Air Canada, Canada Post show why pensions must change

Gardeners know some plants need occasional trimming while others need to be cut down to the ground in the fall in order to bloom beautifully in the spring.

 Sometimes a situation has outgrown tweaking and a chain saw needs to be applied

Management at Air Canada and Canada Post seem to have decided to go at it with the big tools. Oversized, life-long, cushy pension plans are about to take a trimming.

Arbitration usually involves getting out the tweezers and tweaking the details, while simultaneously trowelling on more expense.

Organizations public and private can no longer afford to do business the way they did in the past. And pensions, lovely as they are, will have to change.

They have to change because we have changed.

In 1950 the average life expectancy of a Canadian male — males were the work force then — was 67 years. If retirement was set at 65, a company or a government could expect to pay two years salary in benefits. Not too much to ask management to provide to someone who had given — quite literally it seems — a lifetime to the organization.

Today the life expectancy of men and women combined is just over 81. People are retiring from government jobs at 55. So in 60 years we have gone from a two-year pension obligation to 26. Air Canada is paying benefits to more people than they are paying salary to.

A survey by Sun Life found the average Canadian now expects to retire at 68.

If we can expect to live a decade or two longer than our parents or grandparents anticipated, we may have to stay longer at work.

But I hear from a lot of people who do not want to also have to pay for public employees to spend as much time in retirement as they did on the job.

Of course promises made should be promises kept, so anyone trying to change the pension arrangement for long-time employees will have to do so carefully and with respect, if at all.

But for incoming employees, it is a new ball game. Sorry young people, but your parents and grandparents made themselves too good a deal and didn’t leave the same opportunity on the table for you.

They did come up with the life-extending discoveries that will allow you a longer, more healthy life, so it may at least work out as a wash.

A popular counter argument is to claim CEO salaries as the problem.

Certainly, Air Canada CEO Calin Rovinescu did not help his cause by allowing his own salary to increase 75% to nearly $4.6 million in 2010.

But as reported by QMI June 14, “Air Canada had a pension deficit of $2.1 billion at the beginning of January. The company has 26,000 active employees supporting 29,000 retirees with about $13 billion in total pension liabilities, according to company documents.”

The post office is finding itself in the same situation.

When Lee Iaccoca was working to save Chrysler he took a salary of one dollar. The symbolism was important and inspirational (and a lesson not learned by Rovinescu), but his salary was not what was sinking the company.

The world is changing. Unions in both the public and private sectors can get with the times and help work out a solution, or get left behind.

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