Monday, 12 May 2014

Bitching about NZ$570 Super for comfortable retirees.

Today's top story in the DomPost is about how the New Zealand Government is shelling out over a half billion on National Superannuation to well off senior citizens.

My guess is many of these retirees got to be so comfortable, by working through their productive years while saving and/or investing, Or put another way following the instructions of the 1% in a demand side economic environment which allowed them to do so. What makes things different to now is the economy was geared towards providing a decent income for working and middle class families, rather than geared towards extracting money from working and poor New Zealanders in exchange for shelter, food and services while compensating them has little as possible for their labour.

US income distribution since 1979,
New Zealand has followed a similar path.

Since then things have changed, back then working and becoming comfortably well off was a more reasonable proposition and a good thing because it showed demand side economics worked and there was a reasonable expectation that anyone could follow that path. Now, enter the age of Gordon Gecko. "If you're getting money you better be giving something back and I don't care how little you make, along as I make much more."

Are we now supposed to break this contract with these retirees who kept up their side of the bargain because national retirement planning has been a political foot ball for 40 years.

We knew the baby boomer bubble was coming in the 70's and we did the right thing, until Gecko-esque neoliberal doctrine over took the fourth labour government. An 8% tax was levied which when into compulsory savings. Norway does something like this, and retired Norwegians get to be very comfortable indeed. Our scheme died when Roger Douglas killed it.

The baby boomer bubble has loomed of every government for the last 30 years, and every one of them has done nothing more than punt it along for the next regime to deal with.  The problem is it's in no party's short term interest to increase costs on voters, which must be done in order to generate wealth.

Thomas Pikity's, Capital in the 21st Century points out that wealth grows at 4-8% per annum while income for workers grows at about 1% per annum. it also points to how wealth is becoming entrenched in a small number of wealthy families. I see little reason to deny working people the advantage of this wealth generating mechanism other than to those who are social dominance oriented and fear a large affluent middle class and the challenge it brings to their power in politics just as it did in the 60-70s when a strong middle class protested war, fought for women's rights and the end of segregation. Often meeting brutal and sometimes lethal violence from the establishment. such over top reactionary behaviour has not been abandoned, Operation 8, and mistreatment of the Occupy movement still rings loudly "Don't mess with the silver-back alpha ape". And yet mess with them we must if we are to have a decent society, rather than the brutal savagery of Social Darwinism.

I wonder how much the 1% will think something like "Pfffft nouvo riche, they're not like us, they are takers, cut them off!" No doubt someone will be looking to means test National Super. But is not a real solution to the problem at hand.

Around the 60-70s, there were about 6 working age people for each retiree, soon we will have just two working age people per retiree. and if that is not bad enough, neoliberal economics, especially since the 1980's has left wages stagnant, while productivity has almost doubled. and what's worse since the 1980s those entering the workforce are leaving higher education with a mountain of debt. And the work force they enter is often not the local workforce, preferring to seek higher remuneration overseas.

What would be a better solution? To leverage the wealth generating capacity of investment markets, with the financial transfer tax. It will also reduce the instability of markets, and maintain growth in the economy. This kind of tax has been implemented in Europe and is working well. Additionally, a capital gains tax, would fund a universal basic income, allowing poor and low income families to drive demand and drive economy growth creating more jobs. Also enforcing a maximum salary tied to the lowest wages in a company in a ratio. Thus ensuring company profits can be reinvested in staff and growing the business, rather than be syphoned off in obscenely inflated directors fees.  The economy would respond to this stimulus within 6 months ultimately raising the tax take.

America for all its faults did deal with the problem, they set up a social security trust fund that will fund the baby boomer retirees until around 2037. But Roger Douglas, or rather Rogernomics was not that smart.

Seriously it is time to put end to the economic model of the chiseling 1%.

See also - Super for rich has 570m price tag