Saving CPP from Ontario
Canada’s finance ministers will meet in Vancouver today for a new round of talks on pensions, resolute in their determination to solve a crisis that doesn’t exist.
Federal Finance Minister Bill Morneau has pledged to seek agreement on “enhancing” the Canada Pension Plan ( CPP) by the end of the year. An initial meeting with provincial counterparts in December was considered a success, insofar as no one stomped out of the room in outrage. But no actual money was on the table at the time; the ministers merely agreed to “enter into discussions to review next steps,” and to meet again. The Vancouver meeting may mark the beginning of the hard part.
The task is complicated by several uncomfortable realities. One is that there is no crisis. According to any number of reports by respected institutions, both in Canada and abroad, Canadian seniors are doing quite well. Four out of five have the income they need in retirement. The poverty rate among seniors has plummeted over the past four decades: although advocacy groups pick and choose the figures they use to best bolster their argument, even the starkest numbers suggest seven out of eight seniors are above the line. Compared to other developed countries, Canada ranks near the very top; Statistics Canada figures show the share of seniors living in low- income families fell from 29 per cent in 1976, to 5.2 per cent in 2011, four points lower than the overall population.
Despite t he l ack of a sweeping need, Morneau and Ontario Premier Kathleen Wynne have nonetheless signalled their intention to save the day. They f ear the country’s aging population will mean an increased number of elderly people who find themselves outliving their means. Indeed, after years of decline, poverty figures have been creeping higher, especially among older, widowed women. “Progressives” argue that Canadians aren’t saving enough and thus need government action to protect them from the consequences.
Ontario wants Morneau to “fix” the CPP by increasing contributions. Former finance minister Jim Flaherty resisted similar pressure because it would mean higher premiums, and smaller paycheques, for working Canadians who can ill afford it. That argument makes little headway in Ontario, where Wynne’s government is determined to press ahead with an Ontario-only scheme that will start siphoning money from contributors on Jan. 1, 2018. Only a broader reform of the CPP will stop the province from barrelling ahead with its ill- conceived plan.
Ontario’s resolve is wrongheaded on several fronts. It will represent an additional cost of doing business in a province that has seen its manufacturing base erode and its finances sink deeper into debt. It will put a strain on those at lower income levels who can’t afford the additional deductions and who are already adequately covered by the package of benefits that include the CPP, the Old Age Security pension and the Guaranteed Income Supplement. While a second government pension might benefit some middle- class Canadians, it would reduce the income available during their working years for raising families and paying mortgages, as well as for personal investments. Advocates of pension reform seem oblivious to the fact that, thanks to health improvements, many older Canadians prefer to continue working beyond the traditional retirement age of 65. Canadian seniors are not the doddering grandmas and grandpas of the government’s imagination, but a vibrant and energetic cohort of people who aren’t prepared to be put out to pasture.
The situation represents a problem for Morneau. To halt Ontario’s plunge into t he Ontario Retirement Pension Plan ( ORPP), he needs agreement on a federal enhancement to the CPP that won’t do more harm than good. To significantly change CPP, he also needs agreement from seven of 10 provinces representing twothirds of the population. But Quebec is reluctant — “I don’t think there’s any sort of crisis in our public pension system,” says Finance Minister Carlos Leitão — Saskatchewan is opposed and British Columbia has doubts. Manitoba’s new Conservative government may also be more in favour of small, targeted improvements rather than a sweeping revamp.
Ontario’s ORPP would threaten the balkanization of a system intended to apply equally to all Canadians. It is in Canada’s interest to avoid this. Morneau must find a way to prevent Ontario from undermining the system as a whole, while averting reforms that would be just as damaging. It’s a daunting task, demanded by an unnecessary crusade.