Retirement Security for Everyone!
Over the past year, Canada has been hit hard by the deepest economic downturn the world has seen since the 1930s. Hundreds of thousands of good-paying jobs have been lost and the retirement savings of countless Canadians put at risk by the financial meltdown and corporate bankruptcies.
Many today, even those with jobs are wondering if and when they can ever retire. They have good reason for concern.
Recent events have exposed major faults in our pension system. Our public pensions – Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) plus the Canada Pension Plan – provide a secure income in retirement. But even the maximum value of those pensions falls far short of what people need to maintain a decent standard of living after retirement.
The private portion of our pension system is in deep trouble
About one in five private sector workers belong to a private pension plan. Very few non-unionized workers, with the noted exception of managers and professionals, are covered by plans. Many of the plans which do exist are on shaky financial ground because of low interest rates and the recent collapse of stock markets. Some workers have discovered that when their plans get into financial trouble, there is little help available.
RRSPs have failed to deliver
RRSPs are often billed as the solution to our pension woes. They are supposed to fill the gap left for those not covered by private pension plans – but RRSPs have failed us. The average worker approaching retirement today has saved only enough to buy a monthly pension of about $250 per month.
RRSPs have not worked because many Canadians cannot save enough to overcome the built-in hurdles of high administrative fees (which in Canada are among the highest in the world) and highly variable and uncertain financial returns.
It’s time for change
Decision-makers can hear the growing calls for pension reform in Canada, despite the strong and loud opposition from vested interests in the financial industry. Employers who sponsor pension plans also recognize that supporting decent pensions through public rather than private arrangements would lower their costs and help level the competitive playing field between them and businesses who have offered no pension plans for their workers.
People should not be left to fend for themselves in retirement. It’s time for a change in emphasis toward public pensions and toward greater security for people who belong to existing employer plans.
That’s why the Canadian Labour Congress is proposing three key reforms that would benefit all workers, improve retirement income security, and gear Canada’s pension system to better fit the needs of a changing economy.
The CLC Plan: Retirement Security for Everyone
Double benefits for the Canada Pension Plan (CPP). We propose to phase-in a doubling of the proportion of average earnings replaced by CPP from 25% to 50% over seven to ten years, to $1,635 per month. This would be financed by a modest increase in worker and employer premiums (3% spread over several years).
The benefits of investing in a stronger Canada Pension Plan are clear:
- The CPP already covers 93% of working Canadians and offers an accurate sense of the income they can expect in retirement.
- The CPP is highly risk tolerant because of its size and it has the lowest administration fees of any pension plan in the country.
- The CPP is highly portable – no matter how many times they change jobs, workers will still be covered. Why shouldn’t we build on this successful model?
Increase low-income (GIS) pensions by 15%. This would give low-income seniors up to an additional $110 per month, enough to move virtually all seniors above the poverty line.
Introduce a national system of pension insurance. An insurance floor should be set for defined pension plan benefits through a system funded by contributions from pension plan sponsors. This would be a federal initiative covering federally-regulated pensions but Ottawa should enter into negotiations with the provinces to create a national system.
The Choice: “Move Forward Together” or “Fend For Yourself”
In making these proposals, we are championing the same progressive values which changed our health care system with the advent of Medicare more than forty years ago. We can make a similar choice for pensions today and create a system where no Canadian is left behind.
Changes to EI Benefits Are Needed Now
By Gord Falconer-IAMAW Education Representative
Between October 2008 and May 2009, 363,000 Canadians lost their jobs — and the Organization for Economic Cooperation and Development or OECD, projects unemployment to rise to 9.8% in 2010. In this global recession, the weakness of Canada’s Em¬ployment Insurance (EI) system has become a glaring federal policy omission.
The Canadian Centre for Policy Alternates has completed a study on this very issue, by Lars Osberg. This study looks at income protection for the unemployed, federally and elsewhere, and makes a strong case for EI reforms.
(Un)Employment Insurance is the major program by which the Government of Canada has historically helped offset the financial risks of unemployment faced by Canadian families. Unemployment in Canada is now rising at an unprecedented rate and is forecast to stay high for some time to come — so many Canadians are now finding out personally just how little insur¬ance coverage they have.
This study finds it is much more uncommon for Canada’s unemployed to receive regular EI benefits during this recession compared to previous recessions. Now that Canadians need a social safety net, many Canadians are discovering they do not have much of one.
Compared to the vast majority of OECD nations, unemployment benefits in Canada are very low — much below the OECD average.
But the response of the Government of Can¬ada has been decidedly tepid. Budget 2009 did little to change the fact that in terms of access, benefit duration and income replacement levels, EI in Canada falls far below OECD norms. Eligibility and benefit levels remained unchanged, while benefit duration was increased by only five weeks.
The study concludes that the inadequacies of Canada’s (Un)Employment Insurance — combined with weakened provincial social assistance programs — has produced a massive risk shift, the burden of which is being borne by Canadian families who have fallen victim to the global recession. Since low-wage individuals are especially likely to experience unemployment, the downloading of recessionary risk is having its biggest impact on disadvantaged Canadians — an impact that will only increase as EI benefits are exhausted in coming months.
The study recommends reforms to Canada’s EI system. In the current context, Canadians need  a plausible expectation that they can get unemployment benefits if laid off — i.e. an easing of entrance requirements and  a safety net for the possibility of a longer duration recession — i.e. a ‘second tier’ of unemployment benefits (combined with counselling and retraining) to deal with the problems of the long duration unemployed. The question for Canada’s political economy is — if the recession drags on — what happens if that is not forthcoming?
In addition, organized labour, including the Machinists, has been lobbying the federal government to make changes to the EI system. Here are some facts:
In the late 1970’s and especially during the 90’s, Liberal and Conservative governments made it harder to get EI, and cut the benefit levels and duration of benefits for people who were eligible.
The number of unemployed workers receiving EI went from 80% in 1990 to only 44.5% in December 2008.
While benefits were being cut from workers, the accumulated surplus from EI rose to an astonishing $57 billion in 2008.
A strong EI program is essential to assist unemployed workers while they search for work, and to help stabilize against the effects of a prolonged recession, by providing people with income to spend in their local communities.
That is why we are asking for these changes:
1. 360 hours to qualify for EI benefits in all regions of Canada
2. Increase benefit duration to 50 weeks for all workers, in all regions, and
Provide an additional year of “Special Extension” benefits if national unemployment exceeds 6.5% – paid from federal general revenues.
Extend EI Part 1 benefits while a worker is in approved training.
3. Increase benefit rates to at least 60% of normal earnings, use workers’ 12 best weeks, and raise the maximum. Suspend the allocation of severance pay. Eliminate the 2-week waiting period.