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Old 07-02-2010, 03:17 PM   #161
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Old 07-02-2010, 03:19 PM   #162
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That doesn't follow. Would you say that employers reduce salaries due to the office/parking space needed for the employee?
To some degree, apples and oranges.

Parking lots and office space are more or less fixed costs that are necessary regardless of the current employment market. You still need the parking lot even when the economy stinks, and you can't really "downsize" a parking lot to save money. It's a relatively fixed overhead cost that isn't too dependent on macroeconomic factors.

Still, the question is: If employers didn't have to pay this tax, would they pass the "savings" to their employees to maintain their level of total compensation?

In a job market favorable to labor -- think late 1990s in tech here -- I would expect employers would pass on most of their tax savings to employees as a way to remain competitive and not lose their best employees.

In today's job market, employers can repeatedly screw their employees and the employees will come back begging for more, just grateful to have a job -- any job. So I do *not* think employers would pass on the tax savings to the employee as additional cash compensation in this economic climate. The market doesn't require it now. Just as it's allowed my Megacorp to not give out raises for four of the last six years despite doing very well through the recession. They simply don't need to pay out raises to stay competitive and encourage people to stay.
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Old 07-02-2010, 03:55 PM   #163
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Seems like the employer paid SS tax would be an important factor in deciding whether to outsource jobs overseas or not.
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Old 07-02-2010, 04:59 PM   #164
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This guy really knows how to campaign for votes!

He has two GOP opponents and a Dem.


Here is a US Senate Report on the topic including options: http://aging.senate.gov/letters/ssreport2010.pdf
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Old 07-02-2010, 05:35 PM   #165
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To some degree, apples and oranges.

Parking lots and office space are more or less fixed costs that are necessary regardless of the current employment market. You still need the parking lot even when the economy stinks, and you can't really "downsize" a parking lot to save money. It's a relatively fixed overhead cost that isn't too dependent on macroeconomic factors.

Still, the question is: If employers didn't have to pay this tax, would they pass the "savings" to their employees to maintain their level of total compensation?

In a job market favorable to labor -- think late 1990s in tech here -- I would expect employers would pass on most of their tax savings to employees as a way to remain competitive and not lose their best employees.

In today's job market, employers can repeatedly screw their employees and the employees will come back begging for more, just grateful to have a job -- any job. So I do *not* think employers would pass on the tax savings to the employee as additional cash compensation in this economic climate. The market doesn't require it now. Just as it's allowed my Megacorp to not give out raises for four of the last six years despite doing very well through the recession. They simply don't need to pay out raises to stay competitive and encourage people to stay.

I agree... not only would they not give it to the employees... a number have done across the board pay cuts to save money.... if matching SS was reduced... it would just go to the bottom line... the employee would still get the same paycheck and be happy...
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Old 07-02-2010, 05:37 PM   #166
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Seems like the employer paid SS tax would be an important factor in deciding whether to outsource jobs overseas or not.

When I did cost studies on moving jobs overseas.... SS did not come up... it is total compensation... and even if you took away SS, the number still look good for outsourcing...

I know the rate for IT guys in NY was $150K to $200K all in.... India was $25K... (back when I did them..... not sure now)..
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Old 07-03-2010, 10:10 AM   #167
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Seems like the employer paid SS tax would be an important factor in deciding whether to outsource jobs overseas or not.
Correct. When I was w*rking, I did more than one financial analysis involving replacing people with machines, or outsourcing work to non-employees. I always included the employer's share of SS/medicare in the costs of the employee option.

We had some workers who could be either employees or independent contractors. Both the company and the workers agreed that the ICs would need to get extra cash because of the way they paid SS/medicare taxes. It was a non-issue in negotiating. The economic impact of the tax is on the worker, regardless of who writes the checks to the gov't.
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Old 07-03-2010, 10:30 AM   #168
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Wow. Put "Social Security" in the title and the thread gets long and fractured very quickly.

Back to the OP. I think that explicit means testing based on current income or assets is a very bad idea. It discourages savings. It generates a huge industry in arranging your financial life to qualify for the most SS benefit. (Virtually all American workers expect to retire someday, so they all would have an iterest in hiding assets and income from the gov't. Imagine all the "gifts" to children.)

Fortunately, any politician suggesting this has to eventually go from a vague "let's means test some benefits" to "here are my rules". Once you start writing rules down, the voters discover that he isn't just talking about "someone else" and they get upset.

(Note that your SS benefit is already "means tested", where the "means" is the income you earned while working, not how much of that income you saved.)

OTOH, indexing the Normal Retirement Age makes a lot of sense (Rep Paul Ryan has a reasonable propsal). Indexing the initial benefit to prices instead of wages can also help. IIRC, just these two items cover the long term SS deficits (but not the intermediate term).

The SS actuaries evaluate many possible changes here: Individual Changes Modifying Social Security
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Old 07-03-2010, 10:36 AM   #169
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Does anyone have a link that would explain the proposal to privatize SS (I'm guessing ~ 8 years ago?)? I'm not sure it even hit the 'proposal' stage, or if it was just some general talk. At any rate, I didn't pay much attention then, and I'm curious if the plan made sense at all. All I recall was some (what seemed like knee-jerk) reaction that we'd all be 'risking' our money in the stock market and people's retirement could 'vanish overnight' - I imagine any serious plan allowed for a fairly conservative mix for people approaching retirement.

TIA - ERD50
You are probably thinking about Bush's commission which actually came up with three similar proposals. Bush never officially endorsed any one of them. I'd guess that was a political calculation.

Look at the Jan 31, 2002 propsal here: Proposals to change Social Security

My Cliff's Notes version goes like this:
A) Reduce benefits enough to make SS sustainable over the long term as a pay-as-you-go system.
B) Borrow some money to fund "personal accounts". Figure the interest paid on the borrowed money is less than the investment earnings in the accounts, so workers come out ahead.

I'd say that A is okay (I've forgotten the details) and B is silly.
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Old 07-03-2010, 02:30 PM   #170
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Indexing the initial benefit to prices instead of wages can also help. IIRC, just these two items cover the long term SS deficits (but not the intermediate term).
Historically this would be a big help because historically wage growth beat inflation. Is this happening much any more? Will this occur any time in the next decade or so with what almost everyone expects to be long-term high unemployment and all the pay cuts and pay freezes going on?

If wages fail to keep up with inflation for a while (mine have failed to do so for at least 5-6 years if not close to a decade), this could actually hurt more than it helps.
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Old 07-03-2010, 03:11 PM   #171
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Historically this would be a big help because historically wage growth beat inflation. Is this happening much any more? Will this occur any time in the next decade or so with what almost everyone expects to be long-term high unemployment and all the pay cuts and pay freezes going on?

If wages fail to keep up with inflation for a while (mine have failed to do so for at least 5-6 years if not close to a decade), this could actually hurt more than it helps.
The good thing about indexing to wages is that it is harder for the government to cheat. They can play with the CPI, but the wage index should be a simple, transparent statistical measure.
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Old 07-03-2010, 03:43 PM   #172
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Historically this would be a big help because historically wage growth beat inflation. Is this happening much any more? Will this occur any time in the next decade or so with what almost everyone expects to be long-term high unemployment and all the pay cuts and pay freezes going on?

If wages fail to keep up with inflation for a while (mine have failed to do so for at least 5-6 years if not close to a decade), this could actually hurt more than it helps.
Good point. The SS projections assume 1.1% real growth in wages because that's the historic trend. It hasn't happened recently. Hard to say what will happen in the future.

Their history is in Table V.B1 here: 2009 Trustees Report: Section V.B, Economic assumptions & methods
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Old 07-03-2010, 04:43 PM   #173
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I don't see the house or senate offering to cut their retirement!



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I've made it pretty clear," House Minority Leader John Boehner said, "that if we are a majority and I'm lucky enough to be speaker, I'm going to run the House differently than it's being run today and differently than it was run under Republicans in the past."...
...

Nor did he seem eager to tip his hand on the terms of entitlement reform. In his interview with the Tribune-Review, Boehner volunteered that the Social Security retirement age might need to be raised to 70 for younger workers but he would go no further.
Younger meaning anyone born after 1953.


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Old 07-03-2010, 07:48 PM   #174
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This guy really knows how to campaign for votes!

He has two GOP opponents and a Dem.


Here is a US Senate Report on the topic including options: http://aging.senate.gov/letters/ssreport2010.pdf
Thank you for posting the link to the US Senate Report.

While I did not read it, instead skimmed the relevant sections, my impression is that there is (a) no mention of means testing as a solution, and (b) the areas they recommend to curb short falls in SS fall into several categories (i) fiddling with COLA, (ii) FICA caps and (iii) extending retirement ages.

All of which make perfect sense to me.
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Old 07-03-2010, 09:36 PM   #175
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You're making the case that some types of work cannot be done effectively by older workers, and that because of this workers should be able to get their SS early. I'm saying three things in response:
-- When people set upon a career path (or blunder into one) they know the conditions under which they'll be working. If the career path is short, that's simply part of the deal.
I can testify from personal experience that this is not always the case. I fell into land surveying out of sheer desperation. I had been underemployed and job hunting for two years at that point, and I would have accepted literally any job that was legal. I had never worked out of doors before, and had no idea beforehand what was involved or whether I would be able to do it even over the short term. The possible length of the career path (except in the sense that a City job was considered more secure than the private sector) didn't even come onto my radar screen.
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-- If a worker enters into a trade with a more restricted pool of those capable of doing the work (whether it is pole dancing or hard physical labor) he will receive higher pay than if the pool of eligible workers were broader. No, it;s not the only factor, but it is a factor. With fewer workers capable of doing the work, pay is higher than it would otherwise be (because of lawful discrimination). The young buck benefits from this, he shouldn't demand recompense later when he's too old to do it.
If this is the case, why do laborers make such low pay? I contend the limiting factor is the skill, more than the physical strenuousness of the job. High skill + high physical stress=high pay. High skill + low physical stress=high pay. Low skill + high physical stress=low pay.
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-- SS shouldn't be used as surrogate unemployment insurance.
I am not suggesting SS as unemployment insurance. If that were the case I would not have included the over-50 qualification.

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(snip) it's not that bad of an idea. I just don't see how, when we are living longer and staying healthier, and at the same time SS is in financial trouble it makes sense to encourage people to quit work earlier and to thereby stop paying into SS earlier. There's no fixed pool of jobs out there --industry makes more of them all the time, and they'll create still more of them when the cost of labor goes down. The main thing that causes the cost of labor to go down is having more people looking for work. Trying to "spread the work around" (by reducing the number of workers or the amount they work--as France did with their famous reduced work week) is the path to misery and very low national economic growth.
You are misstating what I have proposed. My idea would add no additional financial stress to SS because the suggested payment would be actuarially equivalent to what that person is already due to receive. It does not encourage people to quit voluntarily; if they did so they would not be eligible for unemployment insurance and hence could not meet the qualifications for "emergency retirement". I agree that there is no fixed pool of jobs, but disagree that jobs will be automatically created when wages are forced down. If there is no demand for the product of that labor, it won't be produced, and if it is not produced, no jobs will be created no matter how cheaply people are willing to work. It will not reduce contributions into SS because it would only be available to people who are already unemployed, so they aren't contributing to the system anyway.

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What's my fix? Gradually raise the retirement age so that a person at FRA can expect to get about 12 years of payments (which is where we started in the 30's). Keep the option for reduced payouts starting a few years earlier. (snip)
My proposal applies only to older workers who have been unable to find new jobs. The older they get and the longer they have been out of work, the less likely it is that they will find a job comparable to the one they had, and I would guess, the less likely they will be able to find a job that pays enough to live on, or perhaps, find any job at all. Your proposal does not address the issue of age discrimination, the third strand of the Gordian Knot, in fact by moving retirement age ahead it increases the number of years that a worker is vulnerable to it.

Here's a thought experiment. Let's take a hypothetical worker who has been laid off at age 50 and (after a period of unsuccessful job hunting) has exhausted his unemployment benefits.

My proposal: Eligible for SS; benefit is actuarially equivalent to what would have been paid at FRA. No additional cost to the SS system for benefits paid to this worker. Worker able to turn to self-employment, part time or lower-wage work which does not fully replace the income from the previous job by itself, but does do so when combined with emergency retirement. Probably creates less payment input to SS and Federal income tax than would have been the case prior to job loss, but more than if the lower paying job had not been accepted. (This assumes that people who work and receive SS at the same pay SS tax. Is that correct? If there are disincentives to work in the treatment of earnings additional to SS, the proposal would need to be tweaked to remove them.) Not eligible for welfare, possibly eligible for social services such as food stamps, health care subsidies etc.

Your proposal: Not eligible for SS for until 10-15 years after job loss, depending on how much the retirement ages are moved ahead. Not eligible for unemployment benefits (they've been used up) and little likelihood of future eligibility since no job offers have been made. May turn to black market/cash economy for income. In either case, provides zero input to SS, creates zero federal income tax revenue, and is probably eligible for welfare and other social services.

Unless I've missed something in your proposal, ISTM that this unemployed worker will create less revenue coming into the system and more expenses in the form of welfare and social services than if allowed early access to SS benefits which are going to be paid anyway.
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Old 07-03-2010, 10:07 PM   #176
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Here is a US Senate Report on the topic including options: http://aging.senate.gov/letters/ssreport2010.pdf
Thank you so much for the link to this report by the U.S Senate Special Committee on Aging, dated May 13, 2010. This report will be extremely helpful to those of us who want to know what the latest thinking in Washington might be on this topic.
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Old 07-03-2010, 10:20 PM   #177
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If this is the case, why do laborers make such low pay? I contend the limiting factor is the skill, more than the physical strenuousness of the job. High skill + high physical stress=high pay. High skill + low physical stress=high pay. Low skill + high physical stress=low pay.
As I specifically stated--the smaller labor pool resulting from the strenuous nature of the job was just one factor. The low wage workers doing strenuous but unskilled labor would be making even lower wages if more people could do that work.

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I am not suggesting SS as unemployment insurance. If that were the case I would not have included the over-50 qualification.
Well, then why do you require the 50 year old to be unemployed in order to get the benefit? Clearly you are introducing employment status into the mix for receiving social security benefits--a factor that doesn't exist today.

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I agree that there is no fixed pool of jobs, but disagree that jobs will be automatically created when wages are forced down. If there is no demand for the product of that labor, it won't be produced, and if it is not produced, no jobs will be created no matter how cheaply people are willing to work.
I disagree strongly. When labor becomes cheaper, then all kinds of activities that were previously not economically viable become possible--and more jobs are created. Products than cannot be manufactured profitably with $20/hour labor can be made and sold if suitable $5/hour labor is available, and these new activities will bring more jobs. We see the reverse happen each time the minimum wage is increased--jobs are eliminated.


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My proposal applies only to older workers who have been unable to find new jobs.
Again--"Hello, Vandelay Industries."

I think we're just going to disagree on this one. I could come up with scenarios where your new system would cost SS a lot of money (by encouraging workers to stay "under the radar" and drawing SS rather than contributing), but anecdotal what-ifs without a real study wouldn't prove anything regarding the economic impact to SS of your proposal. I just don't want SS modified to address unemployment. I also don't think that modifying the system so people can draw SS earlier is what we need to be doing at a time when people are staying healthy longer, living longer, when physical jobs are less prevalent than they were 30 years ago, and when SS is in financial trouble.

When a person gets too old to do a particular job, then they might need to find a different job. It might not pay as much. It might not be the kind of work they'd most enjoy.
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Old 07-04-2010, 03:55 AM   #178
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Thank you for posting the link to the US Senate Report.

While I did not read it, instead skimmed the relevant sections, my impression is that there is (a) no mention of means testing as a solution, and (b) the areas they recommend to curb short falls in SS fall into several categories (i) fiddling with COLA, (ii) FICA caps and (iii) extending retirement ages.

All of which make perfect sense to me.

I think the means testing approach is favored by many ultra conservatives. Mainly because they believe (and describe it) as a hand out. Some would like to recast SS into a "Welfare Program"... as if it were intended only to be paid to people who would otherwise be completely destitute. You can look for SS reform to come soon and whoever is in power will lean the program in whatever direction they choose.


The part that toasts me about all of this is that both sides of the political equation spent the SS surpluses paid in by tax payers and their companies over the last 35 or 40 years.


Bottom Line: SS is not and never was a Welfare program. We paid for it!
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Old 07-04-2010, 04:15 AM   #179
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Bottom Line: SS is not and never was a Welfare program. We paid for it!

As a practical matter if you get the spousal benefit, its welfare. if you are older than about 75 years old its welfare. If you are in the bottom third of the SS distribution It's welfare. Im not saying its bad because its welfare. But those recipients did not pay the true cost of benefits. The welfare is paid for by the people who pay and don't get the spousal benefit, and the upper income group within the limit whose rate of return is very poor. Workers younger than about 75 have also paid more for their benefits
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Old 07-04-2010, 06:29 AM   #180
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As a practical matter if you get the spousal benefit, its welfare. if you are older than about 75 years old its welfare. If you are in the bottom third of the SS distribution It's welfare. Im not saying its bad because its welfare. But those recipients did not pay the true cost of benefits. The welfare is paid for by the people who pay and don't get the spousal benefit, and the upper income group within the limit whose rate of return is very poor. Workers younger than about 75 have also paid more for their benefits

I think you understood my point.
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