Finance Committee on Nov. 15th, 2016

[Mark Janson]

My view would be more in line with the Trudeau government of 1977, when they brought in this measure and said they were doing away with the subsidy that flowed from the unpaid work in the home that served to penalize the person doing that unpaid work under the CPP. They saw that as an unfair subsidy from that person to Canadian society as a whole, so they saw fit to correct that subsidy through the CPP and they did so, and it has worked well for 40 years. I don't agree that having this mechanism is a subsidy. I would argue that, if we do away with this, we add a much more inequitable subsidy to the Canadian pension landscape.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Mr. Janson, do you know the effect the absence of the dropouts will have on the gaps between future CPP pensions and those who would have used these provisions versus those who would not?

[Mark Janson]

You're asking about a dollar impact on a CPP benefit for a person with dropouts versus a person without.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Absolutely.

[Mark Janson]

We don't know those numbers. The finance officials and the chief actuary's office were asked directly about that and they responded that they didn't have those figures and hadn't run them. They're really the only people who can do those kinds of calculations.

As I said, the average woman today earns 70¢ on the dollar for the average man's CPP entitlement. That's with the child-rearing dropout. If that dropout wasn't there, that 70¢ would be lower, no doubt.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Thank you.

Mr. Yussuff, I know your organization has worked very hard, and I give you kudos for the co-operation and participation you have been doing.

I know the CLC called for a 50% increase, from 25% to 50%, a much bigger percentage, but it came out to be 33%. Do you think that has a negative effect on the CLC or your organization, not receiving the 50% but the 33%?

[Hassan Yussuff]

Obviously, when we started the campaign we recognized that 11 million Canadians who went to work today have no workplace pension, and the only pension they're going to have when they retire is the Canada pension plan. The fundamental challenge we face is that we know that their savings are very low. The reality is that for the average Canadian male, a little over $500-and-something a month is currently being paid out under CPP. For women it's even less than that. It's in the range of $474, so when we were looking at what we would like to see happen to an expanded CPP, we figured doubling the CPP benefit over a phase-in period would be the appropriate way to proceed because this would ensure that those Canadians who are currently getting the average benefit will see a doubling of that benefit as this is phased in.

Of course, we're not pleased that we ended up where we did, but again it is a significant increase in the context, given that for the last 50 years the benefit had not changed other than the inflation protection that Canadians get who receive a benefit on a regular basis. It is a reasonable compromise.

We also knew we had to convince the provinces and the federal government to land in the same place, and given the complexity of CPP changes, this was not an easy task, as my friend Mark Janson noted. It required 66% or two-thirds of the provinces, representing 66% or two-thirds of the population. Where they ended up, obviously it was an improvement, but we would have preferred a much larger improvement because it took us 50 years to get to this stage. I hope it doesn't take us another 50 years to get to the next stage in improving the Canada pension plan.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Mr. Janson, do you anticipate the labour movement will rethink its endorsement, given the recent information with the dropout for child rearing and the disabled?

[Hassan Yussuff]

This committee has a direct responsibility to amend the bill to fix that problem. This is an affront to women's equality in this country, and it is simply wrong. It was corrected in 1997, and we have no business going back and taking that away from women and people who get disability benefits. However, the department came up with a draft. They've made a fundamental mistake, in my view, and it needs to be fixed. This committee has the responsibility to fix that.

More than half the workforce today is represented by women. To tell them that they are not going to be treated equally as men in the workforce is wrong and this committee has a responsibility. Equally, the department should come back to say that it made a mistake. This will do very little, I think, in terms of the premium increase. It disadvantages two very important groups in this country, and in my view, it was never discussed during the enhancement. It should not remain as part of the bill going forward when the House debates and finally votes on the bill at third reading.

It's fundamentally wrong and given what the government has said about women's equality, I don't think this was intended. It needs to be fixed.

[Scott Duvall, NDP, Hamilton Mountain, ON]

I appreciate that.

Ms. Lévesque, if I heard you correctly, you mentioned that those people making $25,000 and under would be exempt. Is that what I'm hearing?

[Nathalie Joncas]

Yes, we want them to have.... The bill is good because they will have a credit. Even if they have a low salary, they will get the credit, so we are happy about that because they need it.

However, something that could have been looked at is that the credit, which gives them back their money, their contribution, is maybe not the best way, because there is no mechanism in the law to foresee whether, in the next 20 or 25 years, those two mechanisms will stay the same. If at one point the work credit is moved or changed, those people will end up paying the contribution and will not receive a financial refund.

Maybe take the time to find something in the pension plan that indicates that the contribution is zero for those people and don't collect from them, so that when you have a low salary you don't pay. You could sign something. I think it's at $10,000 when you don't pay forward your income tax.

[Scott Duvall, NDP, Hamilton Mountain, ON]

What about the business? Does it pay?

[Nathalie Joncas]

The business has to pay the contribution, yes.

[The Chair, Liberal, Wayne Easter]

Thank you. We're substantially over.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone, and thank you for flying or driving here for a visit.

I will start off with a general comment about CPP. We live in a time when private employer pension plans are declining as a percentage of coverage of the workforce. We live in a time when interest rates are very low, so there is a big disincentive for firms to continue to maintain what's called a defined benefit pension plan. The CPP is a true defined benefit pension plan. You get it every month, it's stable, it's secure, it's indexed to inflation, everyone contributes, and it's portable, so you can go from one employer to another. The CPP has many advantages that I think make it an envy of the world.

This strengthening of the pension plan will ensure that the next generation of workers and many current workers will receive greater benefits. The replacement rate goes up from 25% to 33%. It is graduated. Not everyone is going to pay the full amount, and not everyone is going to pay the least amount.

To the CFIB, Ms. Moreau, I understand your concerns. Small businesses, SMEs, are the backbone of our economy. We need them healthy, we need them robust, and we need them employing Canadians.

When I was growing up, I worked at McDonald's, Tim Hortons, and Zellers, so I understand that the local businesses need to be supported. Our government is supporting them through tax cuts to middle-class Canadians and an increase in the Canada child benefit. We also need to make sure that workers today and tomorrow are taken care of and that they have a secure and dignified retirement.

We need to look at the bigger picture. This is an investment in Canadians. The other side likes to think not. I think it's an investment in Canadians and an investment in their retirement future.

I'm going to start off with Hassan Yussuff of the CLC because I'd like to hear the feedback you're receiving from your members for our government's achievement in terms of being able to strengthen the retirement pension plan.

To Ms. Moreau, what else are you hearing from your constituency? That is the small and local businesses, which I visit on a daily basis when I'm in my riding and I talk to, whether it's the local Nicol's Pastry Shop or the Desserts Plus down the street.

Mr. Yussuff.

[Hassan Yussuff]

I can tell you, on a personal level, I've spent the last seven years—it will be eight years this December—criss-crossing this country, talking to anyone who cared to listen on why we should do this. The fact that we have done it is truly an amazing achievement on behalf of Canadians.

This will benefit young workers, those who are entering the workforce currently or are about to enter it in the next little while. More importantly, the 11 million Canadians I talked about will have the greatest benefit. For those individuals who work just as hard as I and my members do, they don't have a workplace pension. They rely on the CPP for their entire benefits. If they are fortunate enough to provide savings through whatever mechanism, kudos to them.

The reality is that our organization and activists see this as truly a remarkable achievement, given that they spent so much of their time campaigning for it. Of course, we would have liked to have seen the increase much higher, but the fact is that the increase is universal. Nobody is excluded. The positive thing for low-income Canadians is that it will cost them part of their salary and there's a tax credit to go with that.

Secondly, on the increase, allowing higher-income Canadians to pay on the higher salary is a positive thing. As you know, that was capped at around $52,000 a year. I think that's a significant improvement. Those Canadians will get a better benefit as a result of paying on a higher income. More importantly, this will be phased in over a period of time. Despite all the arguments that have been made, I have yet to see some of those realities happen. There is notice now that it will start in 2019 and will be phased in over a period of time. I think it will have little or no impact on the economy.

I also want to speak directly to the small businesses. Those individual owners who own those businesses are also people who need a pension when they retire. If they are fortunate enough to sell that business when they retire and are able to earn from that, so be it, but they also need a decent pension. The Canada pension plan provides them with an opportunity to save for their retirement.

The CPP is not a tax; it is a savings plan for all Canadians. We pool our investments together so that we can have a better benefit when we retire. Everything we know about the Canada pension plan is that it is 75 years solvent. It has a solid structure. More importantly, it's able to meet the obligation to ensure that every Canadian has a benefit when they do retire.

The last point I would make, and I say this coming back to the point of private pensions, is that every benefit that's been promised by the CPP has been paid. I know the challenges we face with private pensions because we negotiate them. If the company goes bankrupt or the plan is not fully funded, our members are directly impacted by that.

This is a good thing for the economy. It is a good thing that the province came together to support the federal government to do this across the country, so we don't have a piecemeal system happening.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Can I get a couple of comments from CFIB, please?

[Monique Moreau]

Briefly, as I've mentioned repeatedly, Canadians and small business owners are for retirement savings. In the nineties, when CPP needed to have increased premiums with no additional benefits, when the plan wasn't doing as well as it was now, our members voted to increase it. They appreciate and enjoy the benefits that CPP brings to them.

The difficulty for them—and what I unfortunately have to respectfully disagree with Mr. Yussuff about—is on whether or not it's a tax. If you have to pay something without a choice, it's a tax. When you owe money to the government at the end of the year, even though your business has not made any money, by definition, for a business owner, that is a tax to them.

There have to be other ways. Are there ways that we can be innovative and look at what other countries around the world have done to increase retirement savings for their citizens without pinning it on the backs of small businesses? There are options out there. The U.K. has looked at a voluntary model.

Canadians, through the polling that we've done, have said they appreciate a tax-free savings account and contributions to RRSPs over CPP, because they can do more with them when they have those savings. They can pay for their first house. They can take out loans to educate themselves further. They can look into moving the results of their TFSA to other savings, if they need them in that period in their life.

I think, from our perspective, that's what our members have said.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

To Ms. Trask, thank you for coming in from Saskatchewan, even though you didn't have a full presentation.

Could you comment, please, on what seniors are experiencing in Saskatchewan, and what your members are experiencing in terms of what issues they're facing today?

[Pat Trask]

Thank you.

Seniors in Saskatchewan, probably 20% of the senior population, are living at or below the poverty level. I have recently moved into an apartment in Saskatoon, and I'm much more aware of it than I was in the country, although I've always been involved in that kind of thing.

I really feel that while the increase in the Canada pension plan now will not help anybody like me, or a lot of the older people, when some of the younger people get up to that stage, I would be delighted, if I were them, and had an increase in the Canada pension.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Very quickly, please....

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for those comments. Our government did put an increase into the guaranteed income supplement of nearly $1,000 to help a lot of single seniors across Canada.

Thank you.

[The Chair, Liberal, Wayne Easter]

Okay.

Thank you, both.

Mr. Albas, you begin the five-minute rounds.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you again to our witnesses for your testimony today.

I'm going to follow up on Mr. Sorbara's comment.

Ms. Trask, would you agree with the information that CFIB has said that many seniors are not aware that the current changes that are proposed within the bill will not affect them?