Gladwell wrote this interesting article for the New Yorker about the history of pensions. The brief version is: successful company makes promises to provide pensions and healthcare for life to its employees. Company continues success reducing work force. As time goes on, cost per current employee skyrockets. This affects older companies much more than younger companies, wouldn’t it be better if the government handled it (like in other countries) and we didn’t punish old companies for being old.
Predictably, there was an impolite response, basically saying this socialism. It is already done for government employees at state and local levels and it sucks, as with Social Security and that sucks too. Finally, winterspeak points out that Gladwell’s piece makes it sound like productivity is bad (causing more retirees and fewer workers) when it is the only thing that makes everyone richer. In Gladwell’s response, he says that American’s are weird, he trusts the government more than a single company, and with adjustments now, Social Security isn’t that bad off.
So I’m obviously new to blogging and I wonder how useful summarization is. Reading for yourself is desired, and then you can make those paragraphs a waste of time. The most interesting part to me is where Gladwell points out that this whole process of pensions makes older prospective employees less attractive because they spend less time paying into before collecting out of.
All of this finally brings me to my solution to the problem, the older employees should require less income since they should have been saving along the way. The saving rate in this country is dreadfully low, and the best way to fix that would be to change the tax structure. Ignoring 401k’s and IRA’s, people are taxed on their income, and if they decide to save it, they are taxed on the interest it brings, and if they decide to save the interest, they are taxed on the interest it brings and so on. Instead of compounding interest, it’s compounding taxes. My understanding of a consumption tax is that it lets you save and compound the interest and then pay the taxes once you are going to use the money.
Ideally, consumers would not be dependent upon their employer for their health insurance, but upon their own savings and upon their independently bought insurance. Right now, the laws sort of force companies of any size to pay for health insurance. There are two sides to this coin. Case one: an innocent person who, through no fault of his own get hit with a very expensive disease. It makes sense that society should pay for this since it could have been any of us. There are laws that apply if they have insurance already so that they company can’t drop them once he gets the disease. Case two: a person is very self-destructive (i.e. smoking, super size me,…) and is expensive medically. It doesn’t make sense for the rest of society to pay for this since he brought it upon himself. This second case is my main objection to socialized health care because I cannot help but support the self-destructive person. The first case could be remedied through private charity, no guarantee that it would.