Originally Posted by contracycle

Obviously not. Labour is a commodity right? Therefore it has no natural level of price - as you have yourself argued. If you can get it for 1p, you do.

Indeed. IF you can get it. Which is a lot easier in a totalitarian country like China (however Z might dislike the terminology) than in a democracy.

I mean, that's the whole point of labour organisations/unions, innit? They fight/fought to get a better price for their labour...

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Of course, the West doesn't do it either.

Maybe not but there are obviously orders of magnitude. As I've argued before, I am not particularly keen on the end-of-19C capitalism we have managed to revive since the mid-70s...

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Isn't it kind of intuitive that as the average lifespan increases, the average years of work should likewise increase?

I mean, I know, I know, it'd be better if no one had to work at all, but let's look at it realistically...

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Originally Posted by Lucas

Isn't it kind of intuitive that as the average lifespan increases, the average years of work should likewise increase?

And that's why economics is not quite just "common sense". The answer is: "It depends". Specifically, it depends on productivity gains made and how you want to spend them.

Work time has done nothing but go down in the 20th century till 70s/80s where it stablised/went back up a bit. It used to be that a "9 to 5" job was really from 9 till 5...

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My adult life has been spent in the military and now the US DoD- I'm guessing you're saying that 9 to 5 jobs don't last that long anymore? I dunno, my days have always been longer.

The fact is, though, that what a good retirement age was when you lived to be 76 may no longer be when you live to 79. If one can find a compelling argument for the age to be the same, by all means...but I don't think that should be the default assumption.

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Addicted to a naïve stimulus-response philosophy, we tend to take it for granted that people’s actions depend on nothing but the momentary stimuli that we, the manipulators, can control at will.
-Paul Kecskemeti

Originally Posted by Lucas

Isn't it kind of intuitive that as the average lifespan increases, the average years of work should likewise increase?

No. Why should it be? Our technical productivity rises faster than our lifespans.

Originally Posted by Lucas

My adult life has been spent in the military and now the US DoD- I'm guessing you're saying that 9 to 5 jobs don't last that long anymore? I dunno, my days have always been longer.

No, I am saying they do last longer now... as opposed to back in the 70s... but that;s still better than what it was prior-WWI...

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Retiree Ponzi Scheme Is $16 Trillion Short: Laurence Kotlikoff - Bloomberg

Retiree Ponzi Scheme $16 Trillion Short:
By Laurence Kotlikoff - Aug 25, 2010 2:00 AM

Social Security just celebrated its 75th birthday. Love it or hate it, it has done its job and should retire. We need a new system, the Personal Security System, which retains Social Security’s best features, scraps the rest, and covers its costs.

Social Security’s objective -- forcing people to save for retirement -- is legit. Otherwise millions of us would seek handouts in our old age.

But Social Security has also played a central role in the massive, six-decade Ponzi scheme known as U.S. fiscal policy, which transfers ever-larger sums from the young to the old.

In so doing, Uncle Sam has assured successive young contributors that they would have their turn, in retirement, to get back much more than they put in. But all chain letters end, and the U.S.’s is now collapsing.

The letter’s last purchasers -- today’s and tomorrow’s youngsters -- face enormous increases in taxes and cuts in benefits. This fiscal child abuse, which will turn the American dream into a nightmare, is best summarized by the $202 trillion fiscal gap discussed in my last column.

The gap is the present value difference between future federal spending and revenue. Closing this gap via taxes requires doubling every tax we pay, starting now. Such a policy would hurt younger people much more than older ones because wages constitute most of the tax base.

What about cutting defense instead? Sadly, there’s no room there. The defense budget’s 5 percent share of gross domestic product is historically low and is projected to decline to 3 percent by 2020. And the $202 trillion figure already incorporates this huge defense cut.

The 3-Year-Old Vote

Reducing current benefits, most of which go to the elderly, is another option. But such a policy is highly unlikely. The elderly vote and are well-organized, whereas 3-year-olds can neither vote, nor buy Congressmen.

In contrast, cutting future benefits is politically feasible because it hits the young. And that’s where Congress is heading, starting with Social Security. The president’s fiscal commission will probably recommend raising Social Security’s full retirement age to 70 from 67, for those who are now younger than 45. This won’t change the ages at which future retirees can start collecting benefits. It will simply cut by one-fifth what they get.

Some political economists point to Social Security’s 2010 Trustees Report and say, “Leave it alone. The system won’t run short of cash until 2037.”

Misleading Accounting

Unfortunately, the Trustees’ cash-flow accounting, like all such accounting, is arbitrary and misleading. In fact, Social Security is broke. Its fiscal gap, which the Trustees measure correctly, is $16 trillion.

This gap is small compared with the U.S.’s overall $202 trillion shortfall, not because the Trustees treat Social Security’s $2.5 trillion trust fund as an asset (a questionable choice), but because they credit one-third of federal revenue to the program.

But dollars are dollars. If we re-label Social Security “payroll” taxes as “general revenue wage taxes,” Social Security’s fiscal gap increases by $60 trillion, and the fiscal gap of all other government activities falls by $60 trillion, leaving the overall $202 trillion gap unchanged.

Even by the Trustees’ measure, there’s a massive problem. Coming up with $16 trillion requires permanently raising revenue or cutting benefits by 26 percent, starting now. In other words, the program is 26 percent underfunded.

Hitting Young People

Now cutting benefits of new retirees by 20 percent, with an increase in the so-called full retirement age, starting 20 or so years from now isn’t the same as immediately cutting the benefits of all retirees by 26 percent. Hence, the fiscal commissioners will need to hit young people with an even bigger whammy if they really want to solve Social Security’s long-term woes.

Most likely, Washington will simply raise the retirement age and kick the can further down the road. This is what the Greenspan Commission did in 1983, knowing full well that by 2010 the system would be in even worse shape.

I say, retire Social Security and replace it with a version that works. Do this by freezing the current system, paying today’s retirees their benefits, while paying workers only what they have accrued so far once they retire.

Next, have all workers contribute 8 percent of their pay to the new system, with half going to a personal account and half to an account of a spouse or legal partner. The federal government would make matching contributions for the poor, the disabled and the unemployed, permitting the system to be as progressive as desired.

Going Global

All contributions would be invested in a global, market- weighted index of stocks, bonds, and real estate. The government would do the investing at very low cost and guarantee that contributors’ account balances at retirement would equal at least what was contributed, adjusted for inflation.

Between ages 57 and 67, each worker’s balances would gradually be swapped for inflation-indexed annuities sold by the government. Those dying before 67 would bequeath their account balances to their heirs.

While this plan has private accounts, Wall Street plays no role and makes no money. Additional contributions would be used to fund life- and disability-insurance pools.

Our nation is in terribly hot water. Business as usual is no answer. The only way to move ahead is to radically reform our retirement, tax, health-care and financial institutions to achieve much more for a lot less.

The Personal Security System is a major step in that direction. It meets all the legitimate goals of Social Security without the system’s waste and penchant for robbing the young.

(Laurence J. Kotlikoff is a professor of economics at Boston University and author of “Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking.” The opinions expressed are his own.)

To contact the writer of this column: Laurence Kotlikoff at kotlikoff@bu.edu

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Images of banner-waving "workers" are hardly new in France: every year la rentrée (the return to work) brings with it fresh protests and intimations of a troubled winter. Last week, however, the number of angry protesters stomping through the major cities was truly impressive – somewhere between 1.2 million (police figures) and 2.7 million (union estimates). In Paris, the sea of manifestants was so deep and wide that protesters were obliged to part into parallel cortèges just to get through the capital. British viewers watching the chanting hordes could be forgiven for thinking that a 21st-century French Revolution was just around the corner. So what was the target of all this sound and fury? What diabolical measures had President Nicolas Sarkozy decided to inflict on his subjects – so unpalatable that unions instantly called for a follow-up protest on September 23, perhaps a rolling strike, and for the measures to be taken "back to the drawing board"? The President's "radical" plan was to raise "boldly" the legal retirement age from 60 to 62 by 2018, the age of full pensionable entitlement from 65 to 67 by the same point, and the required period of contributions – employer and employee – from 40.5 years to 41.5 years by 2020. Compare this to Britain, where the Government has even considered extending the pension age to 70, or pegging it to life-expectancy rises; or to Germany, which plans to raise it from 65 to 67. French unions can hardly claim, as British ones did, that the reform will force people to "work until they drop". And yet complain they did, and hundreds of thousands heeded their call. On Thursday night, François Fillon, the conservative prime minister, calmly set out the case for reform on the prime-time evening news. "I understand perfectly the fact that the French disapprove of having to work more," he said. "At the same time, I ask them to be realistic and to look at what's happening around them." Polls taken before the protest are paradoxical: one showed that while 53 per cent agreed that the rise in the retirement age was "acceptable", more than 70 per cent of the French backed the protests. There is a temptation to believe that the whole country is in denial, and not just about pension reform, but also about the need for drastic austerity measures. In Britain, David Cameron has promised years of pain as the country braces itself for the biggest austerity cuts since the 1920s, but one could be forgiven for wondering whether the swingeing deficit and debt-fighting measures sweeping through Europe have simply passed France by. While Mr Cameron announced 600,000 job losses in the civil service, one of France's fonctionnaires – its army of 5.2 million civil servants – recently brought out a book called Absolument Débordée! (Absolutely Snowed Under!), in which she explains how she is required to produce five hours of work per week for £36,000 a year, in local government. She was suspended for 10 months for violating a civil servant's "duty of reserve". There was, however, no talk of launching an investigation into the litany of abuses she denounced, from false expenses and sick notes, to all-day internet surfing and fictitious jobs. The generosity of the French system is undoubtedly part of the reason that tens of thousands of Britons descend on our favourite holiday destination in search of the legendary Gallic art de vivre – the wine, the food, the rolling landscapes, the vibrant village and family life of rural France. Working a couple of extra years will clearly not kill that off, but many see it as an unfair attack on acquired social rights. Philippe Risler, a 69-year-old newsagent in Paris, was not among them. He insisted that the demonstrations were little more than a Gallic Pavlovian reflex. Raising his eyes to heaven, he said: "They took to the streets but everyone knows there's no choice but to work over 60. It's just a French principle to strike, but why should we be the only ones to get away with it when the others work more? We're no smarter than the rest." Some, however, believe, or at least claim, that the "French exception" – an expression often referring to its cultural uniqueness – can be extended to pensions. Ségolène Royal, a leading Socialist who lost to Mr Sarkozy in 2007, "solemnly" announced on Thursday night that the Left would reinstate the 60-year legal retirement age, should it gain power in the 2012 presidential and legislative elections. She gave no details on how it would be funded. Yet more progressive Left-wingers know that the problem is simply demographic and one which politicians ignored for decades. Michel Rocard, a fiercely intelligent Socialist and former prime minister, recently recounted his horror in 1981 when president François Mitterrand told the cabinet he intended to cut the legal retirement age from 65 to 60. He would go on to cut the working week from 40 to 39 hours, which was later to be reduced to 35. "All the ministers in charge of the economy… were distraught, appalled," said Mr Rocard, as they knew full well the pension timebomb they had created in a country with one of the world's highest life expectancies. "By turning the retirement age into a symbol, the Socialist party is fighting the wrong battle. It's a courageous reform. The government was right to do it," he said. France's pay-as-you-go state pension system faces a shortfall of 42 billion euros by 2018 without the reform, which is also the only way Mr Sarkozy can meet his commitment to cut France's budget deficit to the EU ceiling of three per cent of GDP by 2013, from a projected eight per cent this year. Elected on a wave of reformist enthusiasm, Mr Sarkozy has lost vast chunks of support, and 55 per cent of the French would like to see him replaced by a Left-winger in 2012, when his term expires. He sees the pension reform as his last chance to prove his reformist mettle ahead of the next elections. He also tried to shore up conservative support over the summer with a controversial drive to expel Roma gipsies from the country, and a plan to strip foreign-born citizens of their French nationality for killing policemen. Fierce opposition to these moves goes part of the way to explaining why last week's demonstrations were so big. "The French know deep down that they have to change the retirement law, but the protest was a convenient way to denounce the president. They feel it is legitimate as they are attacking a man, a government and a system that in their eyes is illegitimate," said political analyst Dominique Moïsi. Part of that sense of injustice is tied to the man leading the pension reform. Éric Woerth, the labour minister, has fallen foul of the Bettencourt affair, an alleged illegal party-funding and tax-evasion scandal centred on Liliane Bettencourt, the heiress to the L'Oréal cosmetics empire and France's richest woman. Mr Woerth, who presented the bill to parliament on the day of protest, faces accusations of a conflict of interest as his wife worked for Mrs Bettencourt's wealth manager when he was budget minister and in charge of a tax clampdown. The Bettencourt affair "has given the impression that there are the privileged, and the rest," said Le Monde. However, it argued that the main reason for the protest lies elsewhere: "The French are scared… of the future… of finding themselves one day driven out of the haven of protection that has been the basis of the welfare state." While baby-boomers are retiring with generous pensions after a life of near full employment, "the passage from one generation to the next is no longer assured". In other words, there is a growing fear that France's cherished way of life is under threat. That fear explains why Mr Sarkozy has tiptoed around the subject of austerity. The government has now said it intends to save 100 billion euros by 2013, by cutting tax breaks for the rich, freezing civil service pay next year and replacing only half of all civil servants who leave. Even if the measures make life tougher, some, like Jean-Claude Taki, a 47-year-old film director based in Paris, think it will take more than austerity cuts to change France's obsession with quality of life. "A Frenchman's prime concern is to live well, not to have lots of money. His aim is to be happy and have just enough for the quiet life," he said while sipping coffee on a sun-drenched café terrace. "People aren't relaxed in Britain; they're always in attack mode. There's a violence in everyday life, it's very tough. We're essentially hedonistic. Our aim is to have pleasure in life rather than money, and that won't change."

France protests: the end of the 'art de vivre' - Telegraph

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