Raising the replacement ratio to 50% is a little too large. It's like hitting the tack with a sledgehammer. It's in the right direction but it's a bit too heavy-handed.
The research report that my colleague Jack Mintz worked on with Mr. Menzies and his office in the fall indicates that the lowest 30% or so of Canadians, among the 60% in particular who do not have pensions, have replacement ratios in the 90% range and higher because of the excellent job that OAS and GIS do in combination with CPP. So there is a gap in the middle that needs to be closed, but the gap is not as big as we thought it was going into the fall.
First of all, there is a little bit of disconnect. I have been asking for 12 years, where did this 70% replacement ratio number come from? And I have had a few political answers. I have had no actuarial answers. But we're starting to have some evidence that maybe the right replacement ratio is in that 50% to 60% range.
There is some information that is not yet ready for public release that suggests that if you look at couples, the group that's right above the YMPE--the middle decile, to use Stats Canada's very statistical terminology--have replacement ratios in the 40% to 55% or 60% range. And 40% is a little too low, so if we could push that 40% up closer to 50% I think we will have solved the most urgent part of that problem. And a 25% increase in the YMPE would cut that in half, perhaps.