Presented by Hassan Yussuff on Thursday, 24 May 2012
(Check against delivery)
Sisters and Brothers, thank you for inviting me to speak to you this afternoon.
I bring you warm greetings from the Canadian Labour Congress, the national voice of 3.3 million workers in Canada.
It brings me great pleasure to speak to you today about the changes underway in our workforce, and what it means for us.
Canada’s ageing population is challenging our pension system, and we’re responding to that.
But it will also affect the way we organize and mobilize as unions and activists, which we haven’t fully taken into account.
Canada’s demographic shift is fully underway, and we have some big challenges ahead. The number of seniors in Canada will double by 2036. By 2041, one in four Canadians will be over the age of 65.
Not surprisingly, the relationship between young and old is shifting. Today, there are 5 working-age Canadians for every senior; in 25 years, there will be 2.5 working-age Canadians for every senior, half the ratio that exists today.
While Ontario is similar to the national average, there are big differences in the speed and extent of this shift, depending on which province you live in. In Alberta, the ratio will be 3.2 working-age Canadians for every senior; in Newfoundland and Labrador, by 2037 there will be 1.7 working-age Canadians for every senior.
The Canadian Labour Congress has said a lot about the challenges working people will face as they enter retirement.
We’ve pointed to the urgent need to act now to improve our public pension system to ensure secure adequate incomes in retirement for all.
A large segment of the population is approaching retirement in the next 25 years. Hundreds of thousands of Canadians will suffer financial insecurity and inadequate incomes in retirement.
About half of Canadians born between 1945 and 1970 and earning between $35,000 and $80,000 are facing at least a 25% drop in their post-retirement standard of living.
It used to be said that middle-income earners faced the biggest challenge replacing their earnings in retirement, and that Canada’s retirement system protects low‑income seniors quite well.
Historically, that’s been true. In fact, Canada has done quite well in bringing down old-age poverty. If you go to the United States, today, you will find one in five seniors, roughly 20%, below the poverty line. In Canada, there are fewer than five percent of seniors living in poverty.
But now, the federal government has moved to reverse that achievement. The federal government's decision to raise the eligibility age for Old Age Security and Guaranteed Income Supplement from 65 to 67 will hit poor seniors the hardest.
For seniors with low incomes, OAS and GIS benefits provide 70% of their income.
And this is especially high for women -- for women aged 65 to 69, OAS and GIS make up 38% of their income, and for men, it makes up 26%.
For seniors aged 65 and 66, the low-income rate of 12% would more than double to 30% in the absence of OAS benefits. Across Canada, almost 700,000 seniors would have been affected, if 65 and 66 year-olds had been denied access to OAS and GIS in 2011.
If these seniors couldn’t work more hours or find some other way to make up the difference, the number of these seniors living in poverty would have more than doubled -- from 50,000 to almost 120,000.
The changes will put additional pressure on individuals, but also Ontario’s provincial and municipal budgets.
If the changes had been implemented in 2011, the federal government would have saved billions, but the provinces would have lost an estimated $500 million in tax revenue alone.
Provincial social assistance costs will rise if low-income seniors require support for an additional two years. Had 65 and 66 year-olds been denied OAS and GIS benefits in 2009, the additional cost of social assistance transfers would have reached an estimated $425.2 million.
In Ontario, that would mean $192.4 million a year in additional costs for 65 and 66 year-olds going on social assistance.
Provinces and cities are going to bear the cost of increasing the OAS eligibility age – even if the government says it will compensate the provinces.
The most frustrating part is that the government has still not provided any serious estimate of the cost savings from increasing the OAS eligibility age. Finance Minister Flaherty has mused about $10 billion or $12 billion in savings.
But we know from the Parliamentary Budget Office, the OECD, a former Deputy Minister of Finance, and a parade of independent economists that OAS is fiscally sustainable.
And the government’s increase in the eligibility age will be fully phased-in just at the point when the cost of the program is projected to peak and begin falling! It just doesn’t make sense.
It’s not just OAS and GIS that are being weakened. Our system of workplace pension plans is in trouble.
Twelve million Canadians -- two-thirds of all workers, and three-quarters of workers in the private sector -- have no workplace pension plan. Only 39% of workers are covered by a workplace pension plan.
And the problem is getting worse. Employers are trying everything in their power to escape their obligations to workers.
In the public sector, municipal governments and Crown corporations like Canada Post are trying to cut benefits and close their defined-benefit plans.
In Ontario, the government has said that if public-sector pension plans have a new funding deficit, the plan will have to reduce future benefits or ancillary benefits before an increase in employer contributions can even be considered.
In the private sector, firms like Air Canada, US Steel, Vale Inco, CP Rail and Caterpillar have sought cuts to pensions and the end of the defined-benefit pension plan. Often they’re doing so with active support from the federal government.
Remember that the Export Development Corporation offered Vale $1 billion in financing while workers were walking the picket line!
Pension plans in manufacturing are being wound up on a weekly basis as the industry struggles with a high dollar and the after-effects of the recession. Ontario still has 300,000 fewer manufacturing jobs than when the exchange rate began to strengthen in 2002. Many of these lost jobs were decent jobs with pension benefits.
Left to fend for ourselves, with no access to a pension at work, we’re simply unable to sock away enough savings for an adequate retirement income.
We’re saving less and relying more on debt. The savings rate in Canada last year was 3.8%, while household debt levels have reached 150% of income.
Small wonder we’re not saving enough, since median real wages have barely budged since the late 1970s.
The federal government seems to be doing everything it can to reinforce this trend, which will make it even harder for workers to save for the future.
The changes to Employment Insurance, the elimination of the Fair Wages Act, and the invitation to employers to pay temporary migrant workers 15% less than other workers all signal that suppressing wages is a priority for the federal government.
Weak wage growth means that workers will go deeper into debt and have even less capacity to save voluntarily for retirement.
We went through a major financial crisis and recession less than four years ago that devastated many people’s existing retirement savings.
Today, seniors are carrying debt into retirement more than ever, and older workers and seniors are among the age groups adding new debt the fastest.
Older workers are coping with financial insecurity by working past the normal retirement age.
Just because we have more seniors than ever, it doesn’t mean we’re going to have an equally larger number of retirees.
Seniors are participating in the workforce more than ever. Today, one in four seniors aged 65 to 69 is in the workforce, and 30% of men in this age bracket are in work or looking for work.
And this change is quite recent. Seniors are participating in the job market at twice the rate they were 10 years ago. Older workers, namely 55 to 64 year olds, are also increasing their level of workforce participation.
A lot of this increase has been driven by women. Women in particular are staying in work longer in life.
We know that women haven’t always had the paid work history that men have been able to build up.
We also know that older women living on their own are especially vulnerable to poverty.
So women may be extending their working lives to continue to build up savings and pension credits for retirement.
The kinds of jobs that seniors are taking on have important consequences for unions.
On the one hand, the unionization rate among seniors has been rising, as workers in the core unionized age group of 55 to 64 year-olds continue working past age 65.
Union members in the future may look a lot like union retirees!
And they will have particular needs and interests, as older workers and union members. The way we work, our terms of employment, the things our union fights for and the way it mobilizes members will be affected by this age shift.
On the other hand, a lot of seniors are working in bad jobs without union protection. Two in five working seniors are self-employed, and half of these individuals are taking home less than $5,000 a year. One in three working seniors are low-wage workers.
The growing presence of older workers in our workplaces and our unions is important for many reasons.
Not least of these is that older Canadians have serious political pull. We know that this federal government listens to retirees.
Seniors can have a big impact, especially on pensions and retirement issues. In the 1980s, when Mulroney tried to de-index OAS, it was senior Solange Denis who warned, “if you touch our pensions, it’s ‘goodbye Charlie Brown.’”
In the 1990s, the Liberals tried to introduce sweeping pension reforms, but were also stopped by opposition from seniors.
Seniors today are active and effective in the campaign to defend and improve Medicare, in demanding a national pharmacare plan, and a host of other campaigns.
Politicians listen, in part, because older Canadians vote at a higher rate than other age groups. In some ways, they are becoming even more important.
Overall, voter turnout in Canadian federal elections has been declining. The decline has been recent and quite rapid. For most of the 20th century, the turnout rate hovered around 70%. Yet all elections after 2000 have had turnout rates under 65%. In 2008, it fell to the lowest turnout on record: 58.8%.
The overall decline was largely due to the drop in voting rates among younger Canadians.
This was partially offset by the growing proportion of older people in the population, since older people are more likely to vote.
If older Canadians weren’t making up a growing proportion of the population, the voter turnout rate would have declined even further.
In 2011, the turnout rate was around 50% among 18 to 24 year olds, and only slightly higher among 35 to 44 year olds.
Among 45 to 54 year olds, the turnout rate was 70%, and it was 82% for 65 to 74 year olds. After age 74, the turnout rate drops, probably for health reasons.
Seniors don’t just vote in higher numbers, they also give more of their time and resources to charitable causes than other age groups.
On average, seniors in Canada and in Ontario have the highest annual donation rates of any age group, and higher total annual donations. The next highest is the age group 55 to 64 year olds.
When it comes to volunteering, Canadians aged 65 years and older have the highest average annual volunteer hours, and the next highest is among the 55 to 64 year old bracket.
It shouldn’t surprise us that we see this kind of solidarity among many older Canadians.
Seniors and older workers can make an enormous contribution to solidarity by advocating with and on behalf of young people.
It was incredibly powerful when older workers and retirees, who weren’t penalized by the increase in the OAS eligibility age, stood alongside young people and said what the government is doing to youth in this country is wrong.
When older workers and retirees defend the interests of young workers, it sends an immensely important message to youth. And it ensures that youth will stand in solidarity with retirees when they need allies.
It’s reprehensible the way some media pundits and politicians try to divide young workers from old. We’ve seen particularly rotten employers do this over and over in bargaining. They introduce two-tier wages and benefits, and they mobilize young workers to try to undercut pensions and benefits.
The campaign to expand the Canada Pension Plan has been an effective way of strengthening solidarity between young and old.
Even though young workers will benefit the most from doubling future CPP benefits, older workers and retirees have led the call for improving the CPP.
Our pension campaign has worked closely with union retiree chapters and retiree groups. We’ve worked extremely closely with the Congress of Union Retirees of Canada. We’ve also collaborated with CARP where we can.
If we could ensure that today’s young workers have better pensions to look forward to, we could go a long ways toward reducing future pressures on provincial and municipal budgets from an ageing population.
It’s time we start over with the fundamental principle that every single worker in this country deserves a decent and secure income in retirement.
No matter where they work, private or public sector.
That means the right to a defined-benefit pension, the type of plan that corporate executives and politicians make sure they set up for themselves.
78% of all defined-benefit pension plans in Canada have fewer than 9 members, and 56% have just one member. These are executive pension plans, and single plans for wealthy individuals.
Canadians already enjoy a secure, low-cost and fully-portable defined-benefit pension. That’s the Canada Pension Plan.
The CPP/QPP delivers secure, predictable, inflation-indexed retirement benefits for life, at a far lower cost than the fees charged by banks and mutual fund industry. It will continue to do so for the next 75 years and beyond. And best of all, virtually all employed and self-employed Canadians already belong to it -- private and public sector.
The problem is that the retirement benefits the CPP/QPP pays out are set too low to provide an adequate income in retirement.
Expanding the CPP is the lowest-cost way to dramatically increase the security and adequacy of retirement benefits for workers without workplace pensions and those with defined-contribution plans.
The CLC’s plan is to double future CPP benefits by gradually phasing-in an increase in contributions over seven years.
By increasing CPP contributions by just 0.43% of pensionable earnings each year for seven years, we can achieve a 100% increase in future CPP retirement benefits.
For a worker earning $30,000 per year, the initial cost would be about six cents an hour, or $2.27 a week. That’s about the cost of two songs downloaded from iTunes. Or for those of you without the latest gadget, it’s less than the cost of a medium double-double with a donut at Tim Hortons.
Our plan benefits young people retiring 40 years from now, who will fully benefit from a doubling of CPP benefits when they leave work.
Today’s youth are often working at low-wage, insecure jobs, while struggling with growing levels of student debt.
An expanded CPP would give them a more adequate retirement income at far lower cost than they would be able to save on their own.
Our plan also benefits older workers approaching retirement, who would see increases in their retirement benefits.
Our plan benefits workers with no pension plan, but it also benefits workers fighting to defend their workplace pension plans.
An increase in CPP benefits would permit employers and employees to negotiate a reduction in plan contributions and benefits over time.
It would allow them to shrink any unfunded liabilities that exist in the plan, while reducing the tax expenditures that support workplace pension plans.
It would narrow the gap between private and public sectors by lifting the boats of all workers.
The CPP provides a fully portable, secure, inflation‑indexed, defined-benefit pension at a very low cost.
The CLC proposes to phase in a doubling of CPP benefits from 25% to 50% of average earnings on a pre‑funded basis. Additional contributions from workers and employers would be invested to pay for higher pensions in the future.
The average monthly CPP retirement benefit in March 2012 was just $525 a month or $6,300 a year.
Our proposal would increase the average benefit each year, and double the average benefit when fully implemented. In fact, future benefits will be higher since they will be boosted by any increase in real wages in the future.
A 100% increase in future CPP benefits can be financed by raising CPP premiums by only 60% over seven years. It would take approximately 40 years for the new system to be fully mature, but a higher pension credit would be earned in each year following a decision to expand the CPP.
Partial benefits would be earned while the premium increase is being phased-in over seven years.
We also want an immediate end to old-age poverty in this country.
Hundreds of thousands of Canadian seniors live in financial insecurity. The GIS helps support 1.7 million low-income seniors. But the average benefit (a bit over $492 in January 2012) is too low to lift many out of poverty.
Our plan is to boost the incomes of poor seniors through an immediate 11% increase in the GIS.
This would have several benefits. First, it would ensure that no senior, current or future, will ever retire into poverty (since public pensions are adjusted for inflation).
Second, money put into the GIS will be spent locally by seniors for their essential needs. Such direct spending into the local economy represents an important and effective form of economic stimulus at a time when it is badly needed.
Finally, workers who worry about looking after their parents in retirement can rest assured their parents will be able to provide themselves with the basics.
This is especially true for workers facing their own retirement years with elderly parents and loved-ones to care for.
The CLC and the labour movement has waged an incredible campaign to put this on the agenda. We launched the Retirement Security for Everyone campaign in September 2009, right in the midst of a financial crisis and economic recession.
At the time, Finance Minister Flaherty said there was no way the government would consider an expanded CPP.
Since then, our campaign has won support from every corner of society. Union members, retirees, community activists have organized townhall meetings and rallies from one end of the country to the other.
In May 2010, mayors and city councillors meeting at the Canadian Federation of Municipalities unanimously endorsed our demands – an incredible statement of support.
From coast to coast, university campuses and student groups like the Canadian Federation of Students passed resolutions in support of our campaign.
Anti-poverty organizations and community coalitions got behind us.
Dozens of academics and pension experts endorsed our proposals.
Even conservative newspapers like the Calgary Herald published editorials in support of CPP expansion.
Union leaders and activists lobbied every single member of Parliament in their constituencies.
Finally, in June 2010, the federal and provincial finance ministers indicated they would support an expansion of the CPP.
But the financial industry, insurance companies and groups like the Canadian Federation of Independent Business lobbied hard against us.
They were successful in getting the government to stall CPP expansion. In December 2010, the government announced that it would push ahead with the financial industry’s model, the Pooled Registered Pension Plans.
These groups opposing CPP expansion favour the PRPP idea because it will be voluntary, and will not require employers to pay a single cent.
The federal government can’t guarantee that savings will be protected against inflation or future market turmoil, and it can’t guarantee that the management fees charged by private sector brokers won’t bleed away future earnings.
In fact, PRPPs are shaping up to look a lot like group RRSPs.
The groups opposed to CPP expansion are the same ones that want to free-ride on the public purse.
With no CPP expansion, GIS and Allowance expenditures will rise, even with the increase in the eligibility age.
Groups like the CFIB want to deflect attention from this looming tax bill by pointing at supposed gold-plated pensions in the public sector.
Make no mistake, these attacks are aimed directly at women, who now make up half of workplace pension plan members, and who are most likely to be employed in the public sector.
These women are earning decent, but in no way extravagant, pensions. The average public-sector pension in 2009 was about $18,000 a year. Hardly a “gold-plated” pension.
The CFIB likes to paint our plan as a “job-killing payroll tax-hike.” But CPP contributions do not discourage employers from hiring.
Beginning in 1997, CPP contributions were nearly doubled over a five-year period, during which time the unemployment rate fell from 9.1% to 7.6%, before continuing to fall.
Instead of spending precious government resources trying to sell Canadians on a scheme designed by and for the financial services industry, the federal government should just accept all the evidence it has, listen to the pension experts, and expand the Canada Pension Plan as soon as possible.
To achieve an expanded CPP, we need the support of two-thirds of the provinces representing two-thirds of the population.
At the next meeting of finance ministers taking place this summer, a specific timeline for expanding the CPP will be discussed.
We need to keep the pressure on all provinces and the federal government to make this an urgent priority.