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Comment by dkokelley | Hacker News Reader

Why does the government need to pay for them? I understand issues like social security and medicare, but shouldn't the employees have been saving for retirement in the first place?

I agree that the company should not be expected to pay for work not done, but these payments are essentially part of the benefits package agreed upon when the employee started working. It was probably unwise for management to agree to those terms, but it's no different than police and firefighters who receive checks into retirement. It's delayed payment for their commitment to the organization.

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Look at it this way: If the individual is supposed to personally save for his own retirement, you'll have 20% or so that will not have any money when they retire. So your society, whatever it is, will have an extremely poor and old social class. These are the people who will also have the most problem with health care. When they get sick, the hospitals will not let them die - their medical care will be paid - by the government. Those people will turn to begging, alcohol and create a new class of homeless people.

It's nice to want to put responsibility on the individual, but those 20% will make your society an unpleasant place to live in. Are you willing to deal with all this?

Retirement has to be be made into an institution that runs on its own. Don't let people work their entire life, and then retire into hell.

It's a matter of personal responsibility. Granted, there will be people who

  A: Don't save, 
  B: Invest their savings foolishly, 
  or C: Fall on hard times and burn through their savings,

but guaranteeing a retirement income will push more people into the A and B categories. I believe that society should help people who fall into the C category, either through welfare programs or nonprofit organizations, but it hurts the rest of society when the people who acted responsibly are required to subsidize those who are in the A or B category. My argument is that it hurts society more to pay for the A and B people than it does to let the A and B people take the consequences of their actions. I argue that the more retirement is subsidized, the more people will rely on the subsidies. The only way to make retirement an institution that runs on its own is to make it the responsibility of the individual.

Why would it be so bad to force people to save a percentage of their income?

If you don't, and guarantee benefits for the C category, then there's a perverse incentive: don't save any money your whole life, get bailed out at the end.

In any case, those who choose to not save any money for retirement (whether willfully or ignorantly) are a huge burden on society, one that the rest of us who did save will have to pay for.

In that sense, examine this solution: we each have a "personal retirement account", with rules set up in such a way that you can only invest the amount of money above what would provide for a minimally sufficient retirement in "riskier" investments, such as the stock market, and you are forced to save 10% of your earnings into this account, which would follow you from job to job.

End result: Everybody has a personally accountable retirement benefit that they directly contributed to their whole life -- it's their money that they saved, and their money that they get. You cannot place the minimum amounts at risk, but you are free to choose how to invest anything above the minimum amounts as you wish. Given that we (eventually) eliminate all social security obligations, we can also completely remove that tax, and several others that currently pay for it.

I like the mandatory savings plan, provided it is offered as an alternative to social security. The thing with mandatory savings plans (such as 401k's, were they mandated) is that ultimately the money belongs to the individual, and you can effectively access the money as you like when you borrow against it. My point is that the people who are not likely to save on their own accord are the same ones who will effectively spend their savings through debt.

In Australia, we have something called 'Superannuation' which is a bit like a 401k plan, except it's mandatory. The employer must pay 9% of your total wages into the plan. You can also contribute extra if you like, and some employers offer terms matching your contributions.

You are not allowed to draw down on your 'super' plan until you are at retirement age, and even then there are rules as to what you can take as a lump sum, and what is paid as an annuity. After a certain point (I'm not an expert) you actually get your money out tax free.

You take this super plan with you from employer to employer as you move jobs, and you're free to transfer the money from one fund to the other. You have to choose the fund yourself, and you can even create your own fund to invest in whatever you like (there are rules on size and reporting, and you can't leverage your fund with debt).

These rules enforce saving for the people who can't do it themselves, because they never see the money. They are a little annoying to people who can quite capably invest for themselves, but there is enough incentives and flexibility to cater for the self-directed investor. It was actually the unions who pushed for this system as they could see the folly of the employer-funded pension scheme. Plus they formed their own 'funds' which their members use - the management fees probably brings in more income for the union than the union dues do.

In addition to super funds, Australia has a universal health care system which you pay with a 2.5% tax on your income. This system covers everyone who is a citizen,whether they are working or not. You may also opt for private healthcover, and there are tax incentives for people on higher incomes to do so (both for the employer and the employee). With this system there are no co-payments or anything like that : just turn up at either the public or private hospital, and get treated. Elective surgery (knee reconstructions, etc) goes onto a waiting list for public, private hospitals you get it done sooner.

The system has it's flaws, but for the most part it works, and you don't get companies with massive pension and healthcare liabilities. It also means that employees are more confident to move between jobs knowing that their pension and healthcare are not tied to a particular employer.

Finally, and most relevant for this discussion, it allows startups to run much leaner because they don't have to worry about pension and healthcare for their employees.

And, to answer the question, on average, an Australian worker pays less tax (local, state, federal) on their income than the equivalent worker in the USA. So it's not about paying less tax and choosing : it's about building a national system that has lower running costs but still allows for choice where the individual can afford it.

Well said, just wanted to add that you only need to be a permanent resident, not a citizen, to be eligible for Medicare.

> I agree that the company should not be expected to pay for work not done, but these payments are essentially part of the benefits package agreed upon when the employee started working.

Those benefits packages were done under extreme coercion from the unions. The management of GM basically just deferred these costs.

Things such as pension funds should not be handled by the employee (IMHO). You should get your full salary (with benefits included) and make your own choice what funds you will use for medical aid/retirement.

Also - on a side note (of topic), these companies should be allowed to fail. They are easily replaceable and most motor manufacturing already happens in lower cost countries in any way.

Aren't there companies that are much more important pillars of the world economy that deserve a bailout more (e.g. AMD).

Aren't there companies that are much more important pillars of the world economy that deserve a bailout more (e.g. AMD).

Haha. I agree that there are more deserving companies, but I would argue that none of these companies should be bailed out. Take your medicine and be done with it. IMO the bailouts are doing more good than harm.

I can't tell if you're joking or not. GM paid dividends up until last year, decades after it was known that they had large health care obligations. Divert a couple years of dividends in keeping their side of the bargain, and GM is in good shape. GM management made a deal they were unwilling to keep.

AMD employs 15,000. GM directly employees 240,000 and suppliers employ millions more. These companies are not easily replaceable. If they were, another company would have replaced them by now. Setting up an operation of that magnitude requires decades of experience and huge capital expenditures.

> GM paid dividends up until last year, decades after it was known that they had large health care obligations.

If you look at the post I said that GM did not take into account their future obligations. Their profits was nothing more than fancy bookkeeping.

> GM management made a deal they were unwilling to keep.

I agree with you on the point that GM should never have made those lavish packages and kept their salaries in line with the market (or relocated their factories).

> These companies are not easily replaceable. If they were, another company would have replaced them by now.

There are numerous companies that can replace the big auto companies. Toyota and Honda has been slowly replacing GM is most of the world markets (including the US). If either GM goes into bankruptcy and gets split up/sold off (e.g. Opel gets sold etc...). It would not be a bad thing.

> Setting up an operation of that magnitude requires decades of experience and huge capital expenditures.

Setting up a car manufacturer is not that impossible in the market. Over the past years there were 10s of new car manufacturers that started (and some failed). A good example is some Chinese companies such as GWM, Cherry. There is also no reason why existing car manufacturers can not grow to fill the gaps that GM leaves (as they have done for a long time – e.g. Hyundai, Honda, Toyota, etc...).

> AMD employs 15,000. GM directly empl

Starting a new x86 processor manufacturer would probably be impossible. The x86 is a patent minefield (to which only AMD and Intel have cross licenses to use each other's patents). Setting up a new generation fab can cost more than $5 billion.

And if AMD goes Intel will have a monopoly. Both Chrysler, GM and Ford can disappear and there still will not be a monopoly.

catz wrote:

Historically, downturns have been the best times to invest (obviously!)

I don't think you've ever worked in the auto industry - most cars are not built outside of North America. In fact, I can't think of a single car that is built in a radically cheaper country like China that's currently on the American market.

You get imports from Japan, Germany, the UK, etc, but those are hardly cheaper manufacturing grounds.

The only major "cheap" source of cars is Mexico, and in general consumers have reacted badly to this sort of cost-cutting (the massive drop in the Mercedes-Benz C-series build quality after moving to Mexico has resulted in an exodus of buyers to other brands, same goes for VW).

By and large the cars you buy today, even ones from Toyota and Honda, are built in the US or Canada, both of which are hardly cheap when it comes to wages and benefits.

And keep in mind that Toyota and Honda are suffering greatly right now. I have many colleagues in the auto industry, and Toyota has already scaled back production in a major way - the demand is simply no longer there. IMHO the American public is waking up from decades of the suburban dream, and car ownership is something that will decrease in importance in our culture as time goes on, especially as new spending in mass transit kicks in and the urban culture takes center-stage.

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