Laura Jones: Canadians don’t want mandatory increases to CPP contributions

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      Whether or not Canadians should be forced to save more for retirement—an issue that affects the pocketbooks of all working Canadians—is shaping up to be a big federal election issue. Déjà vu all over again?

      So let’s start with a little history. For the past decade, a growing awareness of the massive unfunded liabilities of public-sector pension plans, which tend to be far more generous than those offered in the private sector, has been putting pressure on politicians to do a better job controlling public-sector compensation.

      The union response, led by the Canadian Labour Congress, was to mount a campaign to convince finance ministers across Canada to consider a mandatory increase to the Canadian Pension Plan. Pushing for a mandatory CPP increase distracts attention from overly generous public-sector compensation plans. It also helps reduce the unfunded pension liability of public-sector pension plans because when the portion that comes from CPP is increased, the obligation from the public-sector pension fund is lower.

      The CLC was successful at getting a CPP increase on the agenda of a meeting of finance ministers from across Canada in 2010 and subsequently getting some support for increasing CPP from the federal government and many of the provinces. By 2013, it looked like an increase might have the support it needed (two-thirds of the provinces representing two-thirds of the population) to be approved.

      At this point, small business owners really started lighting their hair on fire as it looked like they were headed for a payroll tax increase with no public consultation. Currently, Canadian employers and employees each pay 4.95 percent of payroll costs (on earnings between $3,500 and $52,000) to the existing CPP. Increasing these costs wasn’t seen as palatable to business owners or their employees. Survey results from over 8,000 business owners in 2013 indicated that a mandatory increase in CPP would cause businesses to consider wage freezes and reduce investments in the business.

      An Angus Reid public opinion poll, conducted at around the same time, confirmed that Canadians agreed with small business owners that there were better ways for the government to help Canadians save for retirement. Only 18 percent felt that introducing a mandatory increase in CPP was the best option, while 54 percent supported tax relief. Both business owners and the general public indicated that forcing them to save more for retirement would take money from other important priorities, including, ironically, other ways of saving for retirement.

      In December 2013, the issue was temporarily put to bed when former federal finance minister Jim Flaherty declared the time was not right for a CPP increase. Now, it is back as an election issue with the federal NDP, Liberals, and Green party all supporting a mandatory CPP increase while the Conservatives oppose a mandatory increase but would consider allowing Canadians to voluntary increase their CPP contributions.

      Another important wrinkle: After there was no agreement to increase the CPP contributions, Ontario Premier Kathleen Wynne decided to “go it alone” and introduce an Ontario Retirement Pension Plan that would increase employee and employer contributions by up to $1,643 each, a 40-percent increase on existing CPP premiums.

      So it’s a safe bet this will be a hot topic when the premiers get together next month in Newfoundland for the Council of the Federation meeting. It’s another safe bet that small businesses across Canada will protest strongly if the premiers decide to join Wynne in her policy folly. Helping Canadians save for retirement is widely supported. Forcing them to do it through an increase to a mandated government payroll tax is not.

      Comments

      3 Comments

      Raymond Tomlin

      Jun 26, 2015 at 1:53pm

      Gosh, just what we need. More right-wing, mean-spirited, non-humanist reductionist commentary from the not-so-good folks at the CFIB. Thank you Laura Jones. And, by the way, fuck you and your Fraser Institute-endorsed, Harper acolyte theorizing.

      Like the 73% of Canadians who will NOT vote for Stephen Harper and his merry band of Reaganite social conservatives on election day, October 19th, I am committed to a more just Canada, as the highest expression of Canadians caring for one another.

      For the 60% of Canadians who are not covered by a registered pension plan, for the 600,000 seniors in Canada who - under the Harper government - are consigned to live in poverty (including more than 1 in 4 single seniors), and the millions more who are living in near poverty, an increase in the mandated government payroll tax is a necessary first step to ensure that our seniors (parents and grandparents) may live their retirement years in dignity.

      James Blatchford

      Jun 26, 2015 at 2:00pm

      The usual twaddle from CFIB. The Canadian Pension Plan Investment Board just had the biggest year in their history. Fantastic news for all working Canadians. So did many public sector pension plans. Big is best when it comes to getting most value and efficiency out of pension dollars. In fact, most of the money paid out in public sector pensions is from investment returns, not contributions. Efficiently managed and capable of making large, long-horizon investments makes the Canadian public sector pension plans some of the most admired pension arrangements anywhere in the world. A recent U.K. report called the Canadian public sector pension plans the new Masters of the Universe...even eating Wall Street's lunch.

      I guess the CFIB just doesn't get out much.

      No Cons

      Jun 27, 2015 at 11:52am

      Lets examine the facts shall we...

      1. isolating just the CPP funding issue is a deliberate attempt to hide the failed Economic policies of the Cons,

      2. Politicians should have to contribute for the same length of time to collect similar benefits not Gold Plated 18 carat Public Sector Pensions funded by us,

      3. If the Cons would have put in place a real Royalty regime in place like Norway than Canada would have amassed like Norway about a Trillion Dollars in Oil & Gas revenues! No instead the Cons both in Alberta & Federally reduced effective Royalties!

      4. Public sector unions are not really the problem in the big picture the Con Government gave out more in Corporate Welfare to foreign Multi Nationals like Car Corporations and Banks than all Canadian Governments before it!

      5. The China Trade deal will give Communist China NAFTA on Steroids like powers over ANY Canadian Natural Resource, failure to provide anything that Communist China wants will result in NAFTA like Fines paid by YOU and ME REGARDLESS of Who You Vote For!!!

      6. NAFTA brought in by another Con is costing Canadians $5 Billion Dollars so far in Law Suits, Yes Paid for by You and Me Regardless of your Political Affiliation!

      * Canada is the most sued Nation under NAFTA, US $0 Dollars, Mexico second (but their Government can't really afford to pay as they are Bankrupt) Corporations routinely sue Canada and that Bill is growing every year!!! *

      7. Pension funding can EASILY be SOLVED if Canada puts in place a Norway like Royalty Structure, after all the exact same Oil Corporations that operate in Canada pay Norway high royalties for working within Norway's Oil & Gas patch!

      8. A real strict Royalty regime on all Canadian Resources would provide for Pensions, Education and Healthcare of ALL Canadians regardless of Political Affiliation.

      Unfortunately the Cons have a rigid Corporate Welfare Environment destroying Anti-Citizen, Anti-Canadian pro Big Corporate only ideology.

      I guess the CFIB and the Cons don't want Canada to be wealthy like Norway with a Trillion Dollars in Oil & Gas Surplus revenues, they rather argue that Unions should get a little less in Pensions and that Pensions should not be funded more.

      The Cons live in illusions while believing in delusions.