It can be hard to care about pensions if you are not paying into one. If you are in your twenties or thirties, issues regarding pensions may seem as relevant to you as having great grand kids. However, pension reforms today affect graduate students in a big way.
While you may not pay into pension or plan to ever retire, pension reforms today will affect you in 2 main ways. It will affect:
- Your prospect of finding a job in the next 5 years
- How long you can expect to work once you find a job
1. Pensions and job prospects. Uncertainty about post-retirement financial stability has arguably been on the minds of Canadians for years. As peoples’ apprehensions about post-retirement finances go up, they are more likely to stay in the work workforce and postpone retirement. If you have been watching what has been happening in financial markets over the last few years, you know people approaching retirement have a lot to worry about.
Workers who are lucky enough to have pension plans (only 4 out of 10) are facing a barrage of pension reforms. While these reforms differ between work places, most of them have to do with employers shifting financial risk onto workers. The most notable of these reforms has been the push by employers to transition existing pensions from defined benefit plans to defined contribution plans. While the first is the more traditional type of plan where individuals know approximately how much will receive post-retirement, in defined contribution plans the amount retirees receive post-retirement depends on market performance.
Pension reformers and proponents of the market-oriented retirement solutions argue that individuals should assume the risk associated with their pension savings, and should also be saving for retirement on their own through RRSPs. While this is a convincing argument, recent statistics published by the Canadian Centre for Policy Alternatives suggests that workers between the ages of 55 and 64 hold, on average, $55,000 dollars in RRSP savings–well under the amount required for a livable retirement. Not only does this suggest most Canadians cannot afford to retire, it also signals that the performance of the individual/household market-oriented retirement plans has been woefully inadequate in helping people meet their savings goals.
There are a lot of reasons why people can’t afford to retire. In addition to 60% of Canadians not having access to a pension, declining real wages amongst the working class has affected the ability of households to save, and recent market volatility has eaten into the saving they do have.
The bottom line is that defined benefit pension plans are pooled saving plans, which provide post-retirement financial security. Without this security, people will be forced to postpone retirement and work longer, which leaves less job opportunities for others in the future.
2. If you find a job, you can expect to work for long time. While some of us may never plan on retiring, in 30 years retirement may not be an option because of the erosion of pension plans today. If things remain economically constant (which is unlikely), chances are that most people in their 20s and 30s will not have enough private savings to retire by 2051 in the absence of a strong, pooled saving schemes such as the CPP or workplace pension plans.
Along the same line, the current degradation of pension plans expands gendered-compensation gaps. If you are a woman, chances are that you will likely have to work longer than a man. With a pervasively resilient wage gap between men and women, and with longer life expectancies, women will have to worker longer and save more if they wish to have the same retirement income as men. Adding that many women who perform domestic work (either stand-alone, or in addition to working careers) will not see adequate, if any, wage or pension recognition for the work they perform further compounds the gendered disparity.
So, it may be hard to care, but there are good reasons to. Indeed, these are only two out of the many reasons why young people should care about what is now happening with pension reforms. For more information on pensions, pension reforms visit the Canadian Centre of Policy Alternatives website. For information on pension reforms at Queen’s University please visit the QUFA website.
Canadian Centre for Policy Alternatives: http://www.policyalternatives.ca/
QUFA’s June 2011 Bulletin on Pension Reforms at Queens: http://www.qufa.ca/bargaining/alerts/13_alert_2011.06.21.php
Sean Field, Treasurer PSAC Local 901
Many thanks to MaryAnne Laurico for her comments and suggestions on an earlier draft of this article.