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When union members believe their “entitlements” are “under attack,” they fight tooth and nail to keep them. We saw how ugly it got in Michigan, in the midst of the right-to-work debate.
However, that’s likely to pale in comparison to what’s brewing right now in the Canadian province of Quebec. The Liberal Party government has put forward Bill III (PDF), which would reform municipal-employee pension plans. Among other changes, it would increase the employee contributions to their retirement to 50 percent — very few pay that at the moment — and give municipalities the freedom to stop indexing annuities.
On the latter point, union members do have grounds to be upset. Even if we are opposed to lavish public retirement funds, we should realize that people have responded to incentives and organized their lives around those incentives. An end to the indexing would hurt them badly when inflation picks up, which is likely in the wake the massive increase to the monetary base since 2008 — M2 increased by more than 50 percent — and in the presence of historically low interest rates.
Regarding the other changes, though, they are acting like spoiled children who throw a tantrum when they don’t get 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); and Montreal blue-collar workers, the archetype of union goons, keep intimidating subcontractors who work “where they shouldn’t.” Some have 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 Else Can Get
They are spoiled because they get benefits no private employee would dream of. Firefighters, for example, can retire after as little as 25 years of service. They contribute a mere 6 percent of their salary or CAN$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 at age 65 — at which point their remuneration decreases by $9,000.
In other words, firefighters in Quebec are active (working or looking for work) for less than 33 percent of their lives, assuming a 75-year life expectancy. To achieve such lavish lifestyle, the average Quebec worker would need to save $668 weekly, starting at age 20. He can’t even do that, because contributions to retirement plans are limited to $23,000 per year or 18 percent of one’s annual salary.
Much-Needed Changes
Firefighters are just the start. Imagine all the other government employees who barely, if at all, pay for their privileged retirement benefits. Taxpayers foot the rest of the bill, and they’ve been soaked dry. Between 2002 (the year of the mega municipal mergers) and 2008, consolidated property taxes increased over 34 percent, while the Consumer Price Index (CPI) increased less than 13 percent.
Bill III, acknowledging the contractual obligations problem, is a move in the right direction. 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.
Besides, such an agreement can be reached without unions resorting to barbarism. Last year, the city of Saguenay — about 200 km from the provincial capital of Quebec City — signed such an agreement that also included raising the retirement age to 60 and decreasing the annuities that heirs might receive.
In short, let’s hope the Liberal government doesn’t chicken out, as 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.
Union 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 elitist retirement plans that are simply beyond regular constituents – 36 percent of US Americans have close to nothing for retirement, thanks to Social Security taxes and the ever-higher cost of living.
