Sweetening the CPP is long overdue


It’s always disheartening, though lamentably predictable, when politicians, who ought to know better, adopt the talking points of a vested interest to justify the clearly unjustifiable.

So, when Canada’s Finance Minister Jim Flaherty says that “now is not the time for CPP payroll tax increases”, as he did earlier this month following a meeting with his provincial counterparts in Meech Lake, P.Q., he is merely lifting a line from the Canadian Federation of Independent Business (CFIB) playbook, to wit:

“CPP/QPP increases would mean a significant premium hike for working Canadians and even more serious impacts for the economy. . .Higher labour costs, with no increase in productivity, would lead to job losses or reduced hours for many workers over the first ten years of a CPP increase, and wages would go down by 1.5 per cent. Many Canadians would go without work for years. Some might escape unscathed, but everyone would be at risk.”

This dire warning appears on the organization’s web site, where “research” clearly indicates that most Canadians don’t want to pay higher premiums because, simply, they can’t afford the ones they are facing right now.

Instead, an Angus Reid Global survey says “they believe that government should control spending and reduce taxes to allow more savings. Moreover, many feel that new incentives and voluntary measures to save through existing and new retirement savings tools including the CPP/QPP are the next most effective solutions. Immediate CPP/QPP mandatory increases impose adverse effects: about half of working Canadians express that such increases would reduce their ability to spend on essential goods and services such as food and housing while close to three in four business owners would face increased pressure to freeze or cut workers’ salaries.”

I am not prepared to concede that “most Canadians” actually feel this way, but even if they do, this doesn’t mean that they are right.

As a Globe and Mail editorial, entitled “Flaherty to savers: You’re on your own with CPP as it stands”, admirably pointed out a couple of weeks ago, “The CPP is not a welfare program, or an income-redistribution program. It’s not paid for by taxes. It’s a defined-benefit pension plan, and how much you get out of the program is based on how much you put in. It’s actuarially sound, independently run and low-cost. It’s one of the world’s best-run retirement safety nets. But the maximum pension for a lifetime of contributions is just $12,000.”

Clearly, that is not enough for most working Canadians. By “most”, I am not referring to the rich or lucky few who stand to pull one of those gilded public pensions that assorted bargaining units have been loathe to see watered down.

Nor am I talking about the impoverished, who must subsist on various forms state-supplied handouts and subsidies.

I am looking straight into the worried eyes of those who populate the once sturdy middle class in this country.

The sad fact is Canadians with steady incomes don’t save enough for their retirements. They haven’t in some time. Pundits of quasi-Libertarian bent and their right-wing fellow travelers in political office adoring placing the blame for this conditions squarely at the feet of the non-savers. They’re spendthrifts or layabouts or, simply, poorly advised about their options .

The truth, however, is complex, involving many factors that are out of an individual’s control, not the least of which was the disastrous implosion of financial markets a few years back – a calamity that destroyed trillions of dollars in personal assets, including those held in retirement portfolios, all over the world.

Nothing, of course, will rebuild these funds. But even a small expansion of the CPP – which is a far less risky savings instrument than just about every other option –  will buffer the financial shock of a lower living standard in retirement.

What’s more, it will cost far less now to sweeten the CPP than it will to prop up droves of aging Canadians who will fall into poverty and endure all of its associated evils: ill health, hunger homelessness.

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