Some further points on pension funds

Investments can happen two ways:

• into your own production
• into another firm's production

Profits can be invested in either.

Investment in public markets is just investment in "another firm's production".

From a classical perspective, "earnings" in this case is profit from surplus value not paid to workers who produced surplus product or profit on transfer (theft).

The introduction of profit on transfer in this stage (which existed before too, it is just not the main process of profit generation in capitalism) makes this more complicated. But, outcome is the same if we focus on profit from production: profit from investment earning – either in your own new machines or another firms – comes from not paying workers.

In a complex company, earnings made in a business cycle (a contract period measuring when you must pay workers, debt collectors, and for new inputs) can come from your workers (surplus value) or from other workers (investment income).

Taxes are set by social relations. As such, tax processes currently are set by capital and pushed back against by labour to different degrees depending on labour's power.

Capital gains taxes are different from income taxes because capital gains are unrealized until they are cashed out – because they are fictitious until cashed out. Just as earnings one hour into a two hour poker game are not real earnings.

There is no "tax expenditure contribution" to a pension plan because it has not become wage yet. It is investment and we do not know the outcome of that investment yet. It will be taxed when we know the outcome – either it becomes wages or losses or reinvestment. All taxed at different rates.

The subsidy of not taxing pension investments and the incentive it creates to make pension plans exist is a subsidy to profit generated on those investments. But, only slightly. The real subsidy is that not all of the money generated went to wages.

The income received in retirement can come from different places.

But, focusing on the money pension funds have invested in private markets, the money paid is a wage. It is time-shifted, but it is the section of pre-profit revenue that goes to workers.

In this example, because of the time shifted wage, it is has raised the issue to the level of the class.

Pension funds that invest their money in capital are the socialization of the costs of wages in retirement. It is a smoothing of the risk of not being able to deal with a contract to provide retirement income.

This is a gain for workers who get retirement. And, it is not in competition (at least not directly) with other workers.

However, because it is wage from a production process that produces profit, it is only part of the surplus product produced through the investment of that money.

Therefore, this was not wage ever – even when we say 50/50 contribution to pension funds. Money invested in capital markets is just capital investment. The workers do not own the full surplus generated from this invested money, they simply own the wage generated from the production resulting from the investment.

Even when pension funds own a whole company, they do not displace capital if they ever plan to sell that company again to capital later.

Taken together, pension funds act on behalf of the capitalist class.

The public service is simply a production process. "Services" are provided through labour and produce surplus. Sometimes in complex ways, but their relation to capital in the end is similar.

In classical economics:

• The state has revenue from taxes (regressive and not) and expenses.
• It can generate a net revenue in several ways, but that revenue is tied directly to production.
• What it does with that net revenue is determined on the balance of class forces.

If pension plans paid into by the public sector invest in private markets, it is a public sector direct subsidy to private capital investment. It does this to try to extract some value from the private production process as revenue – just as it would through taxes.

The state can do this because it has privatized state-level production.

However, because it is not receiving all the income from that surplus created by the investment of pension money, it is subsidizing private capital.

• Studies that look at whether workers give up wage gains to get pension suffer from a common issue: they do not look at historical labour power during these negotiations.
• If you have a pension, you had bargaining power to get a pension. You cannot compare this with a group that didn't have bargaining power and say "look there is no difference in wage gain". One might even assume an inverse relation between pension gains and wages.

At negotiation tables the discussion of pensions as deferred wages or when talking about bargaining power over wage gains, there is an inevitable trade-off.

Labour currently has low bargining power relative to historical positions. This is why we are:

• moving to to 50/50 contribution rates
• risks of investment is transferred to the workers through reduction of pension income
• Defined benefit to target benefit to defined contribution
• loss of inflation indexation

All of these are a reduction in the total wage bill going to workers across capital.

• An alternative is nationalized funds.

But, bargaining effectively what we earn means understanding what we are bargaining.

If pension fund payouts in the future are wages from investment in capitalist production, the structure of the fund dictates with whom we are bargaining and who is paying.

We may be bargaining as a class against the capitalist class in some rounds. This is different from bargaining with a single employer.