My brother is a professor at Baylor University. He fits the category of “poor” because his income is below the poverty line while he is going through his PhD program. Of course, his income is only part of his compensation as his tuition is free and other things in his life are subsidized (thankfully!). He brings up an interesting question as a response to my earlier post “With Blinders On” which I’ve reposted here followed by my answer.

Q: As a member of the comfortable poor, I am very interested in this proposed pension plan. But I have a question: given that my employer has budgeted $20,000 a year for my services, who will pay for this cool pension?

1. Take it out of my earnings. I think I could probably do a better job investing my own money, so this doesn’t seem like a real benefit.

2. Force my employer to budget a larger amount for my services to cover salary and pension. Unlikely my employer would be happy to do this, given they are on a somewhat thin margin as it is. Most likely a few people in my department would lose their jobs and the rest of us would have to work longer hours for the same salary to make up for the lost productivity. Or they could raise their prices, but then competition is such that we would go out of business. Most likely they would phase out all the jobs that could be relocated offshore, leaving only a few where it is comparatively expensive to employ people.

3. Tax somebody else to pay for my pension. Which, as a poor person, sounds kinda cool to me. The problem is that I have a hard time figuring out exactly how I have a right to someone else’s earnings. Perhaps I do, but I haven’t figured out what justifies that right.

So, who pays, bro?

>> While my answer below is not really an answer but a plea for a more thoughtful discussion about possible solutions and a discourse about our responsibility for not just the poor, but our society as a whole, I’d appreciate feedback:

A: You’re right. You’re screwed 🙂

The problem as I have noticed is that the middle class in this country is an endangered species. Whereas it used to be possible for a man to join a union and go to work and support his family with his wife staying at home to raise the kids, this scenario is more and more unlikely. This same man could work for the same employer for 30 years and be assured of a nice pension with health benefits when he retired – completely alleviating society’s (read: the government’s) costs at taking care of this man or his family.

Again, this scenario is more and more unlikely.

The reality today is that this man will have more than 5 careers – not jobs; careers in his lifetime. He has no job security as in the past and rather will live in fear of losing that job to downsizing or other global forces beyond his control. His wife will be forced to work, not to save, but just to pay their monthly living expenses. Since there are no more pensions, and those companies who do have them are defaulting on their obligations and shuffling that expense onto the government reinsurance department – who will pay out roughly less than 60% of the obligation.

This scenario is not getting better – it is getting worse. This gap will continue to grow and these pressures will continue to increase.

Is the response to this just to shrug our shoulders and say “oh well”? It’s somewhat cliche, but the poor are getting poorer in this country. Unlike some of your fellow poor, you and your wife have jobs that are mentally stimulating and your life is heavily subsidized by a world-class university. You don’t have day-care expenses, because you aren’t both tied to a 8-5 existence at work. I know you wouldn’t argue against the fact that you are better off than many families in your stated income-bracket.

As the poor do get poorer and the dollars they do have buy less and less due to inflation, what is the solution? Just watch the slide and smile?

The Shrinking Middle Class

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