Pension increase will result in slower wage growth: Study
The federal government has likely underestimated the negative impact on jobs of the planned Canada Pension Plan (CPP) increases, says the Canadian Federation of Independent Business (CFIB).
Beginning in 2019, CPP premiums will rise for five straight years, followed by another two years where the maximum amount of income CPP premiums are levied upon will increase.
A CFIB study, done through the University of Toronto's Policy and Economic Analysis Program, found that the CPP hike will initially cost 64,000 fewer jobs, 4.5 times greater than the federal government's projection of job losses.
CFIB's analysis also shows that negative job impacts will last until the late 2020s, after which the impacts transform into constrained wage growth and higher government deficits.
"Employers will naturally respond to increased labour costs by looking for ways to streamline their labour needs, by adding new technologies or focusing hiring on higher-skill workers. The result is that lower skilled – generally younger workers or new Canadians – are likely once again holding the short end of the employment stick," said Ted Mallett, CFIB chief economist.
"The CPP debate focused too much on the false premise that employers don't pay enough for their employees' retirements, and not enough on finding the best savings model to meet Canadians' needs."
The pension increase will also result in slower wage growth for employees, according to the study. Household disposable incomes will suffer by as much as $700 in 2025 and remain in the red at negative $400 as late as 2040.
Next week’s federal budget should aim to provide payroll relief, said the CFIB. Provincial governments should also focus their budgets on ways to offer payroll and other tax relief to small business owners.