Saturday, November 26, 2011

Dismal child poverty record, and no plan to improve

The Clark government believes reducing the number of unnecessary regulations is important.
It doesn’t feel the same way about reducing child poverty.
That’s the obvious conclusion from the Liberals’ display of government priorities during the legislative session that wrapped up Thursday.
The Liberals introduced, debated and passed a new law — the Regulatory Reporting Act — that requires an annual report on the number of regulations added and removed during the year, and on initiatives to cut regulations.
Why? Because, Finance Minister Kevin Falcon told the legislature, it’s important — vital — for government “to be publicly accountable for progress or lack of progress” on reducing regulations. Only by measuring and reporting can the public be assured that progress is being made, he said.
But when it was reported that B.C. had the highest rate of child poverty in Canada for the eighth consecutive year, Premier Christy Clark rejected calls for a plan to address the problem, with targets, actions and a requirement for an annual report on “progress or lack of progress,” to use Falcon’s words.
Why no plan? Clark and the other ministers never offered a coherent reason.
Because there isn’t one.
The facts are clear. The annual national look at child poverty, released by First Call, an advocacy group, found that 12 per cent to 16.4 per cent of B.C. children were living in poverty in 2009. That’s the highest proportion of poor kids of any province, a dismal ranking B.C. has retained for eight years. (You can debate poverty measures, but the fact remains this province is the worst.)
So some 100,000 to 140,000 children are being raised in poverty, an increase of about 15 per cent from the previous year.
That’s bad for them; childhood poverty is linked to lifelong health issues, educational limitations, unemployment and a variety of other problems. And it’s bad for the province, since a large number of people will never make the contributions they could have.
Any competent manager — a title the Liberals like to claim — knows that progress starts with a plan. You set targets for improvements, develop action plans with expected outcomes, monitor and report on progress and make needed changes as you go.
Clark said the government doesn’t need a plan. It’s doing things like raising the minimum wage and providing housing supports and launching job strategies. Those will help reduce child poverty.
Maybe, though it’s an odd claim since the government has insisted for most of the last decade that raising the minimum wage wouldn’t reduce poverty.
But a bunch of random actions aren’t a plan. There’s no objective, even a modest one like moving B.C. from the worst in Canada to the seventh worst. There’s no estimate of the effect of any actions on reducing poverty.
And there’s no reporting or accountability. Reducing regulations, the government passed a law to make sure there would be real accountability there. Not for reducing the number of children living in poverty.
Children and Families Minister Mary McNeil says the government has “committed to working closely with municipalities” to develop regional poverty reduction plans. That might be useful, if it ever happens. But it should also be part of a provincial poverty plan, with targets and outcomes and public reporting on progress.
There’s nothing radical about the idea of developing a plan to reduce child poverty. Seven other provinces already have plans or are working on them. Alberta is expected to launch a plan. That would leave B.C. and Saskatchewan as the only provinces without a coherent plan to reduce child poverty.
The current approach isn’t working, despite some reductions in the number of poor children in recent years. If it was, B.C. wouldn’t still have the worst record in Canada.
Falcon’s Regulation Reporting Act passed into law on the last day of the session. That mattered to the government.
Poor kids are still waiting.
Footnote: A plan could make quick progress. About one-third of the children living in poverty have parents dependent on income assistance or disability benefits. (A single parent with two children who is deemed employable gets up to $660 a month for housing and another $623 a month for everything else.) Providing enough support to lift those children out of poverty, or allowing their parents to earn some money without losing benefits, would move B.C. into the top half of the rankings.

Tuesday, November 22, 2011

Big pension problems get tiny government response

Canadians have lost a lot over the years.
A generation ago, most people could count on buying a home for the equivalent of about three year’s salary. That dream is gone.
And a generation ago, most people could count on retiring with a guaranteed pension from their company. They knew how much they would get, and with Canada Pension Plan and old age security, they could count on a comfortable retirement.
It’s extraordinary how that has been taken away, with no real debate.
Companies decided defined benefit plans — ones that paid a guaranteed retirement income — were too costly.
Employee and company paid into defined benefit plans. If the reserves looked they might not provide the promised benefits in future, they had to be topped up.
So companies pushed to eliminate the plans, or change them to defined contribution plans. Employees and company would contribute and the funds invested. The pension would be based on however much money was in the fund on retirement. There was no obligation to provide an income. (Government workers, including MPs and MLAs, still have defined benefit plans. MLAs and MPs believe you should pay for guaranteed pensions for them, but not that you should have one.)
And work changed, from long-term employment with big companies to much less certain work, often part-time or on contract, and without any pension.
In fact, only one in four British Columbians have workplace pensions today.
This huge change in the social contract hasn’t been discussed. And while workplace pensions have been slashed, there has been no corresponding increase in public retirement benefits. Those benefits are low compared to other OECD countries, in large part because Canadians could once count on workplace pension plans.
The Harper government has offered a token response to the pension problems with legislation allowing new pooled pension plans.
It’s a lame response to a real problem. The new plans would give small business the opportunity to provide a pension plan by signing a deal with a bank or investment company. The employees would have the voluntary chance to contribute, and the employer could also contribute if he chose (not that likely, I’d say). The investment firm would take its cut for managing the money and the savings would be available at retirement.
Some employers will offer the plan. Some people will sign on.
But not many. And there is no real benefit over RRSPs; people who have not contributed to their own retirement fund, for whatever reason, are unlikely to opt into voluntary pooled plan.
The government could have easily made the plan at least slightly better. It could have allowed the pooled plans, and had the funds managed by the Canadian Pension Plan investment experts. That’s similar to the approach taken in Saskatchewan, where such a plan already exists. That’s also the model promised by the B.C. government in 2008, and never delivered.
That would have provided excellent money management at the lowest cost. Instead, the Harper government offered the banks and the investment houses the chance to manage the money and collect the fees.
That’s strange, because earlier this year Finance Minister Jim Flaherty called for an investigation into the high fees charged by providers of Canadian mutual funds and other investments. A study found Canadians pay more than twice as much in management fees as Americans. Those costs significantly reduce the money being available for retirement. Now Flaherty is opening a new market for them.
This isn’t just an issue for those nearing retirement age.
The giant baby boom bulge is now nearing 65. In 1971, there were 6.2 British Columbians of working age for every person over 65. By 2034, there will be just 2.4 working-age people for each person over 65. If boomers push for better pensions, the cost will fall heavily on those still working.
Footnote: The best option would be a planned increase in CPP benefits, now capped at about $935 a month. That would require increased contributions by employees and employers. The minimum retirees can expect in Canada is about $1,170 per month — that’s basic old-age security plus a guaranteed income supplement for the poorest seniors.