Do Workers Have Pension Portfolios?
Recently, I caught an interview between Michael Shellenberger and Batya Ungar-Sargon, which is available on Shellenberger’s gated Substack. Their conversation centered on Trump’s tariffs, with Ungar-Sargon arguing that these measures represent a form of class warfare against the wealthy, ostensibly in favor of the working class. While her argument holds water to some extent—Trump’s tariff announcements have indeed led to a significant erosion of wealth among the affluent—there’s a critical oversight in her analysis.
To understand why, we must consider two pivotal points: (1) the impact on consumers and (2) the effects on stock ownership. Let’s tackle the latter first. The tariffs introduced by Trump have undermined wealth not just for the elite, but for a wide swath of Americans who invest in the stock market. A considerable number of workers hold stocks through their 401(k) and 403(b) retirement plans. Therefore, these announcements do not merely harm the wealthy; they also adversely affect average workers who are saving for retirement.
Now, moving on to the consumer aspect: it’s hard to find a worker who doesn’t purchase goods. Most workers allocate a substantial portion of their after-tax income toward various products. This leads us to point (2). Should the threatened tariff rates be enforced, the costs of almost all imports will rise—resulting in increased prices for many domestically produced goods as well.
Economists often keep a keen eye on the stock market because stock prices adjust rapidly to new information. Essentially, the price of a stock reflects investors’ expectations regarding future income from owning that stock, making it a reliable early indicator of wealth fluctuations. In contrast, consumer good prices tend to change at a slower pace, but the eventual impact is inevitable.
Some may argue that stock prices are purely driven by short-term earnings, but that’s not an accurate depiction. For instance, if Eli Lilly decided to halt all research and development to boost immediate earnings, I’m confident that the stock would actually decline, despite a short-term earnings spike.
An Additional Note
Fifteen years ago, I presented a talk to a local Rotary Club where I advocated for free trade. For context, the median age of the members was around my age at the time—approximately 59—and, yes, my hair had already turned grey. During the Q&A, one member expressed skepticism, acknowledging how free trade benefits corporations but questioning its advantages for individuals like those in the room. While I had previously outlined the benefits for consumers, I decided to pivot my response. I remarked, “I notice many of us share the same hair color. Don’t you have retirement assets? Isn’t a significant portion of that in stocks?” This elicited laughter from the audience, highlighting a common misconception: the disconnect many feel between corporations and their personal finances.
