Solidarity Funds: More jobs, More Money and Job Security

Posted by under Breaking News on 18 July 2003

Singapore could draw lessons from Quebec to overcome its unemployment. Will NTUC and our million dollar Ministers be open to learning lessons from this worthy experience. The fund invest in firms that combine profitability and solidarity by recruiting the young or people with disabilities. Remaking Singapore Committee has nothing to offer for the disable people. why?

Over 20 years ago, the economy of the Canadian province of Quebec was mired in deep recession, brought on by an international economic downturn and souring relations between the provincial government and labour.

Unemployment had reached 15.5 per cent and interest rates were up to 20 per cent. The lack of capital in small and medium sized enterprises (SMEs) had caused numerous bankruptcies and dismissals.

But crisis often paves the way for new ideas, and the Quebec Federation of Labour rose to the challenge, proposing a "Solidarity Fund" at a provincial economic summit conference in 1982 to help the provincial labour movement create a locally-controlled healthy and sustainable economy.

Since then, the Quebec Solidarity Fund has become a major element in the economic recovery of the province. A voluntary pension scheme with assets of approximately 4.6 billion Canadian dollars, the Fund holds equity in some 1,900 small and medium sized enterprises that have created nearly 100,000 jobs over the past two years.

Workers helping workers

What is unique about the fund is that its 536,000 shareholders - 14 per cent of the active population - are workers.

"With more than 500,000 shareholders today, the Solidarity Fund has created a new class of investors", says Bernd Balkenhol, head of the Social Finance Programme in the ILO. "Along with other labour-sponsored investment funds in Canada, the Quebec Solidarity Fund is of interest to the ILO for several reasons."

The Fund invests in enterprises that attempt to combine profitability and solidarity, for example by recruiting the young or people with disabilities. The four guiding principles of the Fund are job creation and retention in SMEs, workers' participation in economic development, strategic investment to stimulate the economy and incentives for workers to make savings for retirement.

In 1983, the Quebec government helped facilitate the fund's work by adopting legislation that would enable the establishment of a labour-sponsored investment fund and provide a tax credit for people who invested in it.

From the outset the Fund was seen as a tool for development in the Canadian province and a win-win proposition for shareholders, SMEs and local government.

The rate of investment in the Solidarity Fund in Quebec dramatically increased in 1985 when the federal government provided investors in labour-sponsored investment funds with an additional 20 per cent tax credit and also made the investment eligible for registration as a retirement savings plan. Its average return on equity is over 6 per cent, which places it near conventional investment funds.

In the wake of these measures the Canadian Federation of Labour established the Working Ventures Fund, while some unions in British Columbia created the Working Opportunities Fund.

In 1992, the Manitoba labour movement created the Crocus Investment Fund. Creating, saving or maintaining over 10,000 jobs, the Crocus Investment Fund is the national leader in job creation per dollar invested in the Canadian venture capital industry. Between 1983 and 1998, more than 20 investment funds were set up all over Canada. However, the Solidarity Fund retained its position as the country's largest labour-sponsored investment fund.

Investment funds also increase union bargaining power by raising employment levels and enhancing collective bargaining. From the union movement's perspective increased employment levels enhance the bargaining power of all unions. Furthermore, a strengthened local economy increases home values, reduces government expenditures on social services and attracts further business to a community.

While investment in these funds is not a social security programme and should not be seen as a replacement for a pension plan, they provide a number of new opportunities for workers dealing with retirement planning. Workers also have the opportunity to gain knowledge and experience in the financial services industry. Most unions in Canada have education departments that organize a variety of courses and programmes that extend from basic trade union issues to such matters as investment and retirement planning.

Democratic control of the economy is another important goal of such funds. Before making an investment, some funds will undertake a broad social audit to examine labour relations, health and safety and environmental issues. The funds also strengthen the usually weak equity finance in smaller enterprises.

Another distinguishing feature of investment funds is their commitment to employee ownership and participatory management. The Crocus Investment Fund ensures that at least half of the fund's investments advance, either directly or indirectly, employee ownership and employee participation in governance and management. Currently one-quarter of the employees of Crocus portfolio firms are involved in some form of worker ownership plan. One of the Fund's goals is to create a situation where employees would be in a position to enter into an arrangement to purchase Crocus's share in the firm.

In response to the growing demand for more information on the factors of success of labour-sponsored investment funds, the ILO's Social Finance Programme will undertake further assessments and consultations in the coming years.


For further information, please contact the ILO Department of Communication, phone: +4122/799-7912; fax: +4122/799-8577; e-mail:

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