I shall do that. I have a habit there.
Thinking of the benefits to expanding the working income tax benefit, as a method of prefunding retirement income through the current generation's tax revenues, we reduce intergenerational transfers. I like this approach. I wish we had forced it on the baby boomers 30 years ago.
The proposed changes will enhance work incentives among our lowest earners. The changes offer broader support to those with disabilities, with a noticeable expansion to the WITB disability supplement, and using the WITB involves a simple expansion of existing policy. I see the appeal there; however, I don't think it's the best approach, and I will state my concerns with using the WITB to refund CPP contributions.
First, I think we need to design policy in ways that support and promote gender equity. WITB eligibility depends on a couple's earnings, not just the individual's. Also, only one spouse can claim the benefit. This means that the after-tax and benefit wage rate of a secondary earner, who is typically the wife, will depend in part on the decisions of their spouse and their ability to negotiate with their spouse. I think that whenever practical and possible, such policies should be based on individual earnings.
Second, the WITB is not directly and visibly linked to the CPP. As such, the link between this expansion of the WITB to additional CPP contributions will not be clearly visible to workers, and we want that link to be as clear as possible to minimize any negative effects on the labour market. Moreover, without a clear link to CPP, it is easy for future governments to forget the importance of this provision.
Third, the WITB only covers the lowest earners. A single person earning around $20,000 per year would not be eligible.
Fourth, the WITB expansion is only designed to cover the employee's new contribution at 1%, not the employer's additional 1%. We expect wage bargaining to result in employees absorbing nearly the full cost of the additional contributions.
The second part of planned changes that I think is important for understanding the contributions of low earners is the lack of drop-out provisions. Existing drop-out provisions, for years with young children, low earnings, or disability, work to subsidize labour market interruptions. However, the drop-out provisions then sever that important link between contributions and benefits. Also, if those years dropped include some low earnings, the contributions made when earnings are low effectively offer a zero return.
My understanding is that we have not entirely done away with the cross-subsidies and that we are only counting a person's best 40 years when calculating their benefits. As such, workers will continue to have some low-earnings years in which their earnings and contributions are dropped from the contribution period and are not directly linked to a benefit.
Thinking beyond my focus on low earners, I would like to highlight concerns with the survivor benefit formulas. It is my understanding that the provisions that define a maximum combined retirement and survivor benefit remain in the new formula; moreover, the benefit eligibility does not depend on whether retirees have a spouse who would receive survivor benefits. This differs from many employer pension plans that offer reduced monthly benefits to pensioners who keep the option to have survivor benefits available. The prevailing CPP survivor provisions weaken the link between one's contributions—