Friday, October 07, 2005
“Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits.” - Abraham Lincoln
Even though it is a “pay-as-you-go” system, Social Security is able to provide a solid return on investment. Wages typically increase over time, and this natural appreciation creates inflation-protected returns for contributions to the system. While we are powerless to control the fluctuations of the stock market, wages are actually quite stable, and our actions do influence our earnings.
Many politicians are presenting a worst-case scenario for Social Security and a best-case scenario for private stock accounts. Looking to the future, if the economy is prosperous enough to sustain the proposed system of private stock accounts, these accounts would be unnecessary. In other words, the level of economic growth needed to support private accounts would also serve to support the current Social Security system. However, if the economy does poorly, private stock accounts will actually make the Social Security problem worse.
For this reason, it would be unwise to implement a system of private stock accounts, and Honest Abe would probably agree. After all, labor is the superior of capital.
For more information, please read Social Security: A Cross-Generational Wage Swap.
A fixed percentage taken from the average wage of today is worth more than the same percentage taken from the average wage of 40 years ago. For example, workers who contributed to Social Security in 1964 earned an average of $97.41 per week, and these now retired workers receive benefits based on contributions made by workers earning an average of $528.56 per week. Hence the cross-generational wage swap.
