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Lethbridge Herald, The (Newspaper) - October 24, 1974, Lethbridge, Alberta Thursday, October 24, 1974 THE LETHBRIDGE HERALD 5 High inflation rate killing pension plans By Richard Gwyn, Toronto Star commentator A week ago Friday, Art Mi- ron celebrated his 39th1 birth- day. That same day Capital Wire Cloth, the Ottawa plant where Miron has worked as a weaver for 22 years, laid off 14 employees. Four more go next week, another four the week after, until all 70 are gone and Capital Wire has closed its doors. Miron, shop steward for the International Association of Machinists, believe the plant is being closed because Capital Wire wants to rid itself of the costs of the employees' pension plan. Miron's opinion is impossi- ble to prove or to disprove. Company president John Langley denies it and says shrinkage in the market for Capital Wire's basic product has caused the shutdown. Miron agrees, but points out that the company is keeping open identical plants in Quebec and British Columbia. Ottawa is being shut- down, Miron says, because its employees are much older than those in the other plants and therefore the company's pension liabilities are much heavier. The Capital Wire situation, or what Miron believes has happened to his job, isn't unique. Last year Domco In- dustries of Montreal informed its 500 employees that their company could no longer carry the burden of their pen- sion plan. Employees had a choice: close the plan or close the plant. The 500 employees still have their jobs, but no pensions: Hourly rated employees did not even receive back their own contributions to the plan. These are extreme ex- amples, but they may not seem so extreme in the future. Private pension plans could become the first institutional casualty of inflation, the first part of the system to collapse under the strain. The Labor Gazette, official magazine of the department of Labor, writes of "the crisis of private pension William M. Mercer Ltd., Canada's leading pension con- sultants, writes that unless inflation is checked, "It would be not unduly pessimistic to forecast the breakdown" of private pension plans. The consequences of collapse would be terrifying. Four Canadians in 10 rely upon private pension plans, operated by their employers, as their principal source of retirement income. There are about plans in Canada, with combined assets of around billion. Most plans are sound, yet even the best-administered are feeling the strain: Their liabilities are growing at the same time as their assets are dwindling. Inflation is the killer. At 10 per cent inflation a pension worth, say, today, would be worth a bare in five years' time, and would continue to decline in real value. Companies are under pressure to "open" existing plans to provide catch-up bonuses to employees who have already retired. The federal government has gone all the way and indexed its pensions to so has the Royal Bank, for its retired employees. Extra money to compensate retired employees can come from only two sources: Com- pany profits or higher contributions from present employees. The funds themselves can provide little extra cash; the stock market decline has cut the value of pension fund-stock holdings by 20 to 30 per cent. "Pension funds are in effect says Doug Gibson, former executive vice- president of the Bank of Nova Scotia and now consultant to several large pension funds. "Pension plans aren't built to stand much more than three per cent inflation. Most com- panies simply can't afford to index their plans: Their liabilities become appalling." As appalling, though, is the decline in the real value of pensions unless they are indexed to inflation. A lifetime of savings can be destroyed. The spiral is downward, with nothing in sight to turn it a reduction in the inflation rate. At Ottawa an inter-depart- mental committee, led by the Department of Finance, is studying "ways of protecting pensioners against inflation" as the throne speech promised. "We will look at every al- says Health and Welfare Minister Marc Lalonde. "I can tell you already though, that none of the alternatives is particular- ly enjoyable." An extreme solution is the Swedish model, a state plan for everyone (two thirds of final But, says Lalonde, "This doesn't solve the gut problem; it merely transfers to government responsibility for finding the money." Lalonde is worried too by the huge amounts of capital that would be transferred from the private sector to state control: The assets of the Swedish fund, for example, now are worth twice the value of the country's in- dustrial stocks. Inflation threatens to crip- ple private pension plans, but even without it, many of them would be hobbled. Criticism about private pension plans is rising almost steeply as is the inflation index. "The docility of unions (to- ward pension fund manage- ment) always used to astonish says Bob Rudd, former- ly manager of the Canadian Pacific Railway pension fund, the second largest in the country (he's now in real es- tate in Pensions amount to deferred pay, yet many unions have allowed companies to use the vast pools of capital the plans generate almost as if they were company's private prop- erty. This docility is disappearing fast. Last month the research directors of all major Cana- dian Labor Congress unions held a two-day strategy meeting in Ottawa. Only two subjects were discussed: inflation and pensions. "We're talking about the workers' own says Peter Sadlier-Brown of the International Association of Machinists. "First, are the benefits what they should be, to which the answer is no. Second, is the money being invested to bring the max- imum return, to which the answer usually is no. Third, is it being invested in accor- dance with the members' own goals, for instance not in a company that is, say, a union- buster, to which the answer is we don't know." The pension industry is in poor shape to answer such questions. The stock investment record of most pension plans is worse than the stock market index, which means that the high priced managers have done no better than rank amateurs. "Pension fund management has, as a rule, been says Montreal investment counsellor Stephen Jarislowsky. "to be candid, we performed a bit like says Rudd. The unkindest cut comes from highly respected William Mercer Ltd.: Pension fund managers have perform- ed "with a sense of timing hitherto ascribed only to odd- lot a polite way of saying they made the wrong investments at the wrong time. Incompetence and neg- ligence aside, poor perfor- mance (which means smaller benefits for the employees) has at times been deliberate. In 1969, Toronto policemen discovered that their pension fund was being invested in five per cent municipal bonds. Metropolitan Toronto in effect was paying for its roads and 6year whisky 5 year old price. Beautiful! sewers out of the pockets of its policemen. Fund manage- ment sin'ce has changed, and now the money earns eight per cent or more. "Conflicts of interest says Doug Fuller- ton, a former investment counsellor and later chairman of the National Capital Com- mission. Ethics aside, sloppy pension fund management has become too expensive for any com- pany to sustain. Companies now have a high stake in their pension plans. For example, Canadian Westinghouse's pen- sion costs have soared from in 1962 to million in 1972: To illustrate what's in- .volved, Westinghouse's 1972 profits were million. Fringe benefits, of which pensions are the largest item, amounted to 23 per cent of av- erage payroll costs in 1961, are 30 per cent today and are forecast to grow to almost 40 per cent by the end of the decade. All unions are seeking im- proved pension benefits. Better vesting provisions are a common demand. Legisla- tion today requires vesting (the date at which an employee who quits gets back the employer's contributions as well as his own) for all employees who are at least 45 and who have 10 years' ser- vice. The Ontario Pension Commission has recommend- ed vesting at age 40 and five years' service. Pressure is also strong to change plans which calculate pensions on the basis of an employee's life-long earnings, to a "best five years' formula. As wages rise quickly to match inflation, wage rates of as little as five years ago can become almost meaningless as a basis for retirement in- comes. These improvements are needed. The difficulty is to know where to get the money to pay for them. For instance, the present lack of portability between pension plans is patently the hard fact is that many plans stay in the black only because enough employees leave after a few years, in effect subsidizing those employees who hang on long enough to collect full pen- sions. More to the point, these ex- tra costs will be piled on top of those already being demanded of pension plans to offset in- flation. Fullerton proposed a com-' plete state take-over as in Sweden. Rudd forecasts that contribution rates by employees and employers will have to increase "15 to 20 per cent a year" to keep existing plans sound and to find money to compensate existing pen- the erosion caus- ed by inflation. Lalonde sees a partial solu- tion in the expansion already under way, of the Canada Pen- sion Plan which with the separate Quebec Pension Plan, now has assets of about billion, or half those of all private plans. The Canada plan is indexed to discount inflation, and the scale of payments is rising. By 1983, points out Lalonde, an in- dividual retiring with a salary of would be eligible, under CPP and old age securi- ty for a pension of close to The role of private plans then would be to "piggy back" on top of this universal plan to bring pensions up to, say, three quarters of an in- dividual's pre retirement in- come. The CPP and QPP are in healthy shape. At the moment By 1963. calculates Lalonde's department, CPP payments will exceed its revenues, and by the end of the century the fond will be exhausted Luckily for Lalonde, that'll be a problem for another government Integration of state and private pension plans, better fund management and accoun- tability for investment decisions to onion and employees: stricter govern- ment regulation: improved pension portability and index- ing, partial and complete all these reforms will help. The core problem that remains is money. Ultimately it can come from only one source higher contributions by existing employees and employers, or higher taxes, which is another word for the same cut hi take home pay. This is the unpalatable truth no one yet has faced unless we are prepared to abandon the ideal that pension plans should provide workers with a retirement income at least comparable to UK wages they received while working. Canadian literature By Louis Burke, Lethbridge teacher Literature is as much a national expression as hockey and Canadian literature can match any, even if our hockey cannot. It is strange that we do not read or study more of the works produced by Canadian writers. Indeed, one of the best books on Canadian literature is put together by an Italian, Giose Rimanelli, who teaches in California. How, in heaven's name, do such pecularities occur? The fault lies almost everywhere from the prime minister to the classroom teacher, from the parents to the school children. Over the years, Canadians have been taught to think of things Canadian as boring. Try reading a Canadian short story to a class of youngsters; boring is the usual moan or groan from them. If, however, they have been taught one way, it is always possible to teach people the other way, and the classroom is the place to begin. But government and business have a serious responsibility in our literature, too. They neither provide the rewards nor the out- lets needed to develop the talent already there. Without question, the money exists in Canada, but our literary talent keeps migrating south, or across the Atlantic where the outlets and the rewards are many and great. Even the CBC, a public corporation, closed off its outlet for Canadian short story writers. This low level attitude towards literature can, and does, have serious effects on the nation. Right now, the country is in the stage of 'Upper America', and could easily drift towards the entity known as the 'United American Republic' which would merge Canada and the United States with control be- ing located in Washington. Canadian literature has a lot to do with such drifts. Perhaps the most vicious non-Canadian cir- cle exists in the education world. At universi- ty level teachers possess a continuity in a cer- tain tradition which is most difficult to break. In English departments the tradition is Shakespeare and others non-Canadian. In French departments it is Racine and other non Canadians. University teachers are steeped in this tradition and they will teach only what they are familiar with and sure of. Canadian literature is part of the unknown to such personnel. While some few venture into that realm of literature, most shy away from it. Thus, our young teachers have no background in our national literature; English, French or any other language used in Canada. When they enter classrooms, the perpetuation of Shakespeare, Racine and others continues: not that these authors do not have a place in our schools. By the same token Canadian authors ought to have a place in every language curriculum the nation over. In like manner the problem reaches the classroom student, especially those in their last year at high school. Under the present university structure, the penalty would be great for the student who had not studied Shakespeare or Racine if he wished to go further in English or French studies. Yet, an equally good learning experience can be put together using any of the many Canadian authors available. James Tburber, the American short story writer, is not greater than Thomas C. Hurliburton of Halifax. Morley Callaghan, Ontario, matches Ernest Hemingway, John Steinbeck, or Somerset Maugham. Earle Birney, Calgary, and W. 0. Mitchell, High River, Alberta are equal to any; and why haven't the many heard of John Patrick Gillese of Edmonton. Nor can we dismiss the writers in our midst in Lethbridge itself! Indeed, it is unbelievable, if not unnatural, the way people undercut things Canadian, including our literature. But every "you" in the nation can do something about it. This is not the impossible, and it all begins with you. Why not begin today read a story about Canada, by a Canadian, for Canadians! Nixoniana By Norman Cousins, editor of Saturday According to news reports, at least 20 books are now being written about the rise and fall of Richard Nixon. Most of them are by men who were very close to the president and who were themselves implicated in the Watergate scandals. These inside story accounts will be only the beginning of a high tide of books and articles that may last for a decade to come. It is safe to predict that the outpouring will include biographies, psychological studies, even novels and plays. What is there about the Nixon saga that warrants so much literary attention? The answer is not complicated. No man in American public life in recent years has given rise to as many paradoxes, ironies and contradictions as Richard Nixon. Here is a man who was the leading advocate of intervention in Indochina, yet who was primarily responsible for extricating the United States from the Vietnamese war. No man has been more influential or out- spoken in advocating an American policy isolating mainland China, yet no man has been more energetic or imaginative in reversing that policy than Richard Nixon. He scorned anyone who dared use the term People's Republic of China instead of Com- munist China, yet he made it respectable to use the designation preferred by the Peking government. Next to Sen. Joseph McCarthy, no man in government was more dramatically iden- tified with opposition to any dealings with the Soviet Union than Richard Nixon, yet no man did more to initiate and sustain improved relations with the entire Communist world. Even Watergate was full of ironies. Richard Nixon's downfall began when a Watergate guard became suspicious about evidence of a break-in and called the police, thus touching off the greatest political scan- dal in American history. That guard got his job at Watergate after losing another job when President Nixon eliminated the Office of Economic Opportunity. The direct evidence that Richard Nixon had lied to the American people about his part in the Watergate coverup was supplied by a tape recording. This recording, like all the other tapes, had been made on the specific instruc- tions of Richard Nixon himself. A great deal of attention was given during the Watergate investigation to the wholesale bugging of political opponents and even of White House employees. Yet it was the self- bugging of the president that furnished proof that caused Nixon's strongest supporters in Congress to turn against him, and that cost him the presidency. Why would Richard Nixon have authorized his most confidential conversations to be made part of an accessible record? The answer, in all probability, is that Richard Nixon wanted to have the basic materials that would be useful for his memoirs. But what was intended as a device to help establish a high place in history for Richard Nixon turned out to be a merciless form.of self exposure and self destruction. Finally, Richard Nixon's own attitude toward the American people came back to haunt him. He referred to them as children, yet the attitude of fairness, intelligence and maturity was what most characterized the American people during the entire ordeal of Richard Nixon. There is apparently a limitless supply of dramatic material in the Nixon saga. And a great deal of it will come to light in the years ahead. It remains to be seen whether Richard Nix- on will tell his own story. It is doubtful, of course, that he will tell all be has to be careful about furnishing material that could be used against him legally but even if he confines himself to an Ultimate account of that which is generally known, the result could be one of the most fascinating books on politics since MachiaveUi's The Prince. Less can be more By Don Oakley, NEA commentator When economists talk about "productivity" and the need to increase same to enable the nation to compete with foreign countries, most people picture in their minds an assembly line or factory workers adjust- ing so many bolts per hour or machines stamping out so many units of this or that Things get fuzzier when we think about productivity in offices or in service jobs or the professions. After all, there's a limit to bow many words a secretary can type a minute or how fast a repairman can service a washing machine or bow many patients a doc- tor can see in a day or bow much territory a salesman can cover. But productivity applies to everything, and in some cases it can mean doing less rather than more fixing a machine right the first time so that it doesn't have to be fixed again, or not typing an unnecessary letter. As an example of the latter, the publisher of a well known reference work receives thousands of orders every year from private companies as well as schools and libraries. The orders are filled and invoices sent out No problem there. Often, however, the invoices are returned along with a voucher which the publisher must fill out and send back to the purchaser for signature and counter signature and, eventually, payment Sometimes the invoice is returned with a letter or notation advising that it cannot be honored until the publisher requests the of- ficial voucher or payment claim form or whatever, which, when be gets it must be completed and returned to enable the purchaser to initiate the rest of the process. A lot of time, paper, postage and effort would be saved if the necessary red tape accompanied an order in the first place so that everything could be handled at one time and in one mailing. How many other examples are there of similar wasted motion in the business world? She is so prejudiced By Dong Walker "Why shouldn't I wish you a happy birthday? I'm not declared the card Lynn Turner gave me this fall. Inside, the card offered the proof: "Some of my best friends creak." Just because I'm into middle age doesn't mean I creak. Lynn ought to know that since we were at a weekend family camp together and she should remember that I still had enough energy left after playing 27 holes of golf on the Waterton coarse to climb to CrandeH Lake for the evening campfire Perhaps Lynn intended the card for her father who shares the same birthday as me. ;