When unions see/feel that their “entitlements” are “under attack”, they fight tooth and nail to keep them. We saw how ugly it can become in Michigan in the midst of the debate for right-to-work.
However, it’s likely to be very pale in comparison to what’s brewing right now in the Canadian province of Quebec. Don’t think it’s exclusive to that province; several cities across the U.S., notably Detroit, are starting to feel the effects of generous pensions to their employees. With the ever-increasing amount of unfunded liabilities, reforms are vital so that taxpayers aren’t soaked more than they are already.
The Quebec government has chosen the reformation route by putting forward Bill 3, which would reform municipal employees’ pension plans. Among others, it would increase the employees’ contribution to their retirement to 50 percent - very few pay that at the moment – and give municipalities the freedom to stop indexing annuities.
On that latter point, unions are right to be upset. However one is opposed to lavish public retirement funds, one has to realize that people merely responded to incentives by organizing their lives around those incentives. Stopping the indexing will hurt them badly when inflation picks up, as it is likely considering the massive increase of the monetary mass since 2008 – M2 increased by more than 50 percent - and the historically low interest rates.
But for the rest, they are acting like spoiled children who don’t have exactly what they want. Policemen dress unprofessionally with flashy pants; some employees are wearing equally flashy clothes to work as part of their “Lundis Mous” (soft Mondays); Montreal blue collars, the archetype of union “goonery”, keep intimidating subcontractors working “where they shouldn’t;” and some even stormed the Montreal City Hall, leaving quite a mess behind, all of which happened under the passive eye of the police.
Lavish Benefits No One Can Get
They are spoiled because they get benefits no private employee can even dream of. Firefighters, for example, can retire with as little as 25 years of service – in the U.S., it’s as little as 20 years, but the retiree must be at least 50.
Quebec firefighters contribute a mere 6 percent ($4,400) annually to their special retirement fund and can earn as much as $43,400 annually until the public pension plan (RRQ) kicks in; it then decreases by $9,000. They are paying “much” more than their American counterpart; firefighters in the U.S., other than Social Security, pay no special premiums for their plans and their earnings increase as their best three-year average increases.
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In other words, firefighters in North American are active (working/looking for work) for less than 33 percent of their lives (assuming a 75-year life expectancy). To be able to get such lavish lifestyle, the average Quebec worker would need to save $668 weekly starting at age 20. He can’t because contribution to retirement plans is limited to $23,000 or 18 percent of annual salary.
This is only an example for firefighters; imagine for other public employees who barely (if at all) pay for their special retirement benefits. Taxpayers foot the rest of the bill, and they’ve been soaked dry for that.
Bill 3 is a move in the right direction as employees will finally pay their fair share. And since the deadline for the 50-50 contribution is set to 2020, they will have plenty of time to adjust to their new real wage.
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Besides, such an agreement can be reached without unions breaking everything. Last year, the city of Saguenay (about 200 km from the provincial capital of Quebec City) signed such an agreement that also included increasing retirement age to 60 and decreasing annuities heirs might receive.
In short, let’s hope the Liberal government won’t chicken out like they did in 2003. In fact, let’s hope that every politician will realize that “other people’s money is running out,” to quote late Margaret Thatcher.
Unions’ pensions are an electoral issue in Rhode Island, Illinois and New York. Taxpayers need to hold rank and demand that their politicians stop paying for retirement plans people can’t even have – 36 percent of workers have close to nothing thanks to all those Social Security taxes and increased cost of living.
PierreGuy Veer is a Canadian-born libertarian now living in Idaho. His ideas have stirred up debates both in French and in English. You can contact him at email@example.com or follow him on Twitter @le_moutongris
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