Unions set to take stake in Air Canada
http://www.theglobeandmail.com/globe-investor/unions-set-to-take-stake-in-air-canada/article1175555/
Summary:
Air Canada's five unions could acquire a 10-per-cent stake in the airline as management tries to repair its strained labor relations, avoid a strike and preserve cash to survive the recession. Under a tentative deal signed late Monday, three of five unions agreed to accept shares in exchange for supporting the company's proposal to freeze wages and defer most contributions to the employee pension plan for 21 months. The agreement could represent a novel solution to Air Canada's cash problems and, more importantly, help it escape a $225-million pension payment due during the critical summer travel season.
Caisses Populaires and Credit Unions:
Caisses Populaires and Credit Unions were established in order to enable groups of individuals to combine their savings and thus to provide loans to members at relatively low interest rates. These individuals receive their funds by selling shares and accepting deposits from members. The agreement could represent a novel solution to Air Canada's cash problems and, more importantly, help it escape a $225-million pension payment due during the critical summer travel season. If forced to make that contribution, the airline is at risk of falling below the $800-million minimum cash balance it needs to keep payments flowing from a credit card processor.
Reflections:
Air Canada consists of many pilots and flight attendants, the deal’s success now hinges on whether the other two unions, which represent pilots and flight attendants, can be persuaded to sign aboard. By giving equity to some of its 26,000 staff, Air Canada is taking a page from the government-mandated restructurings of General Motors Corp. and Chrysler LLC, in which unionized auto workers accepted an ownership stake in return for giving up wages and benefits. But it may also be an attempt to help blunt a key competitive advantage of rival WestJet Airlines, which uses employee ownership as a marketing tool.
Tuesday, June 16, 2009
Chapter 6 – Determination of National Income
Savings study points to low-wage setback
http://www.ft.com/cms/s/0/516a40f2-5a0e-11de-b687-00144feabdc0.html
Summary:
Reforms aimed at encouraging people to save for retirement are likely to boost the number of pension contributors but leave low-income earners with small pensions pot, a new report concludes. The Institute for Fiscal Studies report said that as of 2005, around 4.7 million employees were not offered the chance to join an employer's pension scheme. From 2012, when the reforms come into effect, they will be able to sign up to a pension through the newly created Personal Accounts scheme. Some pension experts have warned that the new rules are likely to lead to lower levels of pension savings because most employers, who currently offer more generous terms than those set as the minimum, would reduce them.
Saving:
On the economy, saving has both a positive and a negative impact. On the positive side, savings provide a pool of money that can be lent for investment. Most Canadian put their savings in the bank, and the bank lends out the money to businesses. The larger the available pool of money, the lower the interest rate. As a result, when Canadians save, they are helping to lower the interest rates. Negatively, saving is the opposite of consumption. Canadians are not spending when they save, and when they are not spending, they are not creating employment opportunities. Private saving in Canada is approximately 15% of GDP.
Reflection:
The article states that, “The legislation will require all employers automatically to enroll workers in a savings scheme and contribute up to 3 per cent of referenced earnings.” In the words of Ros Altmann, an economist, “The risk is that you encourage employers to 'level down’”. I think that it is generally a good idea for everyone to save money but at the same time spend some of it to promote a growth in the consumption of an economy. The IFS researchers also found those least likely to save were low-wage workers with a median income of £14,000, compared with a median of £21,600 among those who are saving.
http://www.ft.com/cms/s/0/516a40f2-5a0e-11de-b687-00144feabdc0.html
Summary:
Reforms aimed at encouraging people to save for retirement are likely to boost the number of pension contributors but leave low-income earners with small pensions pot, a new report concludes. The Institute for Fiscal Studies report said that as of 2005, around 4.7 million employees were not offered the chance to join an employer's pension scheme. From 2012, when the reforms come into effect, they will be able to sign up to a pension through the newly created Personal Accounts scheme. Some pension experts have warned that the new rules are likely to lead to lower levels of pension savings because most employers, who currently offer more generous terms than those set as the minimum, would reduce them.
Saving:
On the economy, saving has both a positive and a negative impact. On the positive side, savings provide a pool of money that can be lent for investment. Most Canadian put their savings in the bank, and the bank lends out the money to businesses. The larger the available pool of money, the lower the interest rate. As a result, when Canadians save, they are helping to lower the interest rates. Negatively, saving is the opposite of consumption. Canadians are not spending when they save, and when they are not spending, they are not creating employment opportunities. Private saving in Canada is approximately 15% of GDP.
Reflection:
The article states that, “The legislation will require all employers automatically to enroll workers in a savings scheme and contribute up to 3 per cent of referenced earnings.” In the words of Ros Altmann, an economist, “The risk is that you encourage employers to 'level down’”. I think that it is generally a good idea for everyone to save money but at the same time spend some of it to promote a growth in the consumption of an economy. The IFS researchers also found those least likely to save were low-wage workers with a median income of £14,000, compared with a median of £21,600 among those who are saving.
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