Some critical remarks on Kliman's proposition of increasing workers' income

By substantial unequal exchanges, I take it you're including what's called global labour arbitrage?

Anyway, this is the fundamental point many on the left and "leftie" sympathizers don't get very easily. I'd like to add, though, that the "best possible functioning capitalism" would have "fully socialized land rent," as well. For there to be massive reductions in unequal exchanges regarding labour, the whole labour market needs to be "fully socialized," as well.

Mikus,

It's gratifying to know that we agree that income equality has gone up and is not simply a distorted statistic based on some unadjusted numbers. The reports I cited also show that government transfers-- benefits minus refundable tax credits-- have not counteracted the trend to growing inequality. That does a little to undermine the argument that those transfers have effectively bolstered the "compensation" of workers and poor.

I do not come to a conclusion opposite that Kliman, particularly regarding wages paid to production and non-supervisory workers. Fell for 22 years, improved for 6-8, fell again, rose again and still have not exceed the peak recorded some 40 years ago. That's how I've seen it and written it.

I do think Kliman is grossly, I mean grossly mistaken if he is counting corporate contributions towards employee pensions as "compensation." Nothing could be further from the truth. Companies have effectively reduced their pension obligations over the past 25 years, and that reduction in obligation goes directly to the corporate bottom line as profit. Pensions are corporate assets, plain and simple. There is, effectively, no obligation on the part of the corporation to pay a "promised" benefit.

Now maybe Kliman wants to look at the US PBGC that paid out $5.5 billion in FY 2011 to 873,000 people who had been covered by 4300 failed retirement plans, and call that $5.5 billion compensation. I don't think it works like that, since it does not account for the loss in benefits sustained by those thousands. So a "fair" measure would figure the amount of compensation lost to employees in the great retirement heist that began way back in the 1980s.

Simple fact, most workers in the United States have absolutely NO employer sponsored pension plan. Of the 50+million that do, about 30 million of those are under "defined contribution plans" where no benefits are "guaranteed" simply an amount contributed by the employer, which need not be in cash, and which can be reduced, or simply eliminated.

Kliman's argument is that the "stagnation" is not the result of reduced, or static, wages and compensation. I agree. The economic contraction since 2008, and the long term tendency of reduced profitability since, pick one-- 1968-69-70- in the US were neither caused by high wages nor low wages.

Now that must of us, some kicking & screaming, appear to agree that fundamentally (and the politically important parts of) Kliman's overall analysis & conclusions are sound, I guess the rest of this thread is just for picking over the detail

So got to pick up on the points about pensions by S.Artesian

I disagree quite strongly with these comments and for a number of reasons.

Firstly, if the comments above were 100% true (which I don't agree that they are ) - they would not apply to all pension schemes contributions. The nature of the comments above in relation to funding, projected obligations, promised benefits etc.. only apply to contributions made to defined benefit pension schemes, not defined contribution schemes.

Contributions made under defined contribution schemes bear none of the characteristics that you describe above.

In 2004 it was estimated that 65 million workers were active members of Defined Contribution schemes in the US compared to only 25 million members of Defined Benefit schemes. And this development in terms of moves away from defined benefit schemes to definied contribution schemes has been in place since around the mid/late 1970's. That trend has certainly continued to the present so the respective proportion of both members & assets between defined contribution and defined benefit schemes has continued to move from the later to the former. In another generation's time it's entirely possible that defined benefit schemes will not exist at all.

So even if we accept that your comments above are correct (which I don't) they would only apply to what is now a minority of pension contributions made in the US. Defined Contribution schemes have no obligations (other than a standard upfront contribution based on a % of the employee's wage) in terms of future retirement benefits, they have no obligation to up funding to meet projected obligations because there simply isn't any future obligation on the part of the scheme beyond the initial % contribution of the workers wage.

You are correct however that companies have drastically reduced their pension obligations over the last 25 years and the main method of doing this has been to close of defined benefit schemes to new members and shunt workers into defined contribution schemes. As i'm sure you know, defined contribution schemes shift the burden of risk from the employer to the employee. This is how they have reduced their pension obligations by capping their involvement to purely % contributions in the here & now, rather than commit to future retirement benefits to the worker in the future. There is absolutely no case for suggesting that corporate contributions made to defined contribution pension schemes remain an asset of the company making them.

So your points above about pensions apply only to a minority of pension contributions in the United States now. Clearly Kliman's historical study straddles two periods where in one from 1945 to around 1975 Defined Benefit schemes were the majority and from 1975 to present day where Defined Contribution schemes were the majority, so there is some untangling to be done there. But your broad brush comments about corporate pension scheme contributions in general simply do not apply to the majority of pension schemes in operation in the US today.

I also don't agree with you that corporate pension scheme contributions to defined benefit schemes should not be included as part of the overall social wage. I agree here that this area is much more clouded and that some contributions to defined benefit schemes can end up back with the company if the scheme is overfunded, but for some time now there has been structural under funding of defined benefit schemes, so the inclusion of actual corporate pension contributions actually understate, rather than overstate the obligation of the company to the pension scheme. Also over time the cash contributions do balance out and represent the overall outflow from company to pension scheme in which the worker has the beneficial interest (although clearly one which he/she has very little control over). I disagree 100% with you that pension schemes (defined benefit ones) should be treated as corporate assets fo the company who makes them. The huge move away from defined benefit schemes and the desire for companies to offload themselves of these long term obligations (by switching their schemes to defined contribution), show that companies certainly don't see these schemes as a company asset

The question of how much pension schemes are going to pay out is inherently cloudy. The case for payments into pension schemes not going to workers at all seems to overstate the matter.

However, it still seems necessary that if you count payment going out of the schemes and into the hands of retired workers, you wouldn't also count the money going into the pension schemes. Otherwise you'd be double counting (not to whine but see my post above); The same money can't be paid as social wage twice - once as corporate contribution to a pension fund and then again as a pension funds' payment to workers.

For example, yes. Understanding earthquakes involves understanding plate tectonics. Kliman is trying to analyses an earthquake without any theory of plate tectonics. Here he is using "epicentre" to avoid using the word "origins" because he knows to say that the crisis had "its origins in the US" would lay him too open to the charge that he is mistaking forms of appearance and proximate causes, for the underlying ones. And yet, at the same time, through this linguistic dodge, he's effectively doing just that (i.e. implying that the crisis has its origins within the US economy, taken in isolation) while pretending not to. Dissimulation.

Yes i'd agree with that

However, how much defined contribution pension schemes (which are the majority of schemes in the US) are going to pay out is a risk/question that is left with the employee alone. There is no ongoing requirement for the company to ensure a certain level of payout, all they have to do is contribute a certain % of the employees salary each month and that's where their involvement/obligations end. Therefore for these schemes it is a straightforward case of a fixed payment that goes out of the company and 'benefits' the employee as a result.

I agree 100% with you though that it would be double counting to both count contributions going in and contributions going out, and if this is what is being done then I would agree this is wrong. Is this the case though (genuine question as not looked at the detail).

I would argue that only contributions in should be counted. Payments made out of pension schemes represent a mixture of contributions and investment income/capital growth 'earned' on those contributions, so to me it doesn't make sense to include investment returns as part of empoyee compensation. Clearly though any investment returns made on those contributions (after deducting the myriad of management fees that are applied) do benefit the employee, however so does interest earned in a bank account, but we wouldn't view that as an element of compensation for labour. The compensation for labour is the contribution that is made into the pension scheme (regardless whether it is a defined benefit or defined contribution scheme), and I would argue that this is what should be included and definitely any payments made out of the scheme to the employee should not be counted as this would be double counting.

Is double counting going on here, that slide you linked to (B29) displayed contributions in only did it not?

and all the other things I listed which you implied were obvious bollocks - are these obvious bollocks as well?

OK, now I'm totally confused. You appear to be making the same argument I'm making, except against my argument? That is, that in the hypothetical case where one sector is extracting market rent, through the nominal wage, that even though this results in increased wage costs to employers in other sectors, this does not necessarily lead to a reduction in the aggregate rate of profit - in the limit case where all additional wage cost from the other sectors goes directly to the profit account of the rent-extracting sector.

In fact, my crude playing around with numbers (if in doubt, get the spreadsheet out...) seems to indicate something that wasn't immediately intuitive to me, namely that on the aggregate level, it matters whether the rent-extractor has a lower or higher than average VCC:

edit: hmm, annoyingly I don't seem to be able to import the images, I guess I'll see if links are any better. Basically, it appears that whether the total ROP increases or decreases depends on whether the rent-extractor has a lower or higher than average VCC respectively. Not that the actual actors care about this, of course.

https://www.dropbox.com/s/jft94x73liefhkp/RentHighVCC.JPG
https://www.dropbox.com/s/p8u4njvdewknugj/RentLowVCC.JPG

edit2: for the record, the files are mislabelled, low is high and vice versa.

edit3: for the record, there was an error in the formula for the Total ROP (i.e. column sum, rather than (s+r)/(cc+vc)). Corrected tables show that in every case, rent extraction reduces overall aggregate ROP - as in fact makes sense if aggregate s + r remains constant, but aggregate vc increases due to wage cost rent extraction.

https://www.dropbox.com/s/cv5fsqt86rgkcqq/RentVsROP.JPG

I am really uninterested with one-liners that simply refuse to engage with the rest of what I wrote. There's a line between engaging in debate and trolling and imo, you are now on the other side of it. Good luck!

yes, all my posts on this thread have been one liners and trolling - a cursory glance through my posts on this thread reveal nothing but one liners and attempts at trolling

and you take the biscuit moaning about people taking one liners and not engaging with the rest of what is written - that's exactly what you did in the post that prompted the response which has offended you so much! You literally took one line of my long post, replied to that, and ignored the rest of it - then when I responded to you doing that, you get all precious about it

get over yourself

The US Pension Benefit Guaranty Corporation in its 2011 annual report states that 50+million workers are covered by employer sponsored retirement plans. These are private employer sponsored plans. You may be including government workers in your figures. I exclude those numbers in order to be consistent with Kliman's categories used in chart 8.2.

The PBGC reports that in 1979 the number of private sector workers covered by defined benefit plans, where a pension payout based on years of service and earning is "guaranteed," was 20 million. In 2009, 5 million. The numbers in defined contribution plans, where only a contribution by the employer is made during that same period have grown from 5 million to 35 million. The number of employees covered by schemes mixing DB and DC has grown from 10 million to 20 million.

Defined contribution plans are the main method by which corporations have reduced pension obligations and payouts. Corporations can reduce their contributions to zero; they can convert the plans to cash balance plans. They can freeze the plans.

In addition, the "mixed" or hybrid DB/DC plans that have doubled in employee participants are cash-balance plans. A cash-balance plan reduces the growth rate of pensions, and so the total obligation. According to Ellen E. Schultz's Retirement Heist, cash-balance plans freeze the employees pension at the point of conversion. Then that amount is converted into a lump sum called the "opening account balance." That opening balance is then awarded a fixed rate of growth.

However, as the CBO reported in 2005:

See above. Defined contribution plans are no more immune to freezing, reduction, conversion than defined benefit plans. What they do do is eliminate a corporations pension liabilities to zero. Flat zero.

Of course they are a corporate asset. When a corporation buys another corporation, it takes over the defined contribution plans, and can "adjust" the program anew.

My "broad brush" comment is that their is no reason to regard corporate contributions to pension plans, whether defined benefit or defined contribution or the hybrid cash balance as compensation paid to an employee, as contributions are not disbursements. Actual payouts to retirees can be considered compensation. Again, the broad brush comment is that corporate contributions to pension funds cannot be regarded as compensation as all corporate plans are subject to freezing, termination, etc.

First off, legally, the pension plans are corporate assets. That's the point. These plans are not the property of the employees. Legally they are the property of the sponsor. The sponsor has an "obligation" to act in certain defined manners, which of course the sponsors seek to weaken, broaden, evade, etc. Just like any other corporate asset.

Secondly, you are claiming that overall pension outflows balance with the cash contributions made by corporations? That's a little hard to swallow, because the whole basis of defined benefit, cash balance,and defined compensation schemes, as flogged by the sponsors, is that outflows can exceed the inflows of actual cash through "skilled management."

Thirdly do you have any data you can produce that show outflows from private employer retirement schemes to production and non-supervisory workers "balancing" orpresenting some rough equivalent to the corporate cash inflows?

EDIT: and this:

really misses the point. The issue isn't "obligations"-- of which, realistically, looking at the record there are none, the issue is actual compensation to the workers. If I promise you $1000, providing you with a $20 bill and an IOU for $980 10 years from now, what is your actual compensation? If I'm supposed to put $90 a year in a "plan" so that you have your $980 and I only put $50 a year in the plan, what's your compensation? $20. And at the end of 10 years your compensation might be $500, and then again it might not be. So neither the theoretical annual $90 dollars, nor the actual $50 can be considered compensation.

Now if we are going to consider contributions pensions as part of compensation, deriving from, as all profit, value, revenue do, labor power, then it seems to me we should consider the loss of pension benefits, the reduction in pension benefits, as lost wages, and adjust the compensation numbers for those reductions.

I have never disagreed with Kliman that the underconsumptionists are incorrect in their assessment of the causes of stagnation, contraction etc. But it's a little bit funny that he simply glosses over the 22 year sustained (relatively) decline in workers wages, the cyclical upturn 1994-2000, the inability to wages to achieve the level of 1970, that he, in attempting prove that stagnating wages did not cause the contraction, misses the point that attacking wages and compensation levels is and has been the signature characteristic of the overall period after 1970.

See the edit. Any super-profit obtained by any industry will already be accounted for in the aggregate figures.

You keep saying this, but have provided no evidence that any double-counting has taken place. This seems to be a figment of your imagination. The figures in B-29 are taken from the 2008 Economic Report of the President, they are not compiled by Kliman. I highly doubt that they double-counted, and until you provide some evidence otherwise you should probably try to find a new point to gripe about.

Ocelot, we can phrase this any number of ways, with any number of metrics, like: did the United States have the largest MBS market of any capitalist country? Did the US have the largest commercial paper money-market of any capitalist country? Did the US have the largest leveraged loan market of any capitalist country? Did the US have the largest commerical real estate mortgage backed securities market of any capitalist economy? Did the United States have, by assets, the largest investment banking operations of any capitalist country? Did the US have the largest GDP of any capitalist country? Was the US the single largest industrial producer of any capitalist economy? Did the US Fed establish opened-ended currency swaps for dollars with the Bank of England, the ECB, the Bank of Japan, the central banks of Switzerland, Brazil etc.etc in order to prevent the freezing of world trade? Did this "predicament" of capital as capital first manifest itself in the US with rising rate of mortgage delinquencies? Did the bankruptcy of Bear Stearns not mark the eruption of the crisis, announce that the party was over?

We can add: Was the collapse of Lehman Bros the "shock" that exposed the desperate fragility of the entire capitalist network? Would the collapse of AIG, another US company, have been of cataclysmic impact to the US financial network, and thus the global capitalist network?

I think the answer to all those questions is "yes." That's what I think Kliman means by "epicentre." I think Kliman is pretty clear that the origins of crisis are in capital's existence as capital and the US happens to be the most acute manifestation of that.

I don't know why any of that makes Kliman "US centric." It is what it is.

The "earthquake" that Kliman is analyzing is the impact of wages on profitability and expansion. If anybody has an analysis of global capitalism that deviates substantially from the analysis Kliman provides of US capitalism; if Kliman's analysis of US capitalism is incomplete because it ignores certain critical components and interractions with Asia or the EU or the Latin America, then I'd love to see them.

The strength of Kliman's analysis is its specificity. He is accounting for what he can account for.

But what is being counted, even once? Actual compensation paid to workers. Or corporate contributions to pension funds?

Corporate contributions should not be regarded as compensation. Such contributions do not belong to the workers.

If you look at the titles on the table on the graphic I posted you can see this quite clearly relates to private sector. This is the BIS report I got those numbers from (it's an old one, but the point was to demonstrate the movement away from defined benefit to defined contribution). The relevant excerpt is below:-

The figures given in this report by the Department of Labor for private US pensions are also far higher than the 50 million you quote (see tables E5 and E8 - also note table E14 which shows defined contribution contributions from companies dwarfing defined benefit contributions)

Anyway regardless of the absolute numbers, the trend in both sets of numbers is quite clear - a move away from defined benefit schemes (where the employer bears the risk of insufficient investment returns to cover future obligations) to defined contribution schemes (where this risk is offloaded to the employee). Your initial comments about pension scheme contributions in relation to funding & future obligations relate only to defined benefit schemes, a now tiny fraction of overall pension schemes. My point was to point out that your comments in relation to things like funding and future obligations only apply to a small fraction of pension schemes, yet your post did not make this distinction and instead inferred that what you said applied to all pension schemes. It doesn't.

Absolutely

I never suggested they were immune to freezing, reduction or conversion - my point was that you made generalised comments about pension schemes as though they applied to all pension schemes when in reality they only apply to a small and ever decreasing proportion of them

Sorry but this is bullshit - they make take over the responsibility for it, but they do not take over the assets/liabilities in terms of having any actual ownership of them. They can close the scheme to future entrants, but they cannot retrospectively take back the assets of the scheme onto their own balance sheet as if they were their own.

Assets of a pension scheme (benefit or contribution) do not appear as assets on the company's balance sheet (and as far as I know, even any shortfalls/deficits on a defined benefit scheme overall are not actually brought on to the balance sheet as a liability) An asset is defined as the rights or other access to the future economic benefits controlled by an entity as a result of past transaction or events. This simply does not apply to pension scheme assets. Yes the company can close the scheme at any time or refuse to take in new members, but they cannot treat any accumulated assets in the scheme as their own

OK so you're arguing that they should not count as compensation on the way in (to the scheme) but they should be counted on the way out (to the retiree) - which is not as bad as what I thought you were saying initially which was that they shouldn't be counted at all. But I still disagree with you as to what should be counted. As previously mentioned payouts to retirees are a mixture of employer contribution and long term investment return on those contributions. Broken down this is the same as saying any interest earned on wages held in a workers bank account is actually employee compensation, which is just daft. Just because an employee doesn't directly get the cash benefit of a pension contribution to do as they please with there and then, it doesn't mean that this should be ignored when looking at the total amount an employee can 'extract' from that company due to them being employed there.

Again this doesn't stack up. This same logic would lead us to saying that wages that are paid into an employees bank account should not be counted as compensation because bank's can go under and deposit insurance/guarantees may not cover the whole balance in the account. Bonuses paid to workers in the form of shares or company debt should not be counted as compensation because that company could go under and therefore the value could be wiped out? Money in general should not be counted as compensation because hyper inflation might erode most of its value? Now I know these examples are very extreme and admittedly absurd, but not counting something as compensation just because something negative might happen to it in the future is pretty much what you're saying here. The simple fact is that the ongoing contribution to the pension scheme by the employer is an outflow of the company both in profit and cashflow terms, with the ultimate beneficiary being the employee or their estate. If an equivalent employee who works for a company who doesn't have any pension scheme had to buy the equivalent long term retirement benefit provision in the shape of a personal pension plan, they would have to pay a cost similar to that which is borne by the company who does provide a pension scheme. And to say that an employee doesn't benefit immediately at the time the contribution(s) are made is not true, the benefit in the sense that they have some degree of certainty around post retirement benefits, and don't have to spend any of the actual money they receive in actual wages on personal pension plans

edit: also your comment that they shouldn't be included because they are subject to termination or freezing is also incorrect - if a scheme is terminated or frozen, this only applies to future contributions and to new entrants, it doesn't apply retrospectively to contributions already made to existing members, these stay in the scheme with the employee, not the employers, as the ultimate beneficiary

In accordance with generally accepted accounting principles, assets of the company should be disclosed separately and explicitly (i.e. not netted down against corresponding liabilities) in the balance sheet of the company. I can't speak authoritatively about the US position but if you show me one set of financial accounts of a UK company where pension assets of a defined contribution pension scheme are included within the assets of the company's balance sheet i'll eat my hat. As mentioned previously if there is a deficit on a defined benefit scheme, then depending on the territory's accounting standards this can be shown a a liability on the balance sheet or more often it's not and just disclosed in a note to the accounts. They key thing though is that if, as you say, defined contribution (or defined benefit for that matter) pension scheme assets are assets of the company, then they should be reported as assets of the company, as assets in the assets section of the company's balance sheet. Show me one set of accounts that does this and I'll believe what you're saying. But I can guarantee you will not find one. You may find some companies showing a liability for any net deficit on a defined benefit scheme, but even then it will only be in respect of defined benefit schemes. No assets or liabilities of defined contribution schemes appears on a company's balance sheet and as we've already established earlier, these represent the majority both in terms of members & assets. So you are simply wrong to say that these assets are legally assets of the company. If they were assets of the company there would be no laws against companies plundering the company pension scheme to keep the company afloat. If these assets were assets of the actual company they would be allowed to do what they want with them, but they're not and they can't. If you were correct that, legally, assets of defined contribution schemes belong to the company and are legally their asset, then every single listed company with a pension scheme are compiling and getting accounts signed off by auditors that do not represent a true & fair account of their financial position, because they do not show these assets on their balance sheet. That's because they are not assets of the company.

I made no such claim. I didn't say that outflows balance out with contributions made. I said that the ultimate cash payments made into the scheme eventually balance out with the amounts that the company owes in contributions (i.e. difference between cash paid and accruals made). Here is what I said:-

"Also over time the cash contributions do balance out and represent the overall outflow from company to pension scheme"

So my comments in this area were purely about the contribution side from company to scheme and the difference between actual cash contributions made and contributions due (i.e. in response to your points about company's can suspend actual cash payments if they have an actuarial overfunding in relation to the schemes current projected liabilities, although as noted overfunding only relates to defined benefit accounts).

as per above, I never claimed they did balance out. In fact I explicitly mentioned in my post to Red Hughes above (made before you made your post) that payments to pension scheme participants were made up of contributions paid in by the employer plus investment returns 'earned' on those contributions over the life of the pension scheme. So I would have thought this comment by me would have made it very obvious that I did not hold the view that contributions in to a pension scheme by an employer equalled or balance with payments coming out of that scheme to the employee (they could be more, they could be less, they could be the same - absolutely no tied relation between the two however)

First this:

Absolutely bullshit. What certainty? Employees have the certainty so they don't spend any of the actual money they receive in actual wages on personal pensions schemes? Have you looked at the growth in 401Ks, 457Bs, IRAs etc over the last 20-30 years? Are you aware that the PBGC is now the custodian of 4300 failed pension funds with obligations to about 1.4 million people.

There is no certainty concerning any pension payout. Courts have ruled that even if corporations promise "lifetime health coverage" as part of a pension plan, in order to get people to retire, corporations can unilaterally change that provision even if the corporation hasn't established, much less advice the pensioners, of a "reservation-of-rights" clause allowing such an "escape."

As for the numbers covered, I'll stick with those of the PBGC where these economically certain pension plans get dumped after being gutted.

As for pension plans not being corporate assets, again you don't know what you are talking about. Just one example, in 2005 Lucent's pension plan was so "overfunded" that it gave Lucent a $973 million income equal to 82% of the company's pretax profit for the year.

Lucent then used the income from the retiree pension plans to pay for retiree health care, thus releasing it from a separate obligation for the health care. When it became Alcatel-Lucent, it continued to cut benefits, and along with pension plan income, generated 1.7 billion in income which which went straight to the company's bottom line, offsetting about 800 million in losses.

Do corporations break these plans out as "assets" as "ready cash." Of course not. That does not mean they are not treated as corporate assets to generate cash income for the corporation at the expense of the employee.

Yes, misread your remark about inflows and outflows. Sorry, I'm dyslexic, sometimes that happens.

Much more later, got to go, but the more I think about this, the more I think the whole notion of counting corporate pensions as compensation to workers is complete and utter bullshit

firstly, i said 'some degree of certainty', so don't try and make it out im saying it's a cast iron guarantee. It's certainly more certainty than if no provision were made for their post retirement benefits. Sure it might not be enough, they might have to supplement it with things like 401k's etc, and some of those pension schemes may fail yes. But all these things do not detract from the fact that an employee who has a defined benefit or defined contribution scheme, funded by their employer - has more certainty and right to future income (which is a benefit in the present) than one who doesn't

And since you mentioned PBGC - as i understand they are the body that steps in to ensure pensions are paid to retirees if the company backing the defined benefit pension scheme goes bust. And as I understand it the PBGC is not funded through tax dollars, but through levies on the pension scheme providers themselves (so even if the pension obligations are not met by the individual company, they are met by Capital in the wider sense). So we can add this to the list of things that give some degree of certainty.

So can you show me one set of company accounts that include pension assets from defined contribution schemes in their balance sheets? Yes or No? If Yes show me the accounts, if No why not? If they are legally the assets of the company as you claim then under both US GAAP and IFRS they should be shown as assets on the company balance sheet (and not netted off against any liabilities)

It's you who doesn't know what they are talking about i'm afraid. A defined benefit scheme is made up of assets & liabilities. The 'goal' is to have assets in place equal to the amount of projected liabilities. You claim that all of the assets in the scheme are legally and effectively assets of the company who administer the scheme. Your example of Lucent was not an example of a company getting any benefit from the total assets of the scheme. Your example was one where there was a 'surplus' of assets in the pension scheme relative to the liabilities. So just as the company have an obligation to plug the gap if theirs a shortfall, the fact that they are entitled to clawback any surplus of assets over liabilities is nowhere near your claim which is they have the right to do as they please with all the assets in the scheme. Example Pension scheme has 120 of assets and 115 of liabilities, so the net surplus of 5 I agree the company could access this in some way through either reduced payments or investment income on the surplus. However your claim is that the company is legally entitled to do what they want with the whole 120 of assets. They don't. And your examples go nowhere near showing that they do.

Yes, there's a lot you've not addressed from my previous post, so look forward to that

edit: Just a general comment though, I don't in anyway have any illusions about private pension schemes and am well aware of the various ways in which company's look to and do avoid their on paper obligations, and legally and illegally use their pension schemes in ways which are detrimental to employee interests. I'm not cheerleading them at all. But at the same time to take the view that you do that corporate pension schemes should not be treated at all as something that labour extracts back from capital, goes far far too far the other way.

The very fact that there's been a mad rush by capital to close down defined benefit schemes over the last 20-30 odd years and reduce contributions to defined contribution schemes shows just how much a burden they were/are for capital. And who was on the other side of that burden, who was the beneficiary? the worker, the employee, labour of course. That you claim that this was not the case is frankly absurd. If all the assets of corporate pension schemes were actually corporate assets as you assert, there would be no need or desire to shut them down, but there is. How can you explain the drive to close down all these defined benefit schemes while squaring this with the idea that these pension schemes are not a significant benefit to employees/workers. What was the drive to close them down if they did not represent a chunk of value being re-appropriated by labour from capital?

Like I said, what certainty? You said "some" certainty. I never asked for absolute certainty, but show me the "some" over the past 30 years. Some is a quantity. What quantity of certainty is there, given the actual practice regarding pensions? None. Unless you happen to be in the RRB system in the US, and Ryan and his crew can't wait to get their hands on that. Or you're an executive. Where is that "some certainty" for the autoworkers, steelworkers, telecommunications workers, IBM employees, airline employees.

Re Lucent, yeah that's what I said, they had a "surplus" and they move the surplus to the bottom line. But you ignored the part of the story where they cut benefits to generate a surplus so they could move $1.7 billion to the bottom line, remember? That's how corporations meet their obligations and generate "surpluses." Speaking of Lucent, let's look into it, to see how "economic certainty" and "obligations" play out. When Lucent was spun off from AT&T it had about $29 billion in pension liabilities and $34 billion in assets to cover the obligation. Lucent began to trim benefits to retirees. Meanwhile, during the 1990s, when workers' real compensation increased, along with real increases in profitability, Lucent's pension assets hit $45 billion, a surplus of !6-17 billion.

That's a lot of assets, and it's" surplus"-- but it's a surplus generated from workers' compensation isn't it? So why should it be utilized to reduce benefits, reduce compensation? But that's exactly what happened. It used $800 million from the pension assets to cut 54,000 from its payroll. And Lucent kept right on keeping on. Lucent spent 4.7 billion in pension funds [funds that count as "employee compensation" surplus or not] reducing its work force from 118,000 in 1999 to...........22,000. Now those of us in the US know that employees losing a job and then obtaining another one have generally taken a 30-40% cut in pay. So.......now we're in the position of saying......oh employee compensation increased because of the surplus amounts in the pension plan, when in reality, actual employees compensated, and actual employee compensation declined.

Maybe we've reached a problem with looking at "aggregates." Sometimes they don't tell you what's really going on in the relations between classes. Sometimes they only tell you what somebody else wants to know. Not that we shouldn't use aggregates, but we better be careful before we describe numbers as the reality.

Now guess what? It's 2004 and Lucent's retiree population has grown to 127,000, and if the "surpluses" had been left alone no problem-- the decline in the stock market would have reduced Lucent's pension fund surpluses to the amount needed for coverage. But I'm getting ahead of myself.

With the downsizing, Lucent moved its health care compensation costs for about 100,000 employees from its own account to that of the pension fund because these were now former employees. Sound like a corporate asset to you? Sounds that way to me. Sounds like employee compensation to you? Sounds like looting to me.

Well, let's continue. Having downsized, and having moved its surpluses into its own bottom line, Lucent was actually going to have to pay a dollar or two towards its obligations. But guess what? Lucent cut its benefits one mo' time. Lucent could not cut the retiree's pensions , oh no, that would be illegal [then]. But Lucent eliminated dental coverage and Medicare Part B reimbursements from its pension coverage. It could eliminate death benefits, coverage for spouses and other forms of "compensation." And it did. Long live Ayn Rand. And then you know what? The cuts generated a reduction in liabilities for retirement benefits of 1.1 billion dollars, so Lucent did what it had done before -- moved it to its bottom line in subsequent quarters as income.

And it goes on and on.

I said quite clearly that the US corporations do not list pension funds as assets. They break them out separately. I said US corporations use, and can use, and will use pension funds as a corporate asset; changing the terms to reduce obligations, closing the plan, selling the pension plan along with divisions of the company, thus generating cash. That's what they do, that's what they've done.

So if anyone wants to go ahead and count pension contributions as "compensation," then let's count the looting of the pension plans as deductions from workers compensation.

Defined contribution plans are not immune to manipulation, but since the company has zero pension obligations, the room for maneuver is a bit less.

Quite frankly, I think anyone who looks at a cash-balance plan, a hybrid plan, a defined benefit plan, a "pension equity plan," an employee stock ownership plan for funding pensions and sees "compensation" ought to have a check-up from the neck-up.

Anybody who seems "some" "economic certainty" in the various pension schemes floating around is simply not paying attention.

OK,

The situation with Kliman's handout seems to be that he used BEA figures and calculations in his first table and his book whereas he seems to be using Census Bureau figures when gives his chart of per capita income by age. In the BEA figures, pension contributions are calculated as they are made into pension funds whereas in Census Bureau figures, payout out from pensions are counted as income (and payments into pensions would be deducted). So there is indeed no reason to assume double counting in this case.

Still, extraordinary findings merit extra vigilance so I'd claim I'm justified to keep hammering on potential problems and inconsistencies here (relative to present day experience, I'd a claim of the working class getting richer is somewhat extraordinary and Kliman's approach is a bit confusing to boot).

So continuing:

1) A key part of the argument is Kliman is counting transfer payments along with compensation (including social security). Transfer payments are money the government gives to the working class. So where does this money come from? Taxes on the working class, right?

That, along with BEA's table, would lead me to conclude that employee compensation figures published by the BEA are compensation with social security taxes deducted but with ordinary taxes not deducted. That might work for the BEA's purposes but Kliman is arguing for compensation plus transfer payments. One might conclude that the transfer payments given to the working would be balanced (or more than balanced) by state and federal taxes taken from the working class. (I'm going by Kliman's note #3 on page 223 for how he derived his figures).

2) Kliman's Census Bureau chart of incomes by age category certainly suggests that the income of present day workers might only be high because workers are currently collecting the pensions they earned in more prosperous times since only workers aged 55+ have seen their per-capita income rise. Perhaps using the BEA figures for present compensation guards against this. That brings up Artesian's problem - it's reasonable to assume that corporations will be taking some significant amount of present-day pay ins.

Of course, I might well be missing something given the complexity of all this and the obscurity of documentation.

Kliman already subtracted taxes. Pg. 153-155 discusses what he calls "net social benefits", which equal benefits received minus taxes paid in by the working class.

Also, I see no reason, from the quote you provided, to come away with the belief that NIPA only counts social security taxes. They count "personal taxes", which is defined as income taxes paid by persons (not businesses). So that would certainly include other taxes.

Either way you look at it, the BEA figures or the census bureau chart, worker's compensation has gone up. So you can't say that this is an artifact of one or the other accounting method.

As far as Artesian's problem goes, it seems obvious that the amount of money that will be lost due to broke pension funds is not nearly enough to reverse the general trend that Kliman points to. We're talking anywhere between 20% and 36% gains in size-adjusted household incomes (depending on whether you count pre- or post-tax, and other issues)! Even if we were to assume an outrageously large and unrealistic level of defaults and cutbacks on pensions, this would not significantly change the overall picture of a working class that has had more or less a constant share of income.

Which brings me to the point -- if you think that this matters, then make some assumptions about the levels of defaults and clawbacks based on past experience, apply the projected losses to the numbers and show that this affects the overall picture. You won't be able to do it, because it doesn't.

You outlined above how companies go about reducing their ongoing long term obligations to workers post retirement benefits. As these obligations are reduced, the amount the company needs to pay in the here & now (the contribution) is reduced accordingly to reflect the reduced longer term liability.

So simple fact is that by including pension contributions as compensation, the levels of looting of those same pension plans (which reduce future contributions by the company) are reflected automatically by doing so. Following a reduction in the agreed long term obligations to workers, the level of contributions can be reduced accordingly. By counting these annual contributions over time, the decimation of workers post retirements benefits is captured

I'm not going to spend any more time on this because:-

1) we are clearly at a point where neither side is going to budge and you continue to ignore and refuse to address the key/pertinent points of my previous posts and instead focus in on narrower throwaway parts of it. so it doesn't make for a productive discussion when that is done, and

2) as mikus points out, it doesn't actually make any difference to the wider Kliman conclusions

I won't be able to do it because to do so in the "aggregate" will require reviewing each individual pension fund for changes, failures, etc. I know of no agency, department that tracks, records, and reports these changes.

And I don't have to do it. I am not the one claiming that "contributions = compensation." Let's try an example. We'll make up a company, we'll call it-- oh anything that comes to mind. We'll call it Lucent. Suppose our supposed Lucent, over a 4 year period makes 2 billion in contributions to its pension fund for non-supervisory workers. Now suppose over that during those same 4 years, through "skillful investing" that pension fund shows a surplus of 6 billion. The CEO of Lucent and the board, now move that 6 billion to the corporate bottom line as income generated from investments. Now the stock market tanks, and low and behold, Lucent's pension plan is now underfunded, or Lucent claims it is underfunded, and Lucent handles this make believe pension in this real world by----reducing benefits, restricting the plan, reducing its own contributions.

How much of the 2 billion contribution is compensation?

"over time" Priceless, for everything else, there's compound interest.

Of course, it's "over time." So 10 years from now, we produce another graph showing the compensation going down. But the compensation you declared as real during the uptick of contributions was never realized as compensation, was it? The so-called compensation is and was illusory. As in the case of Lucent, the 2 billion contribution was to the company coffers, not the employees.

Maybe the whole plan fails, is destroyed as occurred in the spin-offs of auto parts companies, airlines, etc. The prior "positive contributions" are gone, and the future contributions don't exist, so where is the actual compensation? And no, this is not like workers' losing their savings when a bank goes under, because the workers savings are not counted as additional compensation to his her wage.

Like your "some certainty"-- it isn't.

I think a closer breakdown of who within the working population is getting higher compensation would probably shed more light on the matter.

Also rising structural unemployment, increases in job insecurity through temp agencies, mean that whilst something like hourly compensation could rise by a slight amount since the 70s it wouldnt feel like it amongst the wider working class as it is offset by more peroids of unemployment and underemployment.

Also suburbanisation, the need for alot of families to have two cars for commuting, the need for convience food and other services that are tied to such things mean the working class feel less well off. We all know how you save money when you have more time to cook etc

Oh and without wanting to go down the anti consumerist avenue, consumerism has pushed on the working class a higher moral cost of reproduction, with a real material prrssure to have this or that technology etc.

Contributions made in the past stay in the pension scheme, invested in the markets the return on which (along with the initial capital contributions) ultimately to be paid out in retirement benefits to members (or if the scheme goes bust PGBC steps in to take on the liabilities which in turn are funded not from tax dollars but from levies on providers). Of course the contributions are not realised at the point they are made, even in a scheme where no changes are ever made to it, that's because workers don't get paid pensions erm until they actually retire.

On this logic and under your 'compensation realisation' rule - the total actual money earned and received as direct wages should not be included as compensation because inflation might erode the value of any amounts saved so that this 'compensation you declared as real during the uptick was never actually realised'. Or they might invest some of their wages somewhere and lose the money in that investment, so they've never realised the value of that compensation in terms of using it to obtain use values.

The crux of your argument is that if something could happen to something in the future then that something should not be counted as compensation

boiled down, this absurd logic taken to its logical conclusion says only actual immediate & historic expenditure by workers should be included as compensation, because any kind of value they have (re)captured but not immediately used to exchange for use values is potentially at threat from something that may or may not happen in the future, therefore it should not be counted. So there you go, in your world, consumer spending by workers is the sum total of 'your' workers compensation figure. The more workers spend the more they are 'paid', the less they spend the less they are 'paid'. Good luck with that one.

hey rev - congrats on the job. pushing that income distribution curve way over!

Talk about not dealing with the argument. I'm not arguing what could happen, I'm arguing what has happened. You have credited compensation where there is none. There is nothing that sequesters, preserves past contributions, particularly as those past contributions, as the 2 billion in the example can be moved out, and the plan can be underfunded.

Cost to the capitalist is not compensation to the worker.

This has nothing to do with inflation, except.........we adjust for inflation, we adjust for the real
wage, don't we? You're counting a contributions as actual compensation. Mere technicality.

Your logic is that reduced actual pension benefits are additional compensation paid to workers, not a loss of compensation. A worker at an auto parts plant whose pension benefits were reduced some 80% has actually achieved the "some degree of certainty" you throw out there as a benefit in the here and now.

So we get some people, with their aggregates, claiming "real compensation" has risen, based on pension contributions, when in fact real immiseration, real losses have been sustained. Creative accounting for fun and profit. FREE ANDY FASTOW!

Call it the limits to aggregates, if you wish. I call it bullshit.

And by the way, no, contributions in the past do not necessarily stay in the pension scheme. Such contributions can be, have been, eroded in absolute terms in any number of the 4300 failed pension plans now in the PBGC portfolio.

Short version: follow the money.

inflation has eroded the value of money in the past, workers have lost savings in all kinds of investment schemes/pyramid schemes/cons/equity markets, banks have went bust with not all of the deposits covered by deposit insurance - all these things have happened in the past and conned workers out of the realisation potential of money they had previously earned

your 'compensation realisation' approach should either be applied consistently or not at all - if you insist on applying it to one area you have to apply it to others if you're going to have any consistency of approach

your basically saying that until an element of value that has been re-appropriated by labour from capital is actually 'realised' in an exchange against use values, then this element of value should not be counted as compensation because at this stage it is only 'potential' compensation. if you apply this rule to future benefits like pension obligations, you need to apply it to basic things like money received as wages that has not actually been spent yet. Because in both cases it's 'potential' has not been realised. I don't agree with this approach at all, but if you're going to apply it, at least apply it consistently (of course you can't apply it consistently because to do so would give you absurd conclusions, which unfortunately you're going to get if you start off with absurd premises)

no one disagrees that income inequality has risen in the last 4 decades so we already know who is getting it!

as previously mentioned though increasing income inequality is perfectly compatible with rising real wages (social or direct) across all income bands

I was more thinking in terms of explaining why Kliman's argument seems so counter intuitive on the subjective level.

Also Kliman says he uses stats for non supervisor roles, I'd be interested in what groups this actually includes and excludes.