In my last entry in this space, I brought up the issue of the growing economic weapon of mass destruction that is the defined benefit pensions that are largely the luxury of public sector employees.
The public sector pension problem is fairly complex.
It’s mostly the result of the massive overgrowth of government in the last four decades, and partly the result of public sector union contracts being negotiated by union members on one side and former union members on the other.
It’s also been brought about by an increasing veil of secrecy about the terms of public sector employee contracts.
It becomes a bit of a perfect storm.
As I mentioned earlier, what is coming down the pipe is something that approaches being a form of class warfare.
Millions of regular citizens, those who work in the tax- and wealth-producing sector of the economy, now suddenly face the prospect of being forced to dig even deeper into their pockets in order to come up with the necessary revenue needed to make up for the market losses that have reduced the overall value of public pension plan holdings to a level below what is necessary to meet their commitments.
At the very same time, these taxpayers will also be digging deeper into their own pockets in order to bulk up their own retirement savings in order to make up for recent market losses.
The numbers are real.
The average Canadian puts some $6,000 per year into retirement savings. Most experts say that this number will have to rise by a couple of hundred dollars per month in order for the average 35- to 55-year-old Canadian to recoup his losses, as well as a likely deferral of retirement by one or two years. This is on top of the couple of hundred dollars per month that will be confiscated from our incomes to finance pension plans that were foisted upon us in a somewhat underhanded fashion.
Tax-earning workers are basically exempt from this, as they won’t be required to pony up even more cash for their own retirement, and their employer will also be exempt from the realities of exponentially increasing tax burdens.
It needs to be noted here that decades of increasingly secretive public sector labour agreements have already created an economic imbalance, irrespective of the pension issue.
At one time, not even 30 years ago, public sector workers routinely earned somewhat less than their private sector compatriots, in exchange for almost iron-clad job security and a very good pension plan.
At that time, the public sector was a considerably smaller segment of the workforce. The pensions were sustainable.
But, the public sector has expanded at a rate two and three times that of the real economy that supports it, and wages and benefits in the public sector have also grown to a point where it’s exceedingly rare to find a public sector position that pays less than a comparable job in the tax-paying sector.
This last is a direct result of two things — the lack of legislation against labour action in the public sector (which represents a violation of taxpayers’ rights), and the common habit of having former union members bargaining with the unions, and negotiating pay and pension benefits that often have a direct bearing on the pay and pensions of those same managers.
Increasingly, the pay and benefits of public sector unionized employees have become somewhat secretive, which is a separately troubling aspect.
The whole thing is compounded by legislative bodies that would sooner eat worms than not raise taxes every single year.
In the end, what’s been achieved is a situation where the employees of the taxpayers make more money, have better benefits, retire earlier and with more money than those who spend their lifetimes working in the very businesses that pay their way.
There is time to fix the problem and it won’t be easy. But this ain’t rocket surgery either.
We can’t do anything about pensions already being paid, but we can begin to make adjustments before we face the prospect of rapidly increasing taxes and decreasing services at the same time.
Small adjustments to the pensions of workers close to retirement, larger adjustments for those further down the line, and the complete elimination of defined benefit pensions for those even younger can lessen the blow dramatically, and are the only ethical solution.
The facts and the solutions are easy to grasp. Again, the question is, are there labour leaders and public officials in all the land capable of putting taxpayers’ interests first?
Bill Greenwood is a local freelance columnist.