I learned something new today

I didn’t realize Australia had private social security accounts and it appears to work well for them. Thanks to Dan Mitchell for this excellent post.

I like this line (emphasis added):

This system, which was made universal by the Labor Party beginning in the 1980s, has turned every Australian worker into a capitalist and generated private wealth of nearly 100 percent of GDP.

That’s what I’d call properly aligned incentives. It seems like a good way to turn a Ponzi scheme into a wealth-producer.

Update:  Here’s the Wikipedia article that contains more information about Australia’s pension program.

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2 thoughts on “I learned something new today

  1. I don’t think the differences are made obvious by the post. From what I can tell – and I may be wrong – by briefly going to the various links, it appears that Australia has PERSONAL accounts. That is, each worker contributes 9% of his or her income into an account that is in his or her own name rather than contributing 9% to the national pot. Thus, each worker recognizes that what he or she eventually gets back out at retirement (or disability) will be based upon what he or she put into the account. Likewise, slackers will realize that their “retirement” won’t be subsidized by those who choose to work via a “tax and transfer” system like we have in the US. I don’t know if Australia has some mechanism to assist those who “truly” are disabled or could not fund a retirement account through no fault of their own – which means they would also need the means to differentiate between those who cannot versus those who will not work.

    • Thanks for the nice add of detail, Mike. I will add the Wikipedia link for Australia’s Superannuation program in the post. It does appear they still have a means tested pension program too. On the surface, it seems like it could be a nice transition from what we have.

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