Employers and employees

The Channel 4 News last night contained an item about the problems facing defined benefit pension plans. Increasing longevity and falling stock markets were blamed. No mention was made of Gordon Brown’s removal of tax credits for pension schemes or of the huge amount of extra red tape that Labour has imposed on business. We certainly weren’t told that public sector pension plans continue to expand whilst benefiting from inflation linking at the taxpayers’ expense.

We saw an interview with the chairman of Unilever PLC who was explaining that his company plans to increase contributions to its pension scheme. The reporter asked: “You think that some costs should be passed on to the employees, don’t you?” The chairman confirmed that employee contributions would go up in addition to those made by the company. Big mistake. The chairman was made to sound like some evil exploiter who was unwilling to pay for his workers’ well-earned retirement. What he should have done is to point out that employee’s total remuneration is determined by the marginal productivity of the worker. It makes no difference to the company whether such payment is made as salary, “employer” pension contributions or, indeed, “employer” national insurance contributions. Dividing contributions into “employee” and “employer” is a con designed to mislead workers.