Battle looms over public pension expansion

Please chip in to support more articles like this. Support rabble.ca today for as little as $1 per month!

Mayor-elect Rob Ford famously painted the city's garbage collectors as a pampered elite enjoying a "gravy train." Appealing as it must be to pick up Toronto's garbage, that's one gravy train I don't mind missing out on.

Similarly misleading attempts to portray public-sector workers as overindulged have come from business spokesperson Catherine Swift, who implies that relatively generous public-sector pensions -- for workers cleaning schools and emptying hospital bedpans -- are imposing a huge burden on Canadian taxpayers. (Swift omits to mention that public-sector workers pay into their pensions, both as workers and taxpayers.)

Such claims seem aimed at creating divisions among hard-pressed working Canadians, so that those in the private sector will angrily demand cuts to public programs.

The notion that we can't afford strong public programs -- that we're better off buying services or benefits on our own -- is one of the central falsehoods blocking meaningful progress toward improving Canadian well-being.

An excellent example is the looming battle over public pensions, an issue that will be the focus of a meeting of Canada's finance ministers in December.

While reducing poverty among the elderly has been one of the success stories of Canada's social welfare system, the situation threatens to deteriorate significantly, largely because of the recent failure of employers to expand private-sector pensions.

All Canadians over 65 receive the federal government's Old Age Pension and those with very low incomes receive the Guaranteed Income Supplement. But even together, these provide an annual maximum of just $14,034 per person. The other key public program is the Canada Pension Plan (CPP).

The Canadian Labour Congress is pushing to expand the CPP, to double the average benefit, currently only about $500 a month. This expansion, which would involve mandatory increases in premiums paid by workers and employers, would be phased in over time and benefit younger workers most.

Support for an expanded CPP has come from former CPP chief actuary Bernard Dussault, but business and the financial sector would prefer Canadians rely more heavily on private investments in mutual funds and RRSPs.

This is a costly alternative, however, since the financial sector siphons off a significant amount through management fees.

According to Jonathan Kesselman, professor of public finance at Simon Fraser University, management costs at Canadian mutual funds eat up nearly 2 per cent of assets -- the highest rate in 20 countries surveyed. By comparison, CPP management costs were just 0.17 per cent last year.

This enables the CPP to pay out more in pension benefits. Kesselman argues that significantly extending the CPP would be "by far the best of all savings vehicles." In fact, expanding the CPP would ultimately save governments money, by making future retirees less financially dependent.

But this eminently sensible, cost-effective public solution has been resisted by some on the right, who argue that the mandatory CPP deprives Canadians of the choice not to invest in their retirement.

This is reminiscent of arguments by the American right against public health care, on the grounds that some risk-lovers prefer to be without health insurance.

Of course, those making such arguments are usually well-off financially, with little risk in their own lives. Still, they fiercely defend the right of the poor to experience the risky pleasures of life without a safety net.

Linda McQuaig is author of It's the Crude, Dude: War, Big Oil and the Fight for the Planet and The Trouble With Billionaires. This article was originally published in The Toronto Star.

Related Items

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.

Comments

We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:

Do

  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.

Don't

  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.