Relative
to male high school
graduates, the college wage premium soared from 35 percent to 93
percent between 1973 and 1992 (page 177,
The
Future of
Capitalism, by Lester Thurow).
However, the standard
deviations are also quite large:
"During the peak
earning years of forty-five to
fifty-four years of age, 26 percent of all white males with bachelor's
degrees will earn less than the median white male high school graduate
and 21 percent of al white male high school graduates will earn more
than the median white male with a bachelor's degree (page 282, The
Future of Capitalism, by Lester
Thurow).
Perhaps
the most responsible review
of social security issues is "The Coming Generational Storm" by
Laurence J. Kotlikoff and Scott Burns. Here is an outline of their
proposal, from page 156:
- The accrual of
additional Social Security retirement
benefits is eliminated. Ramsey's paraphrase: immediately stop making
new unfunded promises but keep all the old promises.
- Current retirees and
current workers receive their
accrued Social Security retirement benefits. Ramsey's paraphrase: old
promises are kept.
- Social Security's Old
Age Insurance (OAI) payroll tax
is eliminated and replaced with equivalent compulsory contributions to
PSS accounts. Ramsey's paraphrase: mandatory personal savings accounts
are set up to take care of new retirement needs of new workers, with no
change in take-home pay.
- A new federal retail
sales tax is used to pay off the
accrued retirement benefits owed under the old system. Ramsey's
paraphrase: the money to keep the old promises must come from
somewhere.
- Workers' PSS
contributions are shared fifty-fifty
with their spouses.
- The government
contributes to PSS accounts on behalf
of disabled and unemployed.
- The government matches
PSS contributions on a
progressive basis.
- All PSS balances are
invested in a single
market-weighted global index fund of stocks, bonds and real estate.
- The government
guarantees the real principle that
workers contribute to their PSS accounts. Ramsey's note: real means
growing enough to match inflation.
- Between ages 57 and
67, workers' PSS balances are
gradually sold off and transformed into inflation-protected pensions.
- If a worker dies prior
to age 67, any remaining PSS
balances would be transferred to PSS accounts of the worker's heirs.
Kotlikoff and Burns
personally believe that there is no
chance that Congress will implement a reform plan such as this, but
they offer the plan as proof that we don't have to let a financial
crisis happen.