Free Men and 401(k)s
There are three ways to get a man to do something. You can coerce him, you can fool him, or you can talk him into it. The first treats him as a serf, the second treats him as a sucker, and only the third treats him as a free man. Andrew Biggs’s proposal (“Entitlement Reform after Trump,” May 23) to make 401(k) enrollment automatic upon hiring represents the second.
Who should properly decide whether an employee should open a 401(k) account and how much he should pay into it? If you trust him enough to make his own decisions about his money, you present his choices and let him decide. Biggs would make the decision for him and hide it in the paperwork, just like the car dealer who signs you up automatically for the extended warranty “for your own protection.”
It is good to save for retirement, but it is not the only good. When you take money out of an employee’s paycheck without his consent to contribute to a 401(k), you’re really ordering him to spend less on anything else. That could be food, clothing, shelter, health care, debt payoff, education, charity, or gifts for his family. You can claim to be entitled to do this because you are wiser than he, but the fact is that you get to do it because as his employer you have power over him. The brokerage house and the insurance company don’t get to sign him up automatically for anything, do they? Not unless he is one of their employees.
If automatic 401(k) enrollment is wise and good, then I suggest that the circulation department of National Review apply the same benevolent principle. They should add all Americans to their subscription list and start billing them all. If they don’t pay, send their debts to collection agencies and start the collections harassment. They have no right to complain, since you’re doing it for their own good.
Andrew Biggs responds: Any employer who offers a voluntary retirement plan must choose how to treat individuals who make no active decision with regard to participation. Research since the late 1990s has found that a sizable number of employees — perhaps one-third — will follow the default policy: If the default is to participate, they will happily do so. If the default is not to participate, many employees will not take part. This group of non-choosers is predominantly young, low-income, and minority, groups that conservatives presumably wish to introduce to personal wealth-building and the role that capital and financial markets play in a vibrant economy.
It’s not clear that automatic enrollment in 401(k)s is objectionable even from a purely libertarian perspective. After all, employees are free to withdraw if they choose. From a broader perspective, automatic 401(k) enrollment has the potential to significantly increase wealth, particularly for low earners who otherwise might not save. Increased personal wealth-building will not only improve retirement income security but also hold off progressive efforts, captained by Bernie Sanders and Elizabeth Warren but now accepted by Hillary Clinton, to expand Social Security and establish state-government-run supplementary retirement plans to take the place of 401(k)s.