The drive to dismantle the welfare state has a new target. Governments have already gutted unemployment insurance and social assistance. Out-of-date labour laws make it tough to organize unions in the new, decentralized, service-based economy. Now, thanks in large part to the dynamics of the recession, pensions are under attack.

Curiously, the war against pensions has received less attention than it should. People understand taxes, and usually complain when they rise. They also understand the notion of wages, and raise a similar stink when they go down.

But pensions appear to baffle most of us. They shouldn't. Pensions and other retirement benefits are simply deferred wages – money you earn now and sock away (or have someone else sock away for you) so that you'll have something to live on when you're too old, tired, sick or unwanted to work.

Even before this recession hit, it was clear that pensions were under the gun. Good retirement benefits, like good wages, interfere with what economists call labour market flexibility – that is, the willingness of workers to take low-wage jobs.

Put simply, 65-year-olds who can get by on the pension income they earned earlier in their careers may not be willing to work as Wal-Mart greeters.

This rethinking of retirement expressed itself in different forms. Governments that in the past had committed themselves to better public pensions began to fret that those they offered were already too expensive.

In the U.S., Washington raised the retirement age at which workers could collect social security. Canada's federal government took a different tack by moderately boosting the payroll taxes that employers and employees pay to fund its Canada Pension Plan.

More important, perhaps, Ottawa allowed those running the CPP to invest taxpayer money in more lucrative, but higher-risk stocks – a strategy whose drawbacks are now painfully obvious.

At the same time, private firms offering pensions discovered the virtue of moving to so-called defined contribution plans, which shift all of the risk from employers to employees. (In a traditional, defined benefit pension plan, the employer guarantees a certain payout at retirement and is on the hook to fund it. In a defined contribution plan, the employer contracts only to put in a certain amount each year; if market vagaries cause that money to evaporate before the employee retires, that's his tough luck.)

Meanwhile, the successful assault on trade unions reduced the ranks of those with access to any kind of company pension scheme. In Canada, less than 40 per cent of the work force has employer-sponsored pensions. The proportion in the private sector is even less.

Yet these, too, are now under siege.

Consider the latest spate of labour disputes.

The Toronto civic strike was fought not over pensions per se but another retirement benefit – how much money employees get in the form of banked sick leave. The Windsor municipal workers' strike was sparked by city council's demand that new hires receive inferior pensions.

That same issue – two-tiered pensions – pushed 3,600 workers at Sudbury's Vale Inco nickel operations to walk out earlier this month.

Almost every week, there are reports of struggling companies trying to extricate themselves from their contractual pension obligations.

In Hamilton, media giant Canwest Communications is planning to simply shut down the pension plan at its CHCH television station. That move is expected to cut by up to 25 per cent the payments earned years ago by former employees who have already retired.

Air Canada has won permission from federal regulators to cut back the amount of money it pays into its employee pension fund. General Motors' pension fund is short by an estimated $6.5 billion, an amount that the Ontario government is expected, in part, to cover.

Yet not just those with private pension plans have been affected. The Canada and Quebec Pension Plans, which go to virtually every retiree in the country, have both taken huge hits in this recession.

Thanks to falling stock prices, the CPP lost $24 billion this year. The Caisse de dépôt et placement du Québec, which operates the parallel Quebec Pension Plan, lost even more because of its decision to invest in sexy, but ultimately dodgy, financial instruments known as asset-backed commercial paper.

And, of course, individuals with savings invested in the stock market now face the likelihood that their retirement incomes will be far less than originally anticipated.

The very notion of ordinary workers receiving any kind of post-work payment is relatively new. In traditional societies, children were expected to care for their elderly parents. Not until 1889 did German chancellor Otto von Bismarck bring in the first government-run old age security plan. Canada followed in 1927; the U.S. in 1935.

Private workplace pensions are older. But not until World War II did they blossom in North America – in part because of pressure from newly militant unions, in part because employers facing labour shortages could use them to attract workers without running afoul of wartime wage controls.

In the early 20th century, when most workers didn't live much beyond 65, pensions weren't a big cost to either governments or employers. That's clearly changed.

But the second major change has to do with the stock market. As long as pension funds were invested in safe but low-yield government bonds, retirees could be assured of a constant, if somewhat paltry, income.

In such circumstances, the only way to raise the level of post-retirement benefits was to add more money up front.

But no one wanted to do that. Employers certainly had no desire to contribute significantly more to pension plans. Nor did their employees. Nor did the taxpayers who fund government schemes like the CPP.

The alternative was to invest pension funds in riskier financial instruments that paid higher returns – like stocks or asset-backed commercial paper.

Which was fine until those markets collapsed.

So now, the system is unravelling. Many employers can't pay for the pension obligations they've accumulated.

Governments, reluctant to force such companies into bankruptcy, are quietly easing the rules.

Public pension plans like the QPP and CPP remain solvent but bruised.

Some knowledgeable analysts, like Ontario Teachers' Pension Plan president Jim Leech, argue that with private pensions in retreat, Ottawa should significantly beef up the public CPP.

That's a good idea. But it's one that would have to be paid for by a significant tax increase – which is perhaps why no Canadian political party actively promotes it.