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Dead Money
Feb. 17th, 2010 02:13 pmAnd so, Readers Digest UK goes into administration, putting 117 jobs at risk. And why? Because it cannot meet its pension fund obligations.
So, let me get this right. Companies have to meet obligations to already retired employees (promises made in the past). If they can't, then they are insolvent, thus putting existing employees out of work, and the already retired employees get their dosh guaranteed by the government, while the existing employees (effectively put out of work not because their company is unprofitable, but because a past management made unsustainable promises) are just told to "get on their bikes". GDP falls, the proportion of people producing compared to people not producing also falls. Yet one significant minority gets treated far better than anyone else.
Personally, I doubt that this is a sustainable situation. With asbestosis, all of the primarily responsible companies are now out of business, so the claimants go after secondary companies and insurers. With pensions, will we get a situation where a large number of companies go into administration in order to avoid their pension liabilities? Quite possibly. Eventually the government realizes that its system for guaranteeing the pensions of those already retired, although legally binding, is unsustainable. Something will have to give.
Disproportionate allocation of income is not just a matter of million-pound bonuses for bankers. If you have one sector of the economy feeling that GDP is not being allocated proportionately, you have a recipe for trouble.
The front page of this morning's FT covered a report stating that the younger generations face a "wealth deficit". That is something of an understatement. But the speech by David Willetts highlighted the intractability of the situation, because all that he could say was "the challenge for policymakers is to smooth fairness across the generations". Of specific policy recommendations, there were none.
And with good reason, because any policy that would actually work would have the oldies (and I include myself in this category -- I am one of the winners if the current system stays at it is) up in arms spouting all the normal shit of: "I worked thirty years of my life so that I would be guaranteed an inflation-indexed pension of half my salary on retirement at 55! Any attempt to take this away from me is theft!"
Apparently there has been a good deal of research on intergenerational inequality in the US, but the solutions there will be considerably easier than they are here; partly because of societal attitudes, partly because of the structure of the economy (fewer public service guaranteed pensions) and partly because of a smaller proportion of final salary pension schemes.
If the old give "enough" back to the younger generation, a larger economic cataclysm might be avoided. But if they take the stance of "what we have, we hold", then they might soon find that what they have won't amount to very much. As they say, life ain't fair.
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So, let me get this right. Companies have to meet obligations to already retired employees (promises made in the past). If they can't, then they are insolvent, thus putting existing employees out of work, and the already retired employees get their dosh guaranteed by the government, while the existing employees (effectively put out of work not because their company is unprofitable, but because a past management made unsustainable promises) are just told to "get on their bikes". GDP falls, the proportion of people producing compared to people not producing also falls. Yet one significant minority gets treated far better than anyone else.
Personally, I doubt that this is a sustainable situation. With asbestosis, all of the primarily responsible companies are now out of business, so the claimants go after secondary companies and insurers. With pensions, will we get a situation where a large number of companies go into administration in order to avoid their pension liabilities? Quite possibly. Eventually the government realizes that its system for guaranteeing the pensions of those already retired, although legally binding, is unsustainable. Something will have to give.
Disproportionate allocation of income is not just a matter of million-pound bonuses for bankers. If you have one sector of the economy feeling that GDP is not being allocated proportionately, you have a recipe for trouble.
The front page of this morning's FT covered a report stating that the younger generations face a "wealth deficit". That is something of an understatement. But the speech by David Willetts highlighted the intractability of the situation, because all that he could say was "the challenge for policymakers is to smooth fairness across the generations". Of specific policy recommendations, there were none.
And with good reason, because any policy that would actually work would have the oldies (and I include myself in this category -- I am one of the winners if the current system stays at it is) up in arms spouting all the normal shit of: "I worked thirty years of my life so that I would be guaranteed an inflation-indexed pension of half my salary on retirement at 55! Any attempt to take this away from me is theft!"
Apparently there has been a good deal of research on intergenerational inequality in the US, but the solutions there will be considerably easier than they are here; partly because of societal attitudes, partly because of the structure of the economy (fewer public service guaranteed pensions) and partly because of a smaller proportion of final salary pension schemes.
If the old give "enough" back to the younger generation, a larger economic cataclysm might be avoided. But if they take the stance of "what we have, we hold", then they might soon find that what they have won't amount to very much. As they say, life ain't fair.
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