A Solution To Eroding Retirement Security

It's great to be unemployed and retired if you can afford it.

But the plain truth is that more than four in five older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society, according to a new survey.

Among Americans ages 50 and older who currently have jobs, 82 percent expect to work in some form during retirement, according to the poll by the Associated Press-NORC Center for Public Affairs Research.

In other words, “retirement” is increasingly becoming a misnomer.

“The survey illuminates an important shift in Americans’ attitudes toward work, aging and retirement,” said Trevor Tompson, Director of the AP-NORC Center. “Retirement is not only coming later in life, it no longer represents a complete exit from the workforce.”

For those who have been dependent on employment and/or welfare, the problem is that financially sustainable retirement is and will no longer be a reality. Even with Social Security, which is funded through payroll taxes called the Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax, (SECA), one must have had a job to be eligible for the entitlement––and the amount of Social Security is based on the income level generated from one's employment record of payroll tax contributions.

In the United States, retirement incomes are supported largely by three pillars: Social Security benefits, employer-provided pensions, and personal savings (including non-housing capital asset wealth and home equity). Employer-provided pensions continue to decrease and personal savings is not the norm among the vast majority of American households who must spend virtually every earned dollar on living expenses. While increasingly individuals are finding it necessary to continue working in retirement to supplement their income, most older Americans discontinue full-time career work and struggle to meet obligations with minimum-pay part- and full-time jobs. A proportion of retirees also receive income from welfare programs, such as Supplemental Security Income and other life-support services funded through tax extraction and government debt.

Presently, the United States continues to benefit from never-ending technological innovation and invention. This is exponentially generating tectonic shifts in the technologies of production –– the effect of which destroys jobs and devalues the worth of labor's contribution to the production of products and services. Thus, as the non-human factor of production becomes increasingly more productive, there will continue to be less employment opportunities as long as the economy does not significantly expand, especially with respect to affluent-level wage and salary income.

Amazingly, as a nation we continue to not address this reality or to understand that there are two independent factors of production –– human labor and non-human wealth-creating, income-generating productive capital. Individuals own capital assets (typically through stock ownership in corporations) such as productive land, structures, infrastructure, tools, machines, robotics, computer processing, and certain intangibles that have the characteristics of property. Just as one owns his or her labor used as a source of personal income, capital owners are entitled to the wealth and income their capital produces. Fundamentally, economic value is created through human and non-human contributions.

The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for their owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever-increasing role. And without economic growth the prospects for employment in an increasingly productive capital-dependent economy will continue to diminish.

People invent tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive –– the core function of technological invention. As a result, most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor.

Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power –– and relatively constant). The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

Contrary to conventional thinking, productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, free-market forces no longer establish the "value" of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income and to provide taxpayer-supported job-dependent security. Thus, the government has become increasingly engaged in make-work policy-making. But this approach is cause for expanded government and is directly conflicting with the technological promise of toil elimination.

Because productive capital is increasingly the source of the world’s economic growth, shouldn't we be asking the question why is not productive capital the source of added property ownership incomes for all? Why are we not addressing how the system facilitates greed capitalism and envy while concentrating productive capital ownership among the 1 to 10 percent of the population? One would think that a reasonable and logical conclusion would be to consider this postulation: if both labor and productive capital are independent factors of production, and if productive capital’s proportionate contributions are increasing relative to that of labor, then shouldn't equality of opportunity and economic justice demand that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all? Sadly, the American people and its leaders continue to be ignorant of this plain truth and still pretend to believe that labor is becoming more productive, with a sole focus on job creation.

What is needed is for the system to facilitate spreading the ownership of productive capital more broadly as the economy grows with full payout of dividend earnings, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate productive capital wealth assets. In doing so, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader. This would benefit the traditionally disenfranchised poor and working and middle class, who are propertyless in terms of owning productive capital assets. It would also result is tremendous economic growth, which would benefit everyone including the already wealthy ownership class, and create opportunities for real jobs, not make-work as an expanded economy is built that can support general affluence for EVERY American citizen. Thus, as productive capital income is distributed more broadly and the demand for products and services is distributed more broadly from the earnings of capital, the result would be the sustentation of consumer demand, which will promote economic growth. That also means that over time, EVERY man, woman and child could accumulate a diversified portfolio of wealth-creating, income-generating productive capital assets to provide economic security in retirement and not be dependent on having to work during retirement or rely on government-assisted welfare.

One might ask how we failed to grasp the significance of productive capital's input and the necessity for broad private sector individual ownership? Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment –– thus the political focus on job creation and redistribution of wealth rather than on full production and broader productive capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Yet, the wealthy ownership class knows that this notion is idiotic.

One should ask what form would the structural reforms take. Employment in this new enlightened age would start at the time one enters the economic world as a labor worker, to become increasingly a productive capital owner, and at some point to retire as a labor worker and continue to participate in production and to earn income as a productive capital asset owner until the day you die. As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose asset holdings exceeded $1 million. This would encourage those owning concentrations of productive capital assets (effectively the 1 to 10 percent) to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.

Other stipulations for the structural reform would entail structuring a more just and simple tax system. The tax rate would be a single rate for all incomes from all sources above defined personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt. For example, a family of four would be provided an exemption of $100,000 to meet their ordinary living needs. The poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, interest, rents and other property incomes. This would include the elimination of all tax loopholes and subsidies.

There would be tax policy to incentivize corporations to pay out all profits to their owners as taxable personal incomes to avoid paying stiff corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based individualized employee and citizen ownership with full-voting rights.


The payroll tax on workers and their employers would be eliminated, but all promises for Social Security, Medicare, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor would be paid out of general revenues until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.


The structural reform policies would direct the Federal Reserve to create an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or "CHA" (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing and diversified dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA would process an equal allocation of productive credit to EVERY citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets. The shares would be purchased on credit wholly backed by projected "future savings" in the form of new productive capital assets as well as the future marketable products and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition interest-free loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.


The end result would be that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on our only legitimate monopoly –– the State –– and whatever elite controls the coercive powers of government to extract taxes, incur national debt and redistribute earnings from the productive sector.


For more on how to accomplish such structural reform, see  "Financing Economic Growth With 'FUTURE SAVINGS': Solutions To Protect America From Economic Decline" at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-futu... and "The Income Solution To Slow Private Sector Job Growth" at http://www.nationofchange.org/income-solution-slow-private-sector-j....


Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797 and support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf.

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