistic assumptions for pension pension plan contributions which it expects future taxpayers to pay for.

[Argus]

You missed the entire point I was making. I am still talking about an employee run defined benefit pension and the employer would contribute at each paycheck but the employees would be entirely responsible for managing the fund, benefit exclusively from any surplus and be responsible for any deficit. This should give you everything you want except taxpayers would no longer be on the hook for plan deficits.

The only real problem with this scheme is union leaders would have to be honest with their membership about how much a pension plan costs. Right now the union benefits because it can pretend it got more money than it really did because of unrealistic assumptions for pension pension plan contributions which it expects future taxpayers to pay for.

You said "100% employee funded". How does that mesh with employer contributions?

And what pay for? According to Bonam the plans takes in more than they ever pay out.

My objection remains the same with regard to your belief that people could manage their own investment, however. It's not easy even for me, and I have some education in finance and economics. How are shop clerks and blue collar workers going to do it without getting totally screwed over?

[TimG]

You said "100% employee funded". How does that mesh with employer contributions?

Semantics. Employer pays money every paycheck. A portion of that money would go to pension - call it employee contribution or employer contribution - it really makes no difference.

My objection remains the same with regard to your belief that people could manage their own investment, however. It's not easy even for me, and I have some education in finance and economics. How are shop clerks and blue collar workers going to do it without getting totally screwed over?

Companies don't manage pension funds - they hire firms that specialize in that business. The employees would obviously be responsible for choosing the firm. They would get reports and would be told if the fund is over or under funded and the employees would have to decide what to do. It fits in with the stuff most unions are already doing.

But the better question is: what makes you think you are entitled to a pension backstopped by the taxpayer when everyone else is on their own or dependent on a company that could go bankrupt? If you want a pension then let your union run it and take responsibility for any shortages.

Edited February 6, 2013 by TimG

[eyeball]

At heart, this is a "every man for himself" scheme, which insists that if you're not smart enough or can't make enough money to save enough and run your own pension plan then that's just tough luck.

How about employing the same scheme when you're not powerful or influential enough to prevent the government from enriching other's to your disadvantage or is that just tough luck too?

[Moonlight Graham]

My employees don't deserve a percentage of what I produce, without people like me they have no job, none.

Your employees may not deserve a percentage of what you produce, but I'm arguing that they deserve a better percentage of what THEY produce. No income growth for the bottom 99% income bracket yet increasing total economic growth every decade since 1980, which I argue means employers are taking more and more profit that 99% bracket workers produce and keeping for themselves.

[Moonlight Graham]

An employees share of the profit IS their wage/salary/compensation. That is the "hole" in your "logic". And it is precisely the share of the profit that they agree to when they accept the job. Many companies offer stocks/bonuses to their employees in addition to or instead of just cash, thus tying part of their compensation to the company's performance and profit.

Technically, an employees' wage/salary is a share of the company's revenue, not a share of its profit.

Profit - A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.

http://www.investope...p#ixzz2K6ZbWEYy

Employees may agree to be paid a certain amount in their contract, but does this necessarily make the payment "just", "fair" etc.? An employee doesn't have much of a choice other than to accept the market price for his/her work, or open their own business (obviously only a small portion of people can be full-time business owners in any kind of healthy/effecient capitalist economy). There's nothing inherently just/fair about the market price for labour, that's why most OECD countries have minimum wage laws...to prevent certain socially undesireble consequences of businesses exploiting their employees based on "the market".

[TimG]

No income growth for the bottom 99% income bracket yet increasing total economic growth every decade since 1980, which I argue means employers are taking more and more profit that 99% bracket workers produce and keeping for themselves.

Again - you are obsessing about statistics that tell us nothing useful. If you look at the top 20% you will find most skilled workers from engineers to tradesmen - this group has see wages rise. The group that has seen wages stagnant are the unskilled trades where companies cannot justify paying premium wages here because of low cost alternatives abroad (how can you claim that 10/hour is unfair when people doing the exact same work in China make 1/hour)?. In many cases, the industries with a lot of low skilled labour (farming, retail, etc) are marginally profitable and a mere 5% wage increase would put the business under.

[cybercoma]

Semantics. Employer pays money every paycheck. A portion of that money would go to pension - call it employee contribution or employer contribution - it really makes no difference.

It makes a substantial difference. Employer contribution doesn't come out of the employees salary our hourly wages, employee contributions do. When you pay people less then hit them with this, giving them less money to take home, they stop being able to buy things and aggregate demand nosedives. That's not a good way to create economic growth, despite what the supply-side, trickle-down cheerleaders claim. You don't expand your business and create jobs when nobody can buy anything. You sit on your money and wait or you pursue foreign markets, which further exacerbates the situation at home. Is it as easy for a working-class citizen to move to a foreign market, get citizenship, start a new life there, and get a job? Absolutely not. In other words, the relationship is unbalanced and the companies are going to "sow the seeds of their own demise." And why wouldn't they? They have to keep making money. They have to compete with each other. They have to earn more than the next person. That's the way the system works. And part of making more is getting labour as cheaply as possible, while still being able to produce your products/services. And the end to all of this? Monopolies. When you've crushed your competition and are too big to compete with you win, while everyone else loses.

[TimG]

Employer contribution doesn't come out of the employees salary our hourly wages, employee contributions do.

Completely false. Every cent the employer pays in additional benefits is money that could have been paid directly to the employee. Your argument that these benefits mean employees end up making more than they would have if there were no benefits is nonsensical. If employees really had no negotiating power then no one would make more than minimum wage - but the vast majority do make more than minimum wage because employers need to attract and retain good employees. Eliminate payroll costs and base wages will rise. Edited February 6, 2013 by TimG

[Moonlight Graham]

Again - you are obsessing about statistics that tell us nothing useful. If you look at the top 20% you will find most skilled workers from engineers to tradesmen - this group has see wages rise. The group that has seen wages stagnant are the unskilled trades where companies cannot justify paying premium wages here because of low cost alternatives abroad (how can you claim that 10/hour is unfair when people doing the exact same work in China make 1/hour)?

Do you have any links for these stats/claims above?

In many cases, the industries with a lot of low skilled labour (farming, retail, etc) are marginally profitable and a mere 5% wage increase would put the business under.

I would suspect in ie: a lot of smaller retail stores thats true. But this doesn't explain Walmart, America's biggest private employer, that can't outsource its in-store employees & supresses wages and unions while accruing more & more profits.

[Moonlight Graham]

It wasn't the lack of bargaining power, it was the competition from billions of other workers around the globe willing to work for much less. And hundreds of millions are rapidly being lifted out of poverty around the world as a result.

Are you sure about that last claim? In China, for instance, many manufacturing workers are either former employees of state-owned enterprises (jncluding manufacturing) that have been privatized in the last 20 years, or are migrant rural workers. In all cases, most manufacturing employees make $0.50/hour on average, where its the factory owners taking much of the profit from China's cheap labour, and China has drastically gone from one of the most equal-income countries in the world to one of the most unequal. Since the 90's, former state-enterprise employees have seen their higher wages and much better benefits replaced, making many of them poorer as a result. Some former rural subsistence farmers migrating to urban areas might be seeing an decrease in poverty, but living off $.50/hour is not "being lifted out of poverty" by any stretch of the imagination. China is still a tremendously poor country with high total GDP but still low per-capita GDP (and much of that being concentrated in the hands of few elites & owners etc.). The catch is that once Chinese workers start demanding high enough wages that would actually lift them anywhere near what could be considered "non-poverty", the West would take their business elswhere. China is highly dependend on manufacturing western-consumed products, so this would obviously devastate their economy.

In reality, during times of growth, which represent the vast majority of the time, wages increase substantially above the minimum as employers scramble to attract enough workers to their companies. That is of course as it should be. The converse however also needs to be true, during times of economic downturn, wages and workforces need to be able to decrease, but unions prevent this from happening, thus causing companies to go into bankruptcy and government into debt.

Back to the OP. How can your above claim be possible if Canada, the US, and elsewhere have seen decent overall economic growth in the last 30 years, but the income of the lowest 99%income bracket have stayed virtually the same (adjusted for inflation) over this time?

[WIP]

Really? Sustainable pension schemes run by the people that benefit from them instead of empty promises backed up by endless deficit spending would lead to a Dickensian dystopia? This is the kind of rhetoric that makes discussions on these topics go nowhere. TimG's ideas here are by no means radical. Self funded and self managed pensions are used in a lot of companies and organizations and work just fine.

Yeah sure they do! As long as you live in libertarian, survival-of-the-fittest lala land, they work just fine. What about out here in the real world, where a growing majority of middle class are being squeezed by the cost of living; costs of childrens' education rising, and the costs of elder care which leave a growing gap between pension, OAS and nursing home costs that will consume the estate of the aged and end up being the shared responsibility of the children just to keep them in a decent nursing home? Let's just say that aside from my company plan (which may be pilfered or embezzled before I can get to it), I haven't had anything left for "self funding" and "self managing." My own personal plan is to remain healthy enough to be able to work for as long as I can!

And, let's not forget that Canada Pension and the Social Security in the U.S. were set up to deal with the things that aren't planned for: like early and unexpected disability, those who have lost most of their estate value in real estate collapse....as has happened in the U.S. and I'm told will be coming to Canada very soon now. There are many situations that can arise that would leave some people destitute in their old age....as was the pattern and the typical situation in days gone by, and that was the main reason for creating national pension plans with guaranteed benefits in the first place!

If we allow the pension system to continually be inadequately funded and end up divied up and put in the casino investment system, then we will have gone full circle right back to the beginning when old people were likely to die from malnutrition if they weren't cared for by their families. So, maybe this is what rightwingers call their "pro family agenda." Government services get gutted for everything that the plutocrats don't need, and the rest of us have to turn to family again because there will be no other options even if you're dying.

[bush_cheney2004]

....Back to the OP. How can your above claim be possible if Canada, the US, and elsewhere have seen decent overall economic growth in the last 30 years, but the income of the lowest 99%income bracket have stayed virtually the same (adjusted for inflation) over this time?

Because it's not true.....Canada has not seen the same income trends as in the U.S.....it's just that Canadians think so because they watch so much American media. Even in the U.S. (a favorite phrase here at MLW), the upper income quintile has seen a net gain since 1980.

[Argus]

Semantics. Employer pays money every paycheck. A portion of that money would go to pension - call it employee contribution or employer contribution - it really makes no difference.

Well then, that's what happens now. So you should be happy.

Companies don't manage pension funds - they hire firms that specialize in that business. The employees would obviously be responsible for choosing the firm

Why? Because ordinary joes are well-equipped to evaluate and monitor the capabilities and performance of massive financial organizations which manage multimillion dollar pension funds?

But the better question is: what makes you think you are entitled to a pension backstopped by the taxpayer when everyone else is on their own or dependent on a company that could go bankrupt? If you want a pension then let your union run it and take responsibility for any shortages.

Who says it needs backstopping? Bonam says pension plans take in more than they spend! What's the problem!?

I'm contributing to my pension fund, and so is my employer -- with, (semantics) a portion of what my employer owes me. So your only real problem is that I'm not risking my employer going bankrupt the way others are? How does that impact anyone outside of government?

Despite what union-busting organizations might spout the federal government's pension plan is doing fine. So fine the feds took $28 billion out of it a while back because it was in surplus.

[cybercoma]

Completely false. Every cent the employer pays in additional benefits is money that could have been paid directly to the employee.

You live in a fantasy world. When people don't get these "benefits," they lose money. Nobody gets the equivalent back in wages. It has never happened at any point in history ever. The benefits are cut so the employers can make more money, not so they can pass it on to the employees in the form of wages. If all the benefits were cut back the way you claim they should be, people would have to make $50/hr to make up for all of the employers' contributions. You're either incredibly naive or ignorant if you believe that cutting back benefits is going to increase people's wages. Go ahead and show me when and where that has ever happened. Give me any example where employees wages rose as a result of a cut in benefits. It's always a net loss for the employees, otherwise there would be absolutely no point in the businesses doing it. Edited February 6, 2013 by cybercoma

[TimG]

I'm contributing to my pension fund, and so is my employer -- with, (semantics) a portion of what my employer owes me. So your only real problem is that I'm not risking my employer going bankrupt the way others are? How does that impact anyone outside of government?

If the fund does not earn the returns expected by actuaries then the taxpayer is on the hook for the difference. This is the part that is unacceptable. If you want a pension then let your union invest your money - it is selfish for you to expect taxpayers (most of whom do NOT have a defined benefit plan) to guarantee your retirement income - especially when many of the taxpayers doing the paying earn less money that you stand to make on your pension.

[TimG]

You live in a fantasy world. When people don't get these "benefits," they lose money. Nobody gets the equivalent back in wages.

This is because the only companies that cut benefits are companies that are already in trouble and need to reduce payroll costs. If these companies did not have benefits they would be demanding absolute pay cuts. You cannot use companies in distress for evidence of what happens when benefits are cut.

The fact is employers pay more than minimum wage for MANY jobs. That proves that your are wrong and employees do have bargaining power and over time wages would rise to cover the loss in benefits.

[roy baty]

I am sure I'll be labelled a heretic or a lunatic for doing so but I would like to add my 2 cents here. Capitalism can work. Without the presence of greed that is. Unfortunately we cannot have one without the other. This is why it is failing in the West and it will fail for the same reasons elsewhere. We've seen the result of greed and human nature in general throughout the ages.. Different forms of greed and other flaws in human nature exist and have existed in ALL forms of government since the dawn of civiization. No form of human government has been successful in providing fairness, opportunity and peace in the world for very long. They all have eventually failed in time for similar reasons we see unfolding today. The so called leftist "Progressive Movement" in Canada and the US of income redistribution which is simply a polite term for Socialism will also fail as it already has in the past. Anyone who doesn't see this is either blind or brainwashed. What we're all going to see in our lives is that eventually the left and all those who support this lie of a movement by electing leaders like Obama, will drag the US further towards full blown socialism or a domestic civil war that will ultimately destroy their economy and military power. Ultimately, this ingenious progressive plan will plummet the entire planet (including Canada) into a depression and state of unrest worse than the world has ever seen.

What then folks? The end of the free world as we know it is what. Or perhaps world itself as we know it in this dangerous atomic age. Remember, with the fall of any empire another one rises from it's ashes to replace it. In times of dispair, people will flock to any ray of light whether it has good intentions or not. Just ask the average German who remembers what the Nazis eventually brought on them. Of course the greedy for power lefties and those who are greedy on the right are oblivious to what they are collectively bringing upon us....

Fortunately we don't have to tolerate the consistent failure of the human race to provide a successful, peacful and prosperous world for much longer thanks to a greater power who cares far more for us than we do for each other right now. Eventually, we will all thank God. Literally.

Edited February 7, 2013 by roy baty