The Columbia Journal
P.O. Box 2633 MPO,
Vancouver, British Columbia,
Canada V6B 3W8
The recent move by Air Canada bosses to scrap the firm’s
long-established employee pension plan, and the on-going blow-out fight
over this between them and the workers there shows a crying need for
pension reform—not only at Air Canada, but our whole economy. And this
reform should be aimed at giving people a greater say in how their
pensions are managed.
New Air Canada head, Hong Kong magnate Victor Li, who bought the
troubled firm last fall, wants to scrap the current “defined-benefits”
plan, which guarantees how much a person gets when they retire, to a
“defined-contribution” plan, which only guarantees what the company
agrees to contribute into the plan and leaves investment option to the
At a glance, it doesn’t sound like much of a change. But when it is
applied the consequences are staggering. One could say the proposal is
a victory for the rights of individual workers to decide their own
economic fate. But this supposed victory is negated by the fact that
each worker will bear the burden of investment risk.
Air Canada is under the control of Li’s personal management firm called
Trinity Time Management Inc. And it currently bears the risk of
investing pension money. This is as it should be for three reasons.
First, it is a fundamental economic fact that companies profit from and
are given their practical value by the collective labour of their
employees. In other words, companies accumulate wealth by selling the
goods and services created by workers in the marketplace (which, by the
way, is also created mainly by workers via their massive investment of
consumer dollars). They should be expected to use this wealth and
resources to help secure their employees’ retirement.
Second, markets—especially financial markets--under the sway of
capitalist economics are often unstable and very unpredictable to
almost everyone. It takes teams of experts, analysts and investment
managers with the required training and ready resources to manage money
under changing market conditions. Companies, especially larger firms
like Air Canada, have the resources and connections to enlist these
experts in making secure investments. Individual workers do not.
Third is simply the matter of survivability. Companies can usually
afford to take some degree of money-loss, even substantial ones, and
keep right on moving. Most workers can’t.
It’s easy to see why Li wants it this new type of plan. This way his
company simply makes contributions to the plan as agreed to by
collective agreement. What happens to the money after that is no longer
What's worse is that this development is not unique to Air Canada. In
fact, pensions have been under corporate attack for almost 20 years in
the United States, where almost 70 per cent of workers are now without
pension benefits—as opposed to 30 per cent in the 1970s. This is in
part due to pension busting (and union busting) legislative and
regulatory changes by the Reagan Administration.
In the last few years, due to the repeated stock market crashes—where
pension plans suffered greatly, many company bosses have become even
more interested in dumping “defined benefit” plans. If they can get
workers to bear the risks, and any potential losses that go with them,
why should they keep it? After all, less risky ventures can attract
more investor interest, and thus they can demand higher stock prices.
The problem obviously goes much deeper than what type of pension
workers should have. It is an issue of control over the plans and how
they are used. Workers, who are the supposed beneficiaries, have little
say in setting policy for their plans. Most plans are under the control
of corporations and investment agencies.
Even many fully union-owned plans are administered by actuaries and
investment managers with little accountability to the elected union
trustees or the members.
While companies that own “defined benefit” plans may bear the risk,
they also bear the control. Which means they can choose whether to
change the nature of their plans. Most unionized firms, like Air
Canada, have to negotiate any changes with their employees
collectively. However, even this still keeps most of the control in the
hands of the company, which owns the plan, and the un-elected managers
that run it.
With this situation, it is no wonder that so many firms are pushing to
either transfer pension investment risk on to workers or gut them
What is needed is for the ownership of pension plans to be transferred
to democratically elected trustees and directly hired investment
managers who are accountable to the workers who earn them. Where
necessary, smaller less-secure plans can be merged together with larger
ones to minimize risk and pool resources to hire trained management
teams. In addition, education initiatives directed toward workers to
encourage them to take a more active role in understanding how pension
plans operate, and how they are managed.
Workers who pay into these merged plans should have portability rights,
regardless of who they work for. Employers would simply contribute to
these plans, and they would be self-managing. Rather than workers
individually bearing the risks, these collective plans would bear the
risk on behalf of everyone. This may not be as flexible as workers
individually managing their retirement savings. But it is it certain to
guarantee the most fundamental tenant of any pension plan: security.
These ideas may sound like wishful thinking or dreamy idealism. But
this is the way many pension plans operate in Europe. Portability
rights for workers are a pipe dream in Canada. It is reality in
Germany. Multi-pension trusts democratically managed by elected boards
seem like utopia in Canada. They are a fact in Italy.
If workers are to be the beneficiaries these huge pools of capital,
then it only makes sense that they have a say in running them. This
way, grueling situations like the one at Air Canada could be avoided
and retirement security could be more of a guarantee.