Shortchanged on wages and Social Security

The rich are getting richer. The poor are getting poorer.

There are many ways to parse what’s going on, and previous posts have touched on unemployment (more than once), financial deregulation (more than once), misperceptions about who has the money, credit card abuses, and a misunderstanding of risk.

The idea that Social Security is not going to be there for the next generation of retirees is gradually hardening into conventional wisdom and a self-fulfilling prophecy, with the implication that the desire to keep it is a symptom of greed and self-indulgence on the part of baby boomers. Get Radical: Raise Social Security, an op-ed in the New York Times by labor lawyer Thomas Geoghegan, offers a different take.

Retirees today are shortchanged on Social Security because they have been shortchanged on wages for their entire working lives. The labor economist Richard B. Freeman points out that the hourly earnings of workers dropped by 8 percent from 1973 to 2005 while productivity shot up 55 percent or more. The United States is one of the few developed countries where workers are routinely cheated of a share in higher productivity.

And where has the money from the extra productivity gone? It’s gone right to the top, to the top few percent. If wages had been paid fairly based on productivity, there would have been enough money subject to the payroll tax to avoid even a modest shortfall.