Status of Women Committee on Nov. 5th, 2009

[James Pierlot]

I think there's no question that, to increase the number of years you could use for an earnings, dropout would help, because it would increase the CPP benefits that women get in retirement.

Is this the best way of doing it? I think it depends to some degree what kind of family unit you have and what the reasons for unpaid labour are. We're working on the assumption here that unpaid labour is not done by choice. It's done for reasons of child care. I'm going to work with that assumption. I'm also going to work with the assumption that there's a two-income family. Another approach would be to allow for greater income splitting within couple units when you have children being raised.

The reason I suggest this is that for couples or for women it's very difficult to raise children, because they're a heavy cost to the family, and yet they have a very significant benefit to society, because they keep society from aging or they slow the process of aging. That's one of the great challenges that Canada is facing: the replacement ratio isn't as high as it needs to be and we don't have enough workers coming up to replace the ones who are going out. One of the reasons for this is that it's very difficult for families to have children. I think it would make sense for society to recognize that, by perhaps allowing more income splitting within couples to lower their tax rates, to allow them to make more effective use of their income. This will probably make it easier for them to save for retirement while they're working.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

[The Acting Chair, Conservative, Dave Van Kesteren]

Monsieur Desnoyers.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

I would like to welcome you all. I have to say, after listening to you, that there seems to be a broad consensus. We will be facing a major problem in terms of retirement, and more specifically women's retirement. Mr. Pierlot and Mr. Bonnar stressed this point. The Canadian Labour Congress has made an interesting proposal, that the average earnings to be replaced by the CPP be gradually doubled, which would mean that the pension plan would pay about $1,700 per month.

Do you think this kind of proposal could be put into effect?

[James Pierlot]

If I understand the question correctly—

[Beverley Smith]

May I answer the question?

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Mr. Pierlot could answer first, and then Ms. Smith.

[Beverley Smith]

I can answer, if you like.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Go ahead, Ms. Smith.

[Beverley Smith]

I am not quite sure of what you are saying, but I recently read in the press that thought is being given to providing employment insurance benefits to self-employed persons. We might consider women at home as self-employed persons. That way, we could force the government to pay premiums for women, as is going to be done for self-employed persons. We do the same thing for the military. So it would be double, for the government.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

You have answered my question in part.

Last week, Ms. Demers said that in future, we had to take into account unpaid work in the home. In the appendix provided to us, I don't know the author's name, it says we will not have a choice about changing our approach, in terms of analysis, when we talk about gender in the family and for pensions. We will have to take all these connections into account.

The committee is looking for solutions for women. How could these problems be solved? The Canadian Labour Congress says there will not be many high premiums, when we talk about doubling the proportion of average earnings replaced by the CPP; that is the $1,600 or $1,700 per month I was talking about before. The CLC says the cost would not be very high, given the present state of the Canada Pension Plan.

All three of you seem to agree about the OECD countries where women are disadvantaged. What solutions could be incorporated into the recommendations we will eventually have to make to remedy the situation women are in?

My question is for all three of you.

[Edward Whitehouse]

I can answer about the OECD.

We have just completed a study of the impact on women's retirement incomes of periods out of paid work while caring for children. We've looked at a range of different periods, from one year out of paid work right up to 10 or 15 years. These are for very long periods.

We find that countries have very different policies. In some countries--France, for example--if you take, say, up to five years out of paid work caring for children, your pension is almost fully made up to what it would have been had you continued working; however, once you go beyond five years out of paid work, it diminishes quite rapidly.

In some other countries the pension diminishes straightaway. Every year out of the labour market diminishes the pension. In somewhere like the United Kingdom, you get credits under the basic pension for all the time your children are still of school age, so it's until your children are 16. You could have perhaps 18 or 20 years out of paid work and have that period covered.

We have to come to a much more concrete policy discussion about whether we want to insure people for short periods and make up their full pension, or whether we want to try to somehow spread the money over longer periods out of paid work.

I would also add at this point that many other things can help carers, whether they are carers of children, disabled relatives, older relatives, or others. All these things cost money. If we are working within a given budget constraint, do we want to spend the money on giving people credits in the pension system, which can be quite an expensive thing to do, or do we want to somehow provide respite care, child care services, and so on to help women to combine caring for children, or other caring responsibilities, with paid work?

I'm leaving that as an open question. It is a policy question on which voters and their elected representatives can come to a conclusion, but I think there has to be a trade-off between the pension credits and other services.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

That is for women without earnings. Given the current economic crisis, women are often in the least well-paid jobs. I think it was you, Mr. Pierlot, who said that access to employer-based pension plans has been declining for a number of years, according to Statistics Canada. You all talked about registered retirement savings plans, RRSPs.

If women are in the lowest earnings ranges, what can they do, if they have no access to a pension plan, to have an RRSP and an acceptable pension plan? Are there solutions?

[The Acting Chair, Conservative, Dave Van Kesteren]

Mr. Pierlot.

[James Pierlot]

The solutions that we think respond to your question would be to get more people into pension plans. Generally, the Canadian public is very badly served by the RRSP pension system: most people can't use it; they pay very high fees; when they get into later career after they've gone through a period of doing child care or what have you, they often can't save enough; if they've lost money in the markets, they can't contribute more to catch up.

There are things we can do to our retirement savings system to make pension plan membership or at least membership in a plan where you get better management of the money and more opportunity to contribute. There's a lot that can be done there, and it doesn't just apply to women; it applies to almost everybody in the private sector workforce.

[The Acting Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Pierlot.

Madam McLeod.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

I'd like to thank the guests for being here.

To start, I will ask some technical questions to which I should perhaps have the answers, but it would help me to know.

First of all, I want to talk about poverty. We talked about something that was a glimmer of good hope: the difference between seniors in Canada versus seniors in some other OECD nations. My first question is, since there must be some comparable way that you're measuring the poverty level across those countries, could you explain it?

The second question is, although you would never think it's a lot of money, does the maximum of GIS and, let's say, CPP actually nudge someone just above the poverty line?

Perhaps Mr. Whitehouse could talk to me about how they measure poverty and how we compare.

[Edward Whitehouse]

There's nothing I like more than a technical question.

The OECD follows an international norm, which is that to calculate the relative incomes of older people and the poverty rate we look at equivalized household disposable income. Equivalized means we take account of differences in household sizes. We don't think two people can live as cheaply as one, as the old adage goes, but we don't think two people need as much money as two single people living alone. I think the number comes out to about 1.4.

So we adjust for household size and take off the direct taxes and contributions that people pay. That brings it to disposable income. Then the poverty threshold we use is a relative threshold; it is half of the median of this equivalized household income.

The OAS plus GIS would bring you to about 90% of the poverty thresholds we have for Canada on this basis that we apply to all of the 30 OECD countries. So if you didn't have any CPP or private pension on top of that, then you would be below the poverty line.

In terms of poverty gaps—the distance that people are away from the poverty line—I think most people have incomes in Canada that take them quite a bit above. You are correct in your feeling that in some countries people are either a smidgen above or a smidgen below the poverty threshold because of the level of the safety net retirement incomes.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

In terms of the differential between Canada and.... You mentioned 4% and 14%. Is that because of our OAS and GIS system?

[Edward Whitehouse]

Canada is an outlier in two ways, firstly in that the poverty rate is very low. Luxembourg, the Netherlands, and New Zealand are the only countries that have a lower old age poverty rate than Canada. In Canada, I mentioned, the number is about 4%; for the U.S., it's about 25%; for Australia and Ireland, it's 30%. So there's a very huge difference.

It is largely explained by the level of OAS and GIS, but also, Canada has the highest proportion of retirement incomes coming from private pensions. Around 50% of retirement incomes come from private sources, mainly from private pensions but also from other private sources. That is a bit above countries such as the United Kingdom, the Netherlands, Australia, Denmark, which are all in the 40% to 50% range. But the OECD average is that only 20% of incomes in retirement come from private pensions, and the vast majority come from the state.

So Canada is in a very different position from many of the OECD countries.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I presume the pension splitting has been helpful for couples, of course. For single women, it then becomes a problem. I'm really curious, and I don't know, whether there are any statistics on what is happening with divorce, because it's so common.

I don't know who would commence with that.

[Beverley Smith]

This is Beverley Smith. I could comment.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

[Beverley Smith]

We have noticed in divorce laws an oddity. After divorce, when you're calculating the benefits, the role of the woman to contribute to raising the children is counted as her share, and that is why she is given equal benefits on divorce. It's during marriage that she's not counted as an equal partner. It's during marriage that we look at her as a dependant worth something like a used car and less than a.... It's rather like child status.

Divorce actually legally gives women a few more equality rights than marriage does—which is a very bad incentive for divorce, but some people take advantage of it.

[The Acting Chair, Conservative, Dave Van Kesteren]

You have about fifteen seconds. We're just about out of time.

Go ahead, sir.