A comment by Jacob regarding the Over 30 post made me think about the inter-connection of inefficient structures/systems (not in the hardware sense).
The conclusion of the Over 30 article - younger and older workers are not compensated based on their productivity - (assuming that it is generally true) has at least one significant implication for retirement provision.
In the current structure, younger workers are 'missing' a chunk of compensation that they must wait for until they are older. Essentially the structure defers income, savings, and investment.
If however, younger workers were compensated for productivity that chunk would be available at a younger age - giving them a very valuable option to invest/save more money at a younger age for their eventual retirement. The de facto deferment of 'their' productivity is both a short-term disincentive and a long-term inefficient form of saving.
Clearly changes in overall compensation would need to occur gradually in order for workers 'stuck' in the current inefficient system to adjust. But a more effective structure for younger workers would also help address their own savings needs in light of a completely trashed Social Security system.
Posted by Jeremy Showalter at July 2, 2004 09:50 AM