Alberta, CFIB worry increases will burden employers and low-income workers
The federal finance minister would like to see a modest but mandatory increase to Canada Pension Plan contributions as a way to ensure better pension coverage for Canadians.
Finance Minister Jim Flaherty is meeting with the provincial finance ministers in Charlottetown this week to discuss pension reform.
Ontario's Finance Minister Dwight Duncan has already come out in support of expanding the CPP. Duncan would also like to see regulatory changes that would encourage financial institutions to offer low-cost retirement options to the self-employed and small businesses.
But not all provinces are on board with expanding the CPP.
“It is not a targeted response to the issue at hand. Rather, it is an overreaction," said Alberta's Minister of Finance Ted Morton.
Expanding the CPP will benefit a significant minority who aren't saving enough for retirement but it will also provide additional, and unnecessary, benefits to those who already have adequate income provisions, said Morton.
Expanding the CPP would cost employers and hurt low-income workers who would have to make additional contributions throughout their working lives, he added.
A better answer is to find ways to encourage Canadians to save for their retirement over the course of their careers, said Morton, such as through supplementary pension plans.
“We should be looking for the right combination of private sector delivery with public oversight and monitoring. Alberta is already working with British Columbia on harmonized pension standards legislation that will help enable the private sector to innovate and enhance the retirement savings system," he said.
The Canadian Federation of Independent Business (CFIB) is calling the proposed CPP expansion "outrageous."
“Small businesses in Canada are already bracing themselves for maximum allowable increases in employment insurance premiums for the next four years,” said CFIB president Catherine Swift. This is on top of potential hikes in workers compensation premiums in many jurisdictions and significant increases in minimum wages across Canada, she said.
“Coming out of a recession, these huge increases in mandatory payroll taxes will take a big bite out of the payroll budgets of virtually every business in Canada,” said Swift.
Nearly three-quarters (71 per cent) of almost 8,000 small businesses surveyed by CFIB oppose the idea of increasing mandatory CPP premiums.
“CPP premiums for both employers and employees have already risen by 75 per cent since the late 1990s with no commensurate increase in benefits. Canadians should be skeptical of union claims that they can enjoy a dramatic increase in CPP benefits for a few cents per hour,” said Swift. “As always, if it sounds too good to be true, it is.”
Premium increases now will only result in benefit increases many years, likely decades, from now, said Swift.
Rather than mandating increases to CPP contributions and benefits, governments need to to offer incentives and remove impediments to boost pension coverage, said Satinder Chera, Ontario director of provincial affairs."Businesses must be brought on board as willing participants, instead of being shoe-horned into a one-size fits-all scheme that could have serious negative effects on their businesses, and the economy overall,” said Chera.
