By David Coletto
October 23, 2012
In last week’s tabling of the second budget implementation bill, the federal government announced major changes to the pension plans of MPs and federal public servants.
Starting in January 2013, all federal government employees will have to make larger contributions to their pension, 50% up from 37%.
Moreover, all new public servants can no longer take early retirement at 55. The minimum retirement age has been raised to 65.
These reforms make sense when you consider the quickly approaching demographic tsunami approaching. It’s right that employees and employers pay their fair share into taxpayer-funded pension plans.
But how is the public likely to react to these proposals?
Do Canadians want the federal budget balanced?
Yes they do. In fact, almost seven in 10 told us in a survey earlier this year that balancing the federal budget should be either a very high or high priority.
When asked how the government should get to a balanced budget, most Canadians preferred an approach that sought to cut spending as opposed to one that increased taxes. Almost half — 48% — of respondents were likely to prefer a combination that stressed spending cuts over tax increases.
The estimated $2.6-billion in savings without any increase in taxes is what most of us want to hear. Will Canadians feel much sympathy for public servants who will now have to pay more for their pensions? Not really.
Consider this: 57% of respondents in that survey believed the compensation (wages and benefits) paid to those working in the public service was too high. Only 4% considered their compensation too low.
So apart from some bluster from the federal public service unions, the Conservative government is on the right track in reforming public service pensions if public opinion is any consideration.
But the impact of the pension changes may have consequences on the public service’s ability to recruit and retain highly skilled and motivated employees at senior levels of the public service.
Many have described my generation (those born between 1980 and 2000) as entitled, unmotivated, and lacking focus. I’ve heard many say we are not loyal to our employers, switching jobs and even careers without a moment’s notice. We may switch jobs regularly but it is not because we are disloyal.
When my father started working 30 years ago, things were considerably different.
A defined benefit pension plan was often included in your job offer. That pension was like an anchor. It kept you loyal to your employer.
Like our parents, we want to retire comfortably. But the jobs we are taking these days lack those pensions. So why be loyal to an employer who isn’t loyal to you?
Businesses and governments now face a dilemma.
On the one hand, an aging population and economic realities require reform to programs and benefits like health care and pensions. On the other, labour shortages mean intense competition for skilled people. Organizations will need to be creative and offer prospective recruits new employment anchors to attract and retain the best and brightest.
The federal government is no exception.
Public service and MP pension reform was long overdue. But now, without the benefit of early retirement, the challenge for the federal public service is to make government a stimulating place to work. That’s no small task.