401 KO: Why Your Retirement Account Won’t Support You


The NewCo Daily: Today’s Top Stories

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401(k) accounts were sold to American workers as a way to participate in a booming stock market and put their own names on their retirement accounts. But most Americans who started 401(k)s since the 1980s, when they were introduced, now see that they’re never going to be able to retire on that money.

So what happened? The Wall Street Journal asked the HR experts and finance wizards who sold the government and workers on the idea of privately held, personally managed, tax sheltered investment accounts for retirement. Their answer is simple: 401(k)s were originally intended as supplements to the rest of the retirement-income portfolio — a three-legged stool that also included defined-benefit pensions and Social Security. But businesses, terrified by mounting pension obligations, seized on them as a quick way to cut costs, and kicked the pension leg of the stool right out from under workers. Now a Republican-controlled Congress is eager to cut back on Social Security, too. Also, the 401(k) proponents seriously overestimated long-term market returns.

The 401(k) saga illustrates the perils of privatization of common resources. When you hand people opportunity, you also hand them responsibility and risk. That’s something to think about as Congress starts to dismantle our health insurance system with a new vouchers-and-personal-accounts scheme that looks a lot like the 401(k) system.

Finns Try a Big Test of Basic Income

Finland is conducting a two-year public experiment in a universal basic income plan, handing out about $600 a month tax-free to 2000 people to see what happens (Quartz). Basic-income schemes are gaining coverage and mindshare across the political spectrum: On the left, they’re seen as a broadening of social insurance plans; on the right, they’re often welcomed as a more individual-empowering alternative to welfare; and everyone wants to experiment with them as an escape hatch from the “automation is killing all the jobs, so no what?” dystopia.

Finland is giving its money only to people who are currently on unemployment. The twist is that the payments will continue even if recipients find work. The government hopes this will help it answer the perennial question of whether universal-income plans discourage people from looking for jobs. The Finnish experiment — which joins other research efforts, like that of the U.S.-based Economic Security Project — is the largest so far, and we’ll have some data to review in only two years or so.

Renewables Aren’t Going Anywhere

The renewable energy industry may be facing a less certain future under a fossil-fuel-friendly Trump administration, but don’t count it out prematurely. That’s because, as Justin Gillis writes in The New York Times, “the federal government actually has relatively little control over American energy policy, and particularly over electricity generation.” And whether Trump likes it or not, the industry is pouring investment money into wind and solar projects, while the auto industry is doubling down on its commitment to electrification. (See Ford CEO Mark Field’s latest rundown in NewCo Shift.)

More than half of U.S. states have adopted renewable mandates as part of their energy programs, in many cases with Republicans enthusiastically on board. Of course, the White House has more prerogatives and power when it comes to international deals like the Paris agreement, and climate change is a global problem. So it’s not like there’s nothing to worry about. But the energy transitions that began under President Obama aren’t likely to be reversed any time soon.

The Sharing Economy is Old Hat

Yes, the “sharing economy” label does get applied, maddeningly, to things — like taxi rides and vacation rentals — that aren’t shared at all. But there is a true sharing economy, one that involves shared access to resources as an alternative to private ownership. And you can find it in surprising pockets of communality, often in universities or farm communities, or in forward-looking municipalities that maintain tool lending libraries, or at storefront co-ops like Toronto’s Sharing Depot (The Atlantic).

The approach may feel novel, but it’s actually been the norm for most of human existence. Private ownership’s dominance is a recent blip at the end of a long timeline of hunter-gatherer collectivism. The shift to farming triggered the transition to personal property. But remnants of the old sharing economy, like the commons area set aside in many communities, persisted into the industrial age. Now that the digital era is breathing new life into these old models, we can learn a lot from their histories.

“Saving American Jobs” Doesn’t Mean What You Think

How real are Donald Trump’s factory-job rescues, like last year’s Carrier plant story and or this week’s item about Ford canceling plans to move a factory to Mexico? In every case, a close look at the business questions reveals a much more complex story than the one peddled in a tweet (The Washington Post). Either a company already planned changes and Trump claimed them as wins; or factory production got reorganized in a manner that didn’t actually create new jobs (in the U.S. or abroad); or Trump simply got his facts wrong, as with his criticism of GM for selling Mexico-made Chevrolet Cruzes to U.S. customers.

The deeper truth here is that, whether it’s autos, or tech, or any other large-scale industry involving a global supply chain, manufacturing today can’t be simply divided into “domestic” or “foreign” production. Like it or not, the world economy has become too integrated for such simple labels. You could sever the links that bind it, but only at great cost — including, sadly, jobs.


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