It is necessary to ponder a moment to grasp the full idiocy of this view being promulgated by The Observer. One must taste the argument, gnaw on it a little, in order to discover that it’s spun cotton candy rather than anything of substance. Worse than that in fact, it’s entirely misleading.
It comes from Sonia Sadha, who apparently writes the leaders for the paper as well as dribbles a column out from time to time:
But the divide is not just about resources. As the Resolution Foundation points out, young people are being expected to take on more risk. The obvious example is pensions. Gone are the days when companies pledged to pay retired workers a guaranteed income for the rest of their lives; today’s workers must, instead, save into an individual pot that must last.
It could be worth asking why this is so. The answer being that every company that tried to continue doing this would go bust. The truth being that British workers just aren’t worth their current pay levels plus a 30 year pension after they finish.
Sorry to be so harsh about it but a pension is simply deferred pay. Whatever that pension is is simply to be added to the pay packet received in return for our labour to give the total amount we’re being paid. When those defined benefit pensions were designed and signed up to people tended to live 5 to perhaps 10 years on said pension. 40 years wages plus 10 years pension, that’s the total pay packet for the job being done. Today it’s more like 30 years wages plus 30 years pension as the total price. And that’s higher than the productivity of British workers will support.
The answer is that the wage packet must fall in order to pay for the pension leaving the total labour cost equal to the productivity. Which is what defined contribution pensions do. It isn’t just about shifting risk, it’s about making clear the price and cost of that 30 year retirement income. Here’s your total labour compensation, we’re making clear here how much your labour is worth, now you decide between current and future consumption.
Given that we’re all living longer how else can it be done? No one is going to accept that their wage packet should be 30% smaller to pay for that pension, are they? That’s not how humans think.
This is also very silly:
It’ll be a while before we know the long-term consequences of forcing individuals to bear more risk. But there are clues: back to the myth of the job-hopping millennials. Changing jobs is an important means of securing promotion and boosting earnings. Yet the Resolution Foundation highlights that millennials are significantly less likely to move jobs voluntarily than generation X at the same point in their careers. It points to the higher levels of risk they face as one of the culprits. The effects will be worst for young people who can’t rely on a cushion of parental support.
Job hopping is indeed important. So important that it’s one of the ways we measure how loose or tight the labour market is. Job changes come in two flavours, quits – voluntarily leaving to do something else – and firings/redundancies – involuntary invitations to do something else. In recessions the ratio between the two changes, very many fewer quits. In a booming economy, many more relatively. So much so that we use a rise in the quit to redundancy ratio as a measure of how much tighter that labour market is getting. And given that Marx was right here, such competition among capitalists for the labour they can exploit is what drives up wages, we use a rising quit ratio to predict real wage rises.
So, what’s the labour market been like this past decade? Pretty loose actually. So, we’re surprised there’s a low quits ratio are we? It’s so remarkable that we should be redesigning the entire economy? Or, you know, we could be informed about the economy and insist that this is what we expect, it’s just one of those things?
Well, yes, we know which the Resolution Foundation wishes to blindside us with but why the hell should we believe what they say?
But it’s this part which really grips my goat:
We’re encouraged to heap praise on the wealth creators who have supposedly taken big but smart risks to generate jobs and growth. David Cameron even put Philip Green in charge of a review of government spending in 2010. But it’s all too easy for unscrupulous “entrepreneurs” to make vast sums through wealth extraction, rather than wealth generation. Green made hundreds of millions out of BHS, leaving thousands of people without jobs and depleted pensions.
Hmm, well, rhetoric but perhaps allowable.
So it would be missing a trick just to think of inequality in terms of wealth: we need to ask hard questions about why young people are being expected to bear increasing amounts of individual risk while incredibly wealthy individuals can drive long-standing British companies to collapse and get off scot free.
And that’s just stupid.
A profitable BHS would be worth some hundreds of millions of pounds. A not-profitable one was, as we have seen, worth £1. The loss of a potential what, £299,999,999 is not what most of us call “scot free” is it?