I was asked to comment on this, and I looked at some of the issues and some of the areas. I think the areas I can speak to are what I will call the macro effects, for lack of a better term. Is this going to shake the Canadian economy to its roots and lead to a doubling of the number of bankruptcies in the country or some other difficulty, or is it not?
In looking over the material, I guess the first comment is that as a result of what's already happened there has been an unfairness to pension recipients. The effect of that is going to have substantial macro effects. We haven't even addressed those in this discussion here.
It basically boils down to what a pension is. A pension is a delayed form of compensation negotiated with a group of workers, where they take that money later in lieu of current wages. This is of benefit to the company, which can then say it will pay that out of future earnings. It's a benefit to the employees, who postpone the tax until such time as they retire, with the mistaken belief that their tax rates might be lower than when they earned them.
It is in this event where we now have said we were kind of kidding; we're not really going to pay these pensions, or we're going to make it uncertain. It will be a crapshoot every time to see if you get your pension.
What's the reaction to that by people who are around the negotiating table? They're going to say “Okay, we'll take wages now. We'll put less value on the pension promises in the future, and as a result, you should expect wages to go up in the short run.”
Some people I know are concerned about competitiveness. They're worrying about the cost of borrowing, as if that were a major element of competitiveness. The wage bill for most companies, the value added, is 60% or more. If that goes up, then you have pressures of a competitive nature.
Now, do you lose sleep over that? Some do, and some don't. Some would point out that there are other ways to improve competitiveness. Certainly it's a relative concept. From the corporate viewpoint, If a one-cent or two-cent depreciation of the dollar occurs, that should more than put you back on end in terms of competitiveness.
As you go through your deliberations on this, think about how this is going to change the dynamic of the way Canadians negotiate with companies.
It's unfortunate, but I don't think there's any way this move and this piece of legislation is going to restore trust between employees and companies. It is a very small step in that regard. I wish we had a more magic way of doing it. At least it's a step in the right direction, and it may mean that people are still prepared to accept pensions of one form or the other.
The other item I would quickly mention, to stay within my time limit, is that the debate here isn't in some sense about these macro terms; it's a debate among a group of people who are in a room and they're told to line up and we're going to give you a haircut. What's the order of that lineup?
We're saying that people who don't have experience on an ongoing basis in dealing with bankruptcies, as most creditors would, ought to be at the front of the line. Usually a pension is the single biggest financial asset, and now it's a loss for most individuals who are involved in it. There is an issue of what they should do. Where should they be placed in this haircut room?
It is likely--and this is something you probably cannot restore under this particular bill--that people will still have a haircut. Pensioners are still going to lose. The question is are they going to lose lots, or all of it, or less than they might otherwise? That's what this is about. It strikes me that a move in this direction would be a positive step, along with some of the other measures that were taken in recent legislation.
Thank you very much.