Presented by Barbara Byers on Friday, 11 February 2011

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Good morning Sisters and Brothers.

It’s always a pleasure for me to speak in Regina and to see so many old friends.

Many thanks for inviting me here to discuss what I believe is one of the most important social policy issues facing Canadian working women today – the need for retirement security and pension reform.

Let me get straight to the heart of the matter – I’ll define the problem and tell you what the Canadian Labour Congress proposes as its better solution.

Why do we need pension and retirement security reform?

Because many seniors right now are living in poverty or slightly above the poverty line – about one in seven.

That’s simply unacceptable in a country this rich.

1.6 million seniors today collect the Guaranteed Income Supplement – that means they have incomes not much above $15,000 per year.

This amounts to about a third of all 4.8 million Old Age Security recipients, which is the first clue that low senior poverty rates cited by the federal government are deeply flawed.
The reality is it’s a struggle for those seniors.

And it’s especially a struggle for retired women, who depend almost twice as much as men on OAS and GIS.

Some think times have changed now that the majority of working-age women are on the job. But it isn’t true.

Women still don’t earn equal pay for work of equal value. Canadian women make 70.5 cents for every dollar men earn. As a result, they’ll face challenges accumulating the same pension income as men.

Not only are women paid less for work of equal value; 40% of women work in low-quality, precarious jobs, and won’t be able to accumulate much (if any) pension income.

In spite of all of this, women are told they need to save 8 to 10% more than men because they live longer through their retirement years!

Added to the burden of low wages, women still shoulder the bulk of unpaid caregiving work for children and seniors, which means more time away from paid work and lower pensionable earnings.

In 2002, over 2 million Canadians provided personal care for seniors. Three-quarters of these caregivers were women.

In 2009, over one-quarter of working women worked part-time, and women were 7 times more likely than men to work part-time because of childcare or other responsibilities.

The absence of affordable, publicly-funded child care and elder care has put working women in stressful and frustrating circumstances.

So despite the fact that more women than ever are participating in the labour force, it’s still the case that a smaller proportion of women (86%) than men (96%) receive CPP or QPP.

It’s no mystery why older women are especially vulnerable to poverty.

In 2005, 80% of unattached low-income seniors were women.

What do you say to a 75 year old woman who receives less than $1,300 a month, and is wondering how to pay for the medication she needs, or to pay for the occasional help to clean her apartment?

Do we tell her the current system is just fine?

Here’s a quote from Tami Rogers, a debt counsellor working here in Regina, who reports that over half of her clients are pensioners who can't afford to live on their pensions.

"Most of the time it's a grandmother who is left; grandpa has passed away. She didn't really work, so she's not getting Canada Pension (Plan). So she's buying groceries on her Visa card, not trying to overextend herself but just trying to live."

Take the example of 82 year-old Joyce Burr, who retired from a lifetime farming with her husband Jack here in Saskatchewan. When Jack got sick, Joyce drained her retirement savings paying his $200 monthly drug prescription. When he was moved to a long-term care facility, the expense was so great Joyce was forced to seek an annulment of her marriage to Jack to save herself financially.

Now that her husband has passed on, Joyce spends a third of the $1,305 she receives each month on house utilities and taxes, leaving her $880 a month for transportation, groceries and household costs.

How does she manage to make ends meet? Simple. Besides going to the grocery store and the doctor, she doesn't leave the house.

What happened to dignity in retirement?

A senior receiving the maximum monthly benefit under OAS, GIS and the Saskatchewan Seniors Income Plan would receive $1,375.92. But Statistics Canada’s low income cut-off for a city the size of Regina or Saskatoon is $1,595 -- $219 dollars more than the maximum basic pension.

Joyce Burr and other elderly women in similar circumstances can’t wait for pensions and retirement security reform.

Why else do we urgently need retirement security reform?

Because RRSPs have failed to safeguard retirement since introduced in 1957.

Only one Canadian taxpayer in four made any RRSP contribution in 2008.

New polling suggests only 1 in 3 Canadians bought RRSPs in 2009.

When it comes to young people, precisely those workers commonly in low-paid, non-union jobs without workplace pension plans, fewer than 4 in 10 have an RRSP.

The current average value of an RRSP for an older worker nearing retirement is only enough to pay for an annuity of less than $300 per month.

And Canadians have over $580 billion in unused RRSP contribution room being carried forward.

And women are making even less use of RRSPs than men. 47% of RRSP contributors in 2008 were women, but they made only 39% of total contributions and their median contribution was 70% of the median made by men.

Despite this obvious evidence that RRSPs have massively failed to do the job they were intended to do, some experts are still pushing them as the answer.

But others are admitting the truth.

Don Drummond – the outgoing chief economist of the TD Bank – said:

“After 50 years of promoting RRSPs, we have to conclude they haven’t turned out as envisaged.  I don’t know why we don’t just recognize this and make the needed adjustments to the retirement income system.”

Exactly!

There’s another solution that I like a lot – but one unlikely to be adopted by the Conservative federal government.

That would be to dramatically increase the unionization rate of Canadian workers, because most union workplaces offer a decent pension plan.

But I notice that Finance Minister Jim Flaherty hasn’t told you he is planning to take the CLC’s advice on that solution!

So the reality today is that – despite labour’s best organizing efforts – more than 60% of employees today have no workplace pension.

Voluntary defined-contribution plans like the Saskatchewan Pension Plan are not filling the gap. The Saskatchewan plan’s membership is 71% female, but just over one-half of active members contribute to the plan in any given year.

And even those workers fortunate enough to have pensions are facing both cuts due to the economic crisis and severe pressure from employers to give up their superior defined benefit pension plans, and accept inferior defined contribution pension plans, where income is dependent on the high risk market.

Both RRSPs and defined contribution pension plans put an intolerable degree of risk into retirement plans, when the goal should obviously be to offer security.

Canada’s CEOs clearly understand this – that’s why corporate executives insist personally on getting defined benefit pension plans in their compensation packages.

Half of all registered pension plans in Canada have just 10 members or less – and you know those belong to the people with offices at the top of downtown office towers – because the CEOs know that defined benefits plans provide access, security and certainty.

So – if we recognize that seniors living in poverty is unacceptable, and we understand that RRSPs aren’t working – and if we see that defined benefits pension plans are on the decline for anyone but a corporate CEO – what is the solution?

The Canadian Labour Congress believes the solution is very simple, very effective and most important – very achievable.

The CLC wants to double the benefits of the Canada Pension Plan.

It may seem dramatic – but in fact phasing in a doubling of Canada Pension Plan benefits over 7 to 10 years can easily be achieved – and should be a government priority.

The Canada Pension Plan already covers 93% of all Canadians, union or non-union.

So improving the CPP is the simplest and most effective way to dramatically improve the retirement security of all Canadians.

The CPP is portable – no matter where you work, or how many times you change jobs, CPP benefits follow you.

And it’s universal – all workers pay into it – whether employed or self-employed.

Here’s how it would work – currently both workers and employers pay 4.95% of salary into the CPP.

Under our plan, CPP contributions would gradually increase over 7 years from 4.95% to 7.95%.

If you’re a worker earning $47,200 or more a year, the initial cost of doubling future CPP benefits works out to about 9 cents an hour, or $3.57 a week. That’s about the cost of a medium bag of popcorn at the movie theatre.

For a worker earning $20,000 a year, the initial cost would be $1.51 a week, or about 4 cents an hour.

These increased contributions would effectively double the average earnings replaced by CPP pension benefits, on a go-forward basis, to a maximum – based on the 2011 maximum CPP benefits – of $1,920 per month.

For the financial industry, individuals alone should be contributing that extra money and into risky financial instruments, with no guarantee of stable returns.

For us, we believe the contributions should be shared equally between workers and their employers.

The CLC plan would mean a fundamentally better pension system for younger workers, but all workers would also gradually build up a better CPP benefit.

Under our plan, a 28-year-old worker in a full-time job from now until retirement at age 65 would receive a monthly CPP benefit of about $1,772. With no improvement to the CPP, her monthly payment would be $886.

While there are obviously modest cost increases for employers, there are also important benefits – they get the benefit of a defined contribution plan – without the administrative costs and without the liabilities.

That’s likely why a poll commissioned this year by CUPE saw a strong majority supporting CPP expansion.

They realize that improving CPP benefits is not a high price to pay for pension fairness.

And they know an improved base CPP would take some of the burden off existing employer plans, given that most plans are integrated with CPP benefits.

For workers who don’t have workplace pension plans, the benefit is clear – they get the same thing CEOs want and get for themselves – a stable, reliable defined benefit plan.

Workers get a better quality basic pension – one that is portable and secure – and that will provide them with more security and dignity in their retirement years than they would get if nothing changed.

To individually save the equivalent of our modest increase in CPP premiums, an average worker would need savings of close to $250,000 at age 65.

Why?

Because the administrative costs of the CPP are so low compared to individual savings vehicles, and benefits are indexed to inflation.

In reality, over 40% of retired Canadians report having less than $25,000 in savings and investments.

So expanding retirement incomes through the CPP makes excellent sense.

In addition to making the CPP the main choice for retirement security, the Canadian Labour Congress believes two more changes are urgently needed to improve retirement security.

We need an immediate 15% increase in the Guaranteed Income Supplement benefits to lift seniors out of poverty.

That increase in GIS benefits would cost $1.12 billion.

So for just 6.2% of the $18 billion we currently spend subsidizing RRSPs through the tax system in Canada – we could lift all seniors out of poverty?

Is that so much to ask in such a rich country as Canada?

I don’t think so.

And we need pension plan insurance to protect every worker’s pension income, so they can retire with dignity and security.

We insure our lives, our homes, our vehicles, our jobs – but not our pensions!

That doesn’t make any sense – it must change.

In conclusion, Canada’s unions and their members look forward to participating fully in the national debate on retirement security and pension reform – and we have a lot to say – because we have everything at stake.

You know, former CPP Chief Actuary Bernard Dussault likes to say – when it comes to pensions, everyone wants to go to heaven…but no one wants to die.

We believe that under the Canadian Labour Congress pension reform plan, you can get a little piece of heaven in retirement without going through hell in this lifetime to get it!

Thank you.