Most Canadians would be grateful for such a windfall. After all, the majority of us working outside the government have no workplace pension. Thus, we have to put aside some of our pay cheque each month into an RRSP and hope we have enough saved up by the time we hit our sixties.
In government, it’s completely different. In fact, politicians have been quietly approving what has turned out to be the largest pension bailout in Canadian history.
Consider that back in 2002, governments put an average of $2,676 per employee into government employee pension plans.
Yet over time, the pension plans ran into troubled water and the government started putting in more money per employee. By 2012, the government was putting an average of $5,741 into each employee’s pension plan. That’s an increase of 115 per cent.
If you look at the big picture, Statistics Canada data shows total government spending (federal, provincial, municipal, etc.) on bureaucrat pensions has increased from $6.7 billion in 2002 to $18.1 billion in 2012 (not including special back payments). Had the average contribution increased for inflation, the government only would have put in $10.3 billion in 2012. Thus, taxpayers could be saving over $7.8 billion annually.
While the $7.8 billion in savings would be spread across many levels of government (not just the feds), to put it into perspective, it’s equivalent to dropping the federal GST from 5 per cent down to 4 per cent with a billion or two left over.
If you’re having trouble understanding how such costly bailouts could come about and why you haven’t heard much about it, the answers are simple.
First, politicians listen to government advisors who are members of these government employee plans. The advisors of course want the bailouts so that there is enough money for them to retire on schedule; they don’t want to be inconvenienced like those not in government who saw their RRSP savings impacted during the economic slowdown.
Second, as many politicians also have golden pensions, they merrily agree to the bailouts. “Solidarity Forever?”
The alternative would have meant politicians taking on vocal and aggressive unions to negotiate pension reforms. To see how challenging that can be, look at what happened in Montreal recently. The city’s politicians tried scaling back the golden pensions for employees a wee bit and the unions threw a hissy fit.
Firefighters stormed city hall, threw papers around the council chamber, smashed windows and caused a huge ruckus. All the while the city’s police – who are also enrolled in the pension plan – stood by and watched.
As for why you haven’t heard much about the bailouts, that answer is also simple. In short, pensions are extremely complicated. Mention the word “pension” and many peoples’ eyes roll into the backs of their heads. Few people in Canada understand what’s going on, but the data is all on Statistics Canada’s website in black and white.
Fortunately, the solution is simple. Taxpayers need to put pressure on current politicians to scale back these golden benefits. If they won’t do it, then taxpayers need to start voting for politicians who will.
If that doesn’t happen, then prepare to keep on paying more.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
