Pension deficits aren’t the fault of public-sector workers
Posted on February 22, 2012 in Social Security Debates
Source: Montreal Gazette — Authors: Denis Bolduc
MontrealGazette.com – opinion
February 22, 2012. By Denis Bolduc, The Gazette
Today and tomorrow in a hotel in downtown Montreal, some 600 representatives of the Canadian Union of Public Employees are holding a think-tank session to discuss the future of their pension plans.
Our meeting is being held against the backdrop of a rise in public discourse of voices criticizing supposedly “overly generous” public-sector pension plans.
Governments and employers are painting public-sector workers as part of a privileged class, and are moving to strip these so-called privileges from them.
Quebec City Mayor Régis Labeaume is leading the attack. He is urging the Quebec government to change municipal pension plans in order to help cities and towns reduce their operating costs.
Pension-plan deficits are a sad reality. However, changes such as those proposed by Labeaume place responsibility for these deficits on the backs of workers rather than the true culprit: the financial crisis of 2008 and the economic collapse that ensued.
Canada and the rest of the world are emerging from the worst global economic recession since the 1930s. Thanks to stronger regulation and some good luck, Canada wasn’t hit as badly as the United States and European countries. But there is no doubt that recovery will be slower and more difficult than in previous recessions.
Huge losses as a result of irresponsible speculation in the stock market are largely to blame for current deficits in pension plans. Banks then lowered interest rates, which in turn affected bond-market returns. This had a bearing on pensions plans because the two most important components of pension plans are stocks and bonds.
We were promised that a “free market” would lead us into an era of unprecedented prosperity. Undeniably, as the Wall St. fiasco has shown, this has not been the case. That said, trade unions know that they must take action and that doing nothing is simply not an option.
So, what should unions be doing?
First, it must never be forgotten that pension plans were built using salary money that employees agreed to forfeit, in exchange for a retirement plan. Some commentators contend that public-sector workers are stealing from the public purse. This misconception is offensive. The money in pension plans was always negotiated as deferred salary. Pensions, therefore, must be looked at on a long-term basis, and solvency of plans should consequently be measured over the span of a career. Deficits in place as this particular moment in time should not be used as an excuse to slash benefits.
CUPE Quebec is one of the first major trade unions to sit down with its members, as we are doing this week, to think through the current pension crisis. Pension plans are complex entities and each plan has its own set of rules and regulations.
We shouldn’t forget that there was a time in Quebec when there were surpluses in our municipal pension plans. When that was the case, did you ever hear of Quebec municipalities offering to lower taxes because of those surpluses? Of course you didn’t.
During those golden years, employers were making their pension contributions using money taken directly out of pension-fund surpluses. There was nothing strictly illegal about this. The surpluses legally belonged to them, just as deficits belong to them.
Municipalities had no qualms about sticking their hands in the cookie jar when it was convenient for them. But now that pension plans are struggling with deficits, municipalities aren’t so sure they want sole legal responsibility anymore. That’s not fair: workers expect their employers to do the right thing.
Public pension programs – Old Age Security, the Guaranteed Income Supplement, the Canada Pension Plan or Quebec Pension Plan – are proven successes. However, there is a problem with these plans. They really don’t pay out very much. The labour movement as a whole is running a major campaign right now to improve benefit levels. We are advocating a doubling of Quebec Pension Plan benefits, to be phased in over a period of seven years.
Currently, a majority of Canadian workers do not have a workplace pension plan, and one-third has absolutely no savings set aside for retirement. The loss of supplemental pension plans would mean an increase in poverty among seniors, which in return would mean higher costs for the government in health care and social services.
It’s about time the general public hears our voice on this issue. These are our pensions.
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Tags: budget, economy, pensions, rights, standard of living
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