Pension trade-offs and democratic deficits

Forget houses as a source of secondary income – that’s so 2007. After the latest recession, Americans are increasingly dipping into their retirement savings to fund on-going consumer expenses. Many private 401(k) plans have rules that allow workers to withdraw some amount of saved funds before retirement and such early withdrawals are on the rise.

The individual irrationality of raiding a 401(k) plan fits nicely with the old stereotype of the stupid poor who don’t know how to save; as if this is what separates everyone else from the truly wealthy. We not only lack the human capital for high-skilled, professional or managerial labour – with its attendant high salaries, good benefits, possible stock options, and so on – but this lack of human capital also translates into unfortunate decisions about what to do with incomes and savings. Inequality of resources becomes a question of less capable faculties in more ways than one: worse economic outcomes are compounded by inadequate life-planning, whether you have a pension or not. In short, inequality naturalized. (more…)

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