Labor's Capital

Why are pension funds so large and benefits so small? This examination of
the 120-year-old American system of privatized social insurance - often called, at
1.7 trillion dollars, the biggest lump of money in the world - reveals that the
system fails to provide adequate retirement income security, its most prominent
goal, and, in fact, its greatest influence is in supplying funds to U.S. capital
markets.Linking market forces, historical movements, and social norms in the
evolution of pensions, Ghilarducci's study is the first to focus on all major
aspects of the system. Its trenchant analysis of the many sides of pensions and
pension policy addresses questions of whom the system benefits, its direct and
social costs, and the possibilities of reforms that would take into account the
related problems of capital formation and retirement income.Ghilarducci describes
the history of pension funds and the involvement of unions in bargaining. She takes
up the "moral hazard" involved in the conflicting interests of corporations and
their employees, tackling issues of information availability and inequality of
pension distribution based on sex, race, and job hierarchy. And in two chapters,
each focusing on corporate and union uses of pension funds, she covers such topics
as tax breaks, the effect of corporate takeovers, the use of pensions to pay back
debt, and the kinds of skimming that can occur despite government regulation of
pension activities. Ghilarducci concludes by presenting an ideal pension plan that
would benefit both employer and employee and by offering predictions about pension
plans of the future. Teresa Ghilarducci is Associate Professor of Economics at the
University of Notre Dame.