Labour movement calls for better pensions
Dave Coles would be excused if he said, “Told you so.” But the CEP National President is preoccupied with pushing the reform of Canada’s public pension plan across the finish line.
“The labour movement has been crying out for comprehensive reform of public and private pensions for years,” says Coles. “I suppose it took a financial implosion of global proportions, and the scandalous pension gutting at Nortel and Fraser Paper to get politicians moving.”
The reform to public pensions, notably the Canada Pension Plan (CPP) and its Quebec counterpart QPP, is steaming ahead almost to the surprise of most observers. CPP currently provides a benefit of 25% of the average industrial wage, about $933 monthly. The labour movement’s goal is to double that over time.
"Too many seniors live below the poverty line,” says Coles. “Eleven million Canadians have no private pension plan. One-third of Canadians have no retirement savings at all. Decent workplace pension plans are under attack from employers. RRSPs are the most inefficient savings vehicle known to any one, they are just an opportunity for fee-gouging and profiteering by the financial industry. If future generations of working Canadians are going to be able to retire in dignity, we need fundamental reform. And the cornerstone of that reform is doubling the CPP.”
What is surprising is that federal Finance Minister Jim Flaherty, a hard nosed right-winger who once sponsored a private-member’s bill to outlaw mandatory union dues, is now the unlikely champion of increasing the CPP benefit heading into a finance ministers’ meeting scheduled for December 2010. Flaherty has rejected the labour movement’s target of doubling the monthly cheque. But he is apparently prepared to brave the finance industry’s vehement opposition to any CPP encroachment onto their RRSP-focused sales turf for retirement savings.
“Flaherty’s an interesting guy,” Canadian Labour Congress President Ken Georgetti told the Globe & Mail in June. “He is a fiscal conservative, but honestly I think he gets it, both in terms of the whole economics of pensions and the reality of them, but also the politics of it... He is a very astute politician.”
Local 87-M media union President Brad Honywill says Flaherty is under a lot of pressure to throw a bone to the finance industry and may disappoint when he finally unveils his actual position on improving CPP and filling the gap in retirement income. Honywill says rank and file members need to get involved immediately. He strongly recommends all members email or call their local member of provincial legislature to enlist the McGuinty provincial government in the push for doubling the CPP.
Pensions Facts: Retirement Income in Doubt
Federal retirement pay cheques include Guaranteed Income Supplement (GIS) for the poor, Old Age Supplement (OAS) and CPP. All together, the GIS, CPP and OAS cheques deliver about 40% of pre-retirement income. Most experts identify 60 to 70% of pre-retirement income is necessary to maintain the lifestyle of an average Canadian earning $47,000 annually.
Private savings and pension plans are supposed to fill the 30% income gap between 40 and 70%. However the dismal track record of corporate Canada in providing decent pension plans for employees, and inadequate voluntary saving, means that most of working Canadians will not fill that gap.
The labour movement’s solution: gradually increase employer and employee payroll contributions to CPP from 4.95 to 7.7% of gross payover seven years, phasing in the doubling of the CPP benefit over 40 years. The payroll increase would cost workers about 9 cents per hour although this would not apply to employees who already participate in a company pension plan that is integrated with CPP.
Secondly, increase the GIS by 15%, from $14,000 to $14,800 annually, to assist the poorest Canadians.
Thirdly, CEP proposes a government-sponsored pension fund to absorb and stabilize, but not subsidize, private pension plans that are faltering in bad economic times.
The financial industry’s solution: maintain the status quo.
The government solution: still evolving, with federal finance minister Jim Flaherty leading most provinces (Alberta excluded) towards a small improvement to CPP.