Third Way: A Social Contract for the Digital Age

Politics and religion
21

Timex is correct about Social Security: it’s a “transfer payment” system of social insurance, not a retirement investment plan. The perception that many people have is wrong, but many politicians for decades have treated Social Security as if it were a retirement investment plan.

Now, there is one way in which Social Security could work as an investment plan (but also like a pyramid scheme) - as long as the wage base of the economy (ie the number of workers times the average wage) keeps going up, then the income stream for the transfer payments also keeps going up. Some people have tried to describe this as “investing in the future American workforce” which is not correct: it’s relying on continued growth in the workforce and wages. I actually think a system like this is fine but in order to provide for a proper retirement without exponential workforce growth, I believe it would need to be supplemented by an actual investment system as well.

One idea is a “permanent personal 401K” type setup where every person gets assigned an account that is 100% transferable between jobs etc. with a small mandatory contribution, plus some matching from the feds for low income earners, and allowance for employer contribution, all tax free until withdrawal, with very limited rules for withdrawal: retirement, college education, maybe buying a first home or a business. The devil would be in the details, but something like that as a supplement to Social Security would probably be a big positive.

22

Sure, but what I’m objecting to is that you explicitly call it a scam. It isn’t a scam. It’s insurance. You almost always pay more for insurance than you get out of it, that’s how it works.

23

It’s not at all clear to me that this is true. A look at how productivity gains have been divided between capital and labor over the past 30 years — when it has all been given to capital — suggests that there’s room for wages to go up substantially.

Beyond that, if you can work full time and still not be able to subsist without assistance, then the market doesn’t work. It shouldn’t produce that result.

24

Eh, i guess this is fair.

25

Several Democrats in Congress are floating the idea of making the maximum wait time for a 401(k) plan drop from 1 year to 3 months, allowing a lot more part time employees to participate and more people to start earlier.

Personally, I would rather they got rid of vesting. It’s a pain in the ass, especially if you leave, get paid out with less than 100% vested. If you return and return the money, the employer has to make you who again and return the forfeited money.

26

But the reality is that or ability to automate stuff has improved dramatically.

Human wages are competing against the price of automation now, and that price is dropping fast. It’s going to replace those jobs eventually anyway, but suddenly jacking the minimum wage up to twice the current amount is certainly going to force the issue.

Well, on some level, the government is subsidizing that.

If you removed government assistance from the equation, those wages would likely go up because, as you say, those wages simply wouldn’t be enough to survive.

Of course, another possibility would be that people could in fact subsist, at a lower quality of life.

27

We’ve run this experiment, and that’s not what happens. When we eliminated welfare in the 1990s, wages did not go up. When states have added more restrictions to (work requirements, etc) to assistance programs, effectively reducing the number of people who qualify and the scope of those programs, wages have not gone up. There is nothing that compels employers to raise wages if someone loses government assistance. Nothing.

28

The 401k plan basically failed. It was supposed replace defined benefit pensions, but in practice it allowed employers to shed most of the cost of pension plans, and those save dollars were not reallocated to employee compensation. As a result, employees had nothing like the resources they needed to fund their 401k. It was a massive giveaway to business at the expense of labor. There really isn’t any doubt about that today.

29

Timex, there’s no mechanism of causation in your statement. How, exactly, would removing government assistance cause wages to go up? If the low wage workers had the bargaining power to drive wages up, they would do so. Yes, it’s true the wages would not be enough to survive on, but the causation would not be to force wages up (the low wage workers have no power to do this) but instead it would mean the people who can’t earn enough to survive, without government assistance, would turn to crime, starve, or otherwise be in very bad circumstances.

I respect a lot of what you write and have stood up for you, but that statement you made - think it through. It makes no sense at all. I’m not sure what assumptions you were making or what magical mechanism of causation you were imagining but that’s not how the world works.

In the real world, if you remove government assistance, some people who would otherwise not work would look for work. But that would not force wages up. How could it? Instead, it would actually increase the labor pool and weaken the bargaining position of low wage workers b/c you’d have more workers looking for the same number of jobs.

I’m interested in what sort of thought process you went through to make that statement. Are you assuming something that I missed? In your mind, how would the causation of wages going up due to removal of government assistance happen?

30

The raw logic is that if those people literally could not survive on those wages, then they would literally not be able to work for those wages.

Of course there is the part after what you quoted which gives the other alternative.

However, you also ignored the party immediately preceding it, which mentioned how those social programs are essentially subsidizing the corporations. Poor people get assistance to live from the government, which effectively increases their wages beyond the minimum wages they are paid.

So in that way, our tax dollars end up making up for some portion of the wages that a corporation like Walmart or McDonald’s refuses to pay.

31

You’ve never been poor, obviously. I have. What you do is keep working and hoping something will change. Then you can’t pay the rent, so you forego food to pay it. Then you beg someone to loan you money you know you can’t pay back. What you don’t do is stop working because the wages are too low. I mean, be serious.

32

Timex, my issue is with the idea that if people can’t subsist on the wages being offered, that will somehow drive wages up. How? If low wage workers demanding higher wages was powerful enough to drive wages upward, that would already be happening as low wage already have massive incentive to demand higher wages. Sure, the threat of immediate starvation would increase the incentive but trying to live on minimum or near-minimum wage is already a huge incentive to try to earn more.

The problem is, the workers simply have very little bargaining power, under current economic conditions. That’s why wages are so low to begin with.

And like scottagibson said, when the labor market is producing a result where people willing to work simply can’t earn enough to survive without assistance, that’s a real problem.

I’m not a socialist and I do believe the market is the best economic tool we humans have invented, but like any tool it needs to be used with skill, and to me that means reasonable rules and regulations on the market, and a structure of law and society that incentivizes the market to produce the outcomes we want.

That’s an example of why, although I’m not a socialist or democratic socialist, I’m also not a libertarian. The idea that the market will self correct, especially when you are talking about a massive imbalance of bargaining power worsened and entrenched by the corrosive power of money in politics, is ludicrous to me. Reasonable rules and regulations are mandatory, IMO.

As to the reality that this type of social program is a defacto subsidy to corporations and businesses who pay extremely low wages, that’s true. But the solution to that is not to take benefits away from those barely surviving but to change the market conditions to produce a better outcome.

Better wages in the low wage sector of the economy (for long term employment) along with better benefits and working conditions, is something we desperately need. I’m OK with low wages for a very small number of workers such as teenagers or people just picking up a little supplemental cash but when the primary income of a household is shit wages, that’s a huge problem. And if that means we need to pay teenagers (and others) a bit more to avoid a huge problem, I’m OK with that.

33

I think that maybe the disconnect here is that I’m talking about literally subsisting. I mean, if if you are alive, you are subsisting. And again, I specifically mentioned this as part of the explanation in the part you didn’t quote, which is where the disconnect is coming from.

If you literally can’t subsist on the wages, then you die.

Please don’t mistake this as me saying that’s acceptable. It’s just pointing out that wages which may not actually be high enough to subsist on, are subsidized by us. We are paying for the part that the corporation isn’t.

Don’t get me wrong, i totally grasp exactly what you are saying. I understand the idea that removal of those safety nets would potentially push more people into the labor market, and that increased labor supply would potentially depress wages. But again, that implies that you have people who are able to accept those wages, and continue to survive on them.

I can tell here though, you are thinking that I’m actually suggesting that we do that. I am not at all. Not even remotely. It’s purely about pointing out that corporations are exploiting this.

34

I guess I interpreted the phrasing differently than what Timex intended. In an era where Republicans are referring to plans to throw people off Medicare if they don’t have jobs as “workforce development” I tend to be highly suspicious of things I interpret as right wing tropes, and “throwing the poor off welfare is good for them” is one of those tropes. It’s not what Timex intended, I realize, but in this environment, it’s hard to tell.

35

Throwing the poor off welfare will give us an interesting crime wave.

36

Do people accept jobs which don’t pay enough when they have no other choice? Sure, but what does that prove about wages?

You know, starving people will eat dirt. They’ll eat their shoes. They’ll eat anything, really, but this doesn’t demonstrate that dirt and shoes must be good enough otherwise they wouldn’t ‘accept’ them.

There’s no evidence that reducing assistance has caused any increase in wages. If you think there is, then point to it. And you haven’t described any mechanism that would cause this effect.

37

The mechanism would be that they would literally die. But even that was pointed out as not the only possibility, as i specifically said that the other option is that they would continue to subsist, but just at a lower standard of living.

You aren’t reading the whole posts. You think that I’m arguing something that I’m not, and rushing to respond to individual paragraphs.

The point of all this is NOT to suggest removal of those safety nets.

It’s pointing out that we are currently subsidizing low wages with our tax dollars, funneling resources into corporations.

This is an argument for increasing minimum wages.

38

I believe I understand the confusion now. Part of the problem is that Timex’s post was poorly written to convey what he intended, and part of it was me interpreting it as being similar to common right wing tropes.

Timex is stating those paragraphs from the point of view of the corporations being subsidized (indirectly) by government assistance, not from the point of view of the workers. He’s saying that corporations who pay wages so low their workers can barely subsist are being propped up by government assistance.

That’s actually correct. However, I do think the part of his statement about wages rising is incorrect. Not just incorrect but in fact the opposite of what would happen. If government assistance were removed, people would have to try to work more, and more people would seek work. This would increase the low wage labor pool and probably drive wages down not up. Instead of corporations bearing the cost of this change, as Timex seems to think, the workers would bear the cost in terms of reduced quality of life, threats of starvation, etc.

The bigger picture here is that the low-wage labor market in the US is so F’ed up that we need government assistance to help people who are actually working full time survive. The market is not providing high enough wages. And that’s b/c the rules of the market we current have, where there are de facto hiring monopolies in many areas, where employers are much larger, wealthier and more powerful than those they hire, where unions are weak and divided, where union organizing is both weak and heavily resisted, where employers are allowed to flaunt the law and hire millions illegally, suck ass.

The rules we set up impact the market in a huge way and right now we have rules that cause the market to produce shit-tastic results on low end wages.

Here are a couple of Vox articles on the big picture issues:

Companies don’t have to compete for workers

Corporate freeloaders

39

It’s true that I didn’t imagine you meant that wages would go up because all the laborers starved to death, because I can’t grasp the point of making that argument. If what you meant to say is that corporations are free-riding on the taxpayers, and that we should raise minimum wages to stop them, that’s a good argument; but I think saying ‘if the laborers all die wages will go up!’ is an opaque way to make that argument.

40

Yes, this is covered in that last sentence of the quote. That workers could actually subsist on even lower resources, but at an even lower standard of living.

And yes, i suspect that is in fact what would happen.

The only way where it drives up wages is if they literally cannot subsist on those wages, and they literally die. Like, for instance, you literally could not subsist on $0.01 an hour. You would die of starvation and exposure. Employers would be forced to pay more than that, because even with a large portion of potential employees, workers would not take that work because it wouldn’t serve any purpose for them, since they would still die.

Again, this was all originally a minor side point to the issue of subsidizing corporations.