Feds, provinces step forward on CPP reform

Canada’s finance ministers were at it again Monday in Vancouver, trying to find consensus on how to modernize the Canada Pension Plan. And this time they did it.

After previous failed attempts, the ministers reached agreement in principle. Provided final consent can be ironed out between at least seven provinces, the expansion will kick in starting in 2019. Contributions for a typical worker earning about $55,000 will initially increase by $7 a month and employers would match those contributions.

It’s not dramatic. Critics on one side will say it isn’t enough, and others will argue it goes too far. The first group may have a point. The latter group is wrong.

It’s hard to understand how anyone can sensibly argue the CPP doesn’t need updating. In Ontario it is estimated that 3.5 million workers don’t have workplace pensions. That’s two-thirds of the total workforce.

Critics may call this a payroll tax, but it’s more like insurance. Those same critics point out that retirees today are actually faring quite well, especially compared to other countries where senior poverty is a more serious issue. Indeed, changes in the last 20 years have improved the fortunes of retirees considerably.

But we’re not talking about the present, we’re talking about the future. We’re talking about the time when that group of 3.5 million retires without a pension. Just because of our aging society, those numbers are going to be a lot bigger and more problematic than they are now. Inadequate income will have an impact on secure housing, on health, on health care costs, on social isolation. People who don’t have adequate income make poorer life decisions. They often end up more sick, requiring more intervention.

So fixing CPP is insurance to mitigate these problems. It’s pretty much pay now or pay later.

Research says we’re not talking about people living in poverty now. It’s more about those earning between $55,000 and $75,000 — one study puts that upper limit at $100,000 — who aren’t putting aside enough or anything for retirement.

To listen to the complainers, you would think CPP costs are like utility rates in Ontario — going up, up and up again. But the truth is that CPP costs have changed only once in the past 20 years, and that was back in 1997 for the purpose of insuring one generation of workers isn’t paying for another generation’s retirement.

The Canada Pension Plan has been a success story overall. But it was never meant to be carved in rock in perpetuity. It needs to evolve to reflect changing circumstances, including new situations such as precarious employment and scarce company pension plans.

This agreement may not be perfect, but it is a step in the right direction.