Coverage keeps shrinking even as private-sector employees value pensions more than ever
Canadian private-sector workers were willing to give up about 3.3 percent of their pay in 2001 to land a job that came with a pension.
By 2019 that figure had roughly tripled to 10.1 percent, according to a study that links Statistics Canada's census of registered pension plans to two decades of tax records.
On average across the 2001 to 2020 period, private-sector workers gave up 6.3 percent of earnings, or roughly $3,000 a year for a typical worker, to hold a job with pension coverage, the study by Benoit Dostie and Todd Morris found.
The research draws on the Pension Plans in Canada census matched to the Canadian Employer-Employee Dynamics Database, covering tax filers from 2001 to 2020.
That rising valuation came as coverage shrank.
After adjusting official figures for workers counted more than once, the authors estimated that only about 17 percent of core-age private-sector workers held a pension-covered job in 2020, down slightly from 18 percent in 2001.
Among those with coverage, the share in defined benefit (DB) plans fell from 70 percent in 2001 to 39 percent in 2020, according to the paper.
Workers did not value all pensions equally.
DB plans carried an implicit value of 7.4 percent of earnings, the study found, compared with 5.2 percent for defined contribution (DC) plans and 6.2 percent for other arrangements.
Flat benefit DB plans, which pay a fixed dollar amount for each year of service, drew the highest valuation of all, with workers accepting a trade-off worth more than 12 percent of earnings.
Pensions also reduced how often workers changed jobs.
Fixed-effects estimates put the annual drop in mobility for DB-covered workers at roughly 40 percent, the authors found, with effects ranging from about 35 percent for DC plans to as much as 70 percent for some DB designs.
Back-loaded plans such as final average and average best earnings created the strongest retention incentives, while flat benefit plans locked workers in far less.
Those retention effects may help firms hold onto experienced staff, the authors noted, but could also reduce how efficiently the labour market allocates workers.
Official coverage statistics can mislead, the authors cautioned, because Statistics Canada's numbers double-count workers who hold or switch between more than one pension-covered job in a single year.
In a companion memo published by the CD Howe Institute, Dostie and Morris argued that the findings should shape federal and provincial pension policy.
They called on governments to reframe Statistics Canada's headline coverage numbers to include linked administrative data, to review financial literacy programs as more retirement responsibility shifts onto individuals, and to weigh options for encouraging employer pension provision in the private sector.
"If pension scarcity is now a feature, not a bug, of Canada's private labour market, policy needs to examine options to consider nudging employer pension offerings to make up the difference," the authors wrote in the memo.
Dostie is a professor of applied economics at HEC Montréal and scientific director of its Retirement and Savings Institute.
