Study cites benefit, feasibility of CPP expansion

The Canadian Press
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Internal research by the federal Finance Department says there would be economic benefits from ex-panding the Canada Pension Plan (CPP) and suggests this country could afford an improved plan in a strong economy.

The findings in the fall 2013 document are more balanced than the bleak message presented last December, when the Harper government seized on the study’s job-loss conclusions to dismiss demands from the provinces to improve the CPP.

Kevin Sorenson, the junior finance minister, said various proposals to boost CPP premiums and benefits would kill up to 70,000 jobs, citing the results of the internal study without releasing it.

But a summary of the study’s contents, prepared for then-finance minister Jim Flaherty, shows the job-loss claim was based on a misleading assumption.

The research also suggests Canada could absorb any negative economic impact from an improved CPP when the economy is more “robust.”

The Canadian Press obtained a copy of the Dec. 13 briefing note for Flaherty under the Access to Information Act.

At a meeting near Ottawa in December, Flaherty categorically rejected proposals from Ontario, P.E.I. and others to improve the CPP, saying Canada’s fragile economy could not bear the load, as higher premiums for businesses would dampen job creation.

Earlier this month, Ontario Premier Kathleen Wynne castigated the federal government for intransigence on the issue, indicating her province will go it alone on pension reform.

“In the long run, expanding the CPP would bring economic benefits,” says the briefing note. “Higher savings will lead to higher income in the future and higher consumption possibilities for seniors.”

Sorenson’s public statements last December, including a widely distributed op-ed piece, said various proposals to improve the CPP would kill between 17,000 and 70,000 jobs as some businesses would be overburdened paying higher premiums for workers.

However, those statements did not note that a basic assumption of the internal analysis was that expansion of the CPP would occur within a single year, whereas P.E.I., the NDP and others all proposed phase-in periods of up to 10 years to avoid any shock to the economy.

A spokeswoman for Finance, Stephanie Rubec, called the one-year phase-in “a simplifying assumption adopted to compare the economic impact of various CPP expansion proposals.” A longer phase-in would mean a longer negative job impact, she said without providing numbers.

The document also notes that governments would be somewhat insulated from a drop in tax revenues arising from an enriched CPP as workers and businesses received bigger tax breaks for their increase in premiums.

Organizations: Canadian Press, NDP

Geographic location: Canada, Ontario

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  • Hippo
    March 31, 2014 - 00:59

    There are alot of things you can do when the economy is strong. But that doesn't mean we should plan for the economy to always be strong, that is not only short sighted, but simply foolish.