On Fri, 18 Feb 2005, Doug Orr wrote:
At the risk of entering the discussion after all interest has past,
No worries of that!
BTW, if other people haven't seen Doug Orrs's article on social security in the December _Dollars & Sense_, it's excellent:
http://www.dollarsandsense.org/1104orr.html
I will offer an explanation of what the shift from "wage indexing" to "price indexing" that Bush is proposing means. For those who don't want to plow thru the long version, the short version is that it has absolutely nothing to do with changing an "index" and everything to do with an outright cut in benefits. It is being dressed up as an "index" problem to try to hide what is going on.
Fair enough. That solves at least three quarters of my problem. And I think if go carefully through the Robert Greenstein article Max posted
http://www.cbpp.org/12-17-04socsec.htm
that should clear up the details.
But leaving Social Security aside for a moment, I feel there's still something I'm misunderstanding about pension benefits in general when you say:
If the benefit is indexed for inflation, the benefit will not erode with inflation, BUT as the standard of living of the rest of the population rises with productivity, the standard of living of the retiree will slowly fall further and further behind. So in the best possible scenario, retirees fall behind the rest of society.
This only seems true if real wages rise. If real wages fall, a benefit indexed to inflation would actually move ahead of the rest of society. No? (And if not, why not? I seem to be the only person who believes this, so what am I missing?)
And it's not just a theoretical question since, according to the stats that Doug Henwood posted that started this thread off, real wages have fallen 10% since their peak in 1973. So a theoretical person who retired then on a pension indexed to inflation and is still alive today would actually have gained 10% relative to the average worker's standard of living. No?
And if the assumption that workers will get a least some of the productivity increases in the form of real wage increases didn't hold over the last 30 year period, should we really assume it for the future?
Michael
