Pensions, paternalism and ideology

Today’s report by the Employer Task Force on Pensions (set up by the government, not employers) highlights three aspects of our dominant New Labour/managerialist ideology.

Aspect one is paternalism. The report begins from the twin presumptions that people aren’t saving enough for their retirement, and that something should be done about this. 

Both presumptions are dubious. Research by Sarah Smith, Susann Rohwedder and John Karl Scholz suggests that most people do save enough for their retirement, at least if they are allowed to retire at a time of their own choosing. Sensational talk about huge “savings gaps” is more contentious than you might think.

But even if it’s not, it’s not clear that this is a problem for anyone except those individuals stupid enough not to save enough.

Aspect two is the belief that there’s no conflict between bosses and workers.

The ETF says: “a growing number of employers do not see the same value in pension provision that they once did.”

This is no surprise. The two conditions in which it was worth their while to contribute to pension schemes have ceased to exist. These were:

• When share prices rose faster than salaries, firms could take the pension surplus for themselves. But this was an artefact of the 1980s and early 1990s. It’s not likely to happen again.
• Final salary pensions gave workers an incentive to stay with their employer. However, with companies facing increasing firm-specific volatility, perhaps because of increasing creative destruction, the value of retaining staff – especially perhaps older staff who are less able to adapt to new technology – is fading.

Indeed, for employers, it might be a good thing if workers don't save for their pensions. This would create a pool of workers who need jobs in their old age. Such an increase in the labour supply would hold down wages.

In these ways, the interests of bosses and workers now diverge, in a way that they didn’t a few years ago.

Despite this, the ETF calls on firms to increase their pension contributions to around 10 per cent of salaries.

But why should they do this? It’s because if they don’t do so voluntarily, the government will compel them to. The report says: "This is the ‘last chance saloon’ for voluntarism. If business fails to grasp this opportunity, it will face higher taxes and/or compulsion in the future."

And herein lies the third aspect of managerialist ideology – an ignorance of trade-offs. If you raise the price of something, people will buy less of it. Better pensions for some workers, therefore, means unemployment for others.

I highlight these three aspects of managerialist ideology for two reasons. First, to show that even apparently technocratic documents are ideological texts.

Second, to remind ourselves that there are alternatives. Why can’t we recognize trade-offs between important values, conflicts between interest groups and that the function of government is to protect us from other people, not from ourselves?

Comments

[Blimpish]

Answer: Because that would be sensible.

And yes, you're very right about the ideological nature of all policy documents.