A Labour Day reality check

On Labour Day, we should commemorate the achievements of unions in Canada in establishing workers’ rights. But we should also acknowledge taxpayers’ rights.

(This column originally appeared in the Toronto Sun)

By: Candice Malcolm

Labour Day’s origins in Canada can be traced back to the early 1870s, when the Toronto Typographical Union began advocating for a limited, 58-hour work week. Several unions banded together, and as a result, thousands of workers peacefully marched through the city to gather on the lawn of Queen’s Park. Although many workers lost their jobs over this illegal strike, Prime Minister John A. Macdonald intervened and sided with the workers, who were granted both the shortened work week and legal protection to engage in union activity in Canada.

Over the years, unions have fought for and achieved countless important rights and protections for their members. But today, things are quite different. Many unions — particularly government sector unions — are no longer fighting for rights. They are now fighting for entitlements. And these entitlements come with a hefty price tag for taxpayers.

Take pensions, for instance. Over 87% of government employees have a workplace pension, compared to just 24% of workers in the rest of the economy. Virtually all government employees receive the most lucrative and expensive kind of pension: a defined-benefit plan. These plans are basically extinct in the private sector because they are so unaffordable. Employees are promised specific retirement benefits, regardless of how much money is actually saved in the pension account.

These plans were designed based on a number of assumptions that have not panned out. The architects of these plans had to guess factors such as life expectancy, stock market returns on investments, the number of members contributing and the inflation rate. As baby boomers retire and our workforce shrinks, many of these guesses have turned out to be wrong. The result is that most government sector pension funds are deeply in debt.

This trend will continue, and so will the future debt burdens from these overly generous pensions. This is the elephant in the room politicians and union leaders haven’t had the courage to acknowledge, let alone try to fix. Their favoured solution is to leave taxpayers with the bill for bailing out these indebted pension funds.

According to Statistics Canada data compiled by the Canadian Taxpayers Federation, taxpayers across Canada contributed $18.1 billion into government employee pension plans in 2012, almost three times as much as the $6.7 billion paid in 2002. The annual government contribution per employee jumped from $2,676 in 2002 to $5,741 in 2012, an increase of 115%.

The story in Ontario is very similar. When it was discovered the Ontario Teachers’ Pension Plan had a funding shortfall, the funding formula was adjusted by hiking contributions paid by both taxpayers and teachers. The taxpayer portion has increased by 114% over the last decade, from $713 million in 2003 to $1.53 billion in 2013. These contribution increases are bailouts to some of the most well-off people in our society.

Instead of standing up to fat cat union leaders and negotiating fair deals for taxpayers, most politicians resort to these stealth bailouts. They agree to tackle pension shortfalls by increasing the “employer” contributions, another way of saying taxpayers get stuck with the bill.

On Labour Day, we should commemorate the achievements of unions in Canada in establishing workers’ rights. But we should also acknowledge taxpayers’ rights. Taxpayers should not be forced to pay the lavish benefits of the governing class. It’s especially crass to tell someone with no pension to bail out their government-employed neighbour’s pension.