A French philosopher about 150 years ago said that demography was destiny. Every once in a while that turns into reality, as will be the case as we start this next 20- to 30-year period. The way to think about this is that we currently have four workers per retiree in Canada today. That ratio will go from 4:1 to 2:1 in the next 20 years. So you just have to imagine a world with that new ratio.
I put it to you that the fundamental thing we have to ask ourselves is how do we maintain our standard of living with that ratio, and the simple logic is we have to get people over 65 in the workforce. That's the simple logic. So to me that's the background and, by the way, we all live longer than we did a long time ago. Those are the underlying realities.
I have three issues that I'll touch on very briefly. The first one is the move in OAS from age 65 to 68, which is long overdue. Michael said it was on the radar screen in 1979 and the U.S. actually did this decades ago and it's hardly noticeable that it's happening. We are doing it more quickly, because we waited longer and it is what it is, so let's get on with it and let's get over the fact that we need to do this.
To me a subpoint would be that given the degree to which we're interested in fiscal sustainability—and this is one element of it—I wonder whether we really need to have that clawback range from about $65,000 to $110,000? The other way to pose the question is do seniors who have income over $100,000 really need to even get a piece of OAS? So one way to make it a cheaper program is to think about that question and figure out whether there isn't some interesting answer there.
The other thing Michael mentioned that I'll reinforce is that you can't look at these things on their own. We have an integrated retirement income system, and even though it's a complex system, if you don't keep track of all the pieces and whether they fit or whether they don't fit, you will lose focus and do things that are stupid. For example, the piece I will bring into it is that when you look at employment-based pensions, the issue is the private sector workforce and the fact that most private sector workers don't have an employment-based pension plan. That, to me, is a major issue.
We've looked at a number of ways of dealing with that, one of which was to expand the Canada pension plan. That got voted off the ship. So now we're left with PRPPs. It's sort of the best at this, the only hope for the next few years. Unfortunately, with the track that we're on, I think they're going to fail, which would be a sad thing given that we've worked at this for the last three or four years. My concerns are the following.
First, if you don't have auto enrolment, if you don't automatically enrol workers into these plans, they're not going to happen. We already have voluntary RRSPs. Why would we want to create another program that looks like that? So this is one element that needs to get dealt with. Quebec, to its credit, is dealing with it. Nobody else has gone this far.
The other thing is the question of this integrated system, in that these PRPPs have to fit into the larger scheme of things. I'll give you an example. Our current system provides 100% income replacement for low-income workers through GIS, OAS, and CPP. So getting them into a PRPP doesn't make any sense at all, because basically all those hard-earned savings will be taxed back by lower GIS payments later down the road. That's just one example of the design thing that we have to put into PRPPs to make them do the job. They have to target private sector, middle-income workers, which means, for example, that you shouldn't start deductions in PRPPs until you get past the first $30,000 of income. That's just one example.
That leads to the other thing. We need a really smart licensing body to make PRPPs work. We need, in effect, a CRTC of pensions. You need about a dozen providers at the most, because you need scale. You need oversight to make sure that these services are delivered at low cost, and you need a regulatory process that understands that.
Here I would say that OSFI actually has some very good people in it, but they're wondering what's going to come out in the regulations and what their job is going to be with respect to PRPPs. Frankly, they don't know right now. That's a sad state of affairs.
There's also the dumping of it back on the provinces that's going on. They're being told to figure it out. Again, that's a shame. We did the Canada pension plan reforms in the 1990s together, and it's still, by global standards, a world-class program.
That's the integration issue.
The third issue that came up in the budget is public sector pensions. I'll simply say that you now have comparable current income between private sector and public sector employment. The difference is that a public sector employee gets an increment of about 30% of pay in the form of deferred wages, and that's an issue. The budget says that it's going to deal with it, but doesn't really say how. I'd be interested to know what exactly the plan is.
We have this 18% deferral right now in terms of how much income you can save today and defer. It is 18% of pay. So why don't we put everybody on the 18%-of-pay program for starters, and if you want to be fair, we'll split the 18% to 9% and 9%. We have to end up with an employment system for public sector workers that basically is 9% and 9%, which equals 18%. By the way, the taxpayer in the future can't bear any more risk in these programs. They have to be self-insured.
Here's my proposition. The richest plan of all in the country is actually the members of Parliament's pension plan. That's all of you. So why don't you think about starting by closing down your plan and going to a PRPP for MPs with a contribution rate that's split 9% and 9% between the employees and the employers? Lead the way.