Evidence of meeting #57 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was workers.
A recording is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
I call the meeting to order.
As our witnesses know, we're dealing with the subject matter of Bill C-26.
Thank you for coming. We will at least start with the presentations so that we have that on the record. We have to leave when the clock hits 15 minutes down.
I'll start then with the Council of Canadians with Disabilities and Mr. Hicks.
James Hicks National Coordinator, Council of Canadians with Disabilities
Hello, everyone. Thank you for inviting me to talk. I'll make it quick so that you can move on.
Who are Canadians with disabilities? When we speak of people with disabilities, we are actually talking about people with impairments who are disabled by the environment and type of society in which they live. People may have impairments with hearing, seeing, communicating, walking, thinking, learning, or doing any similar activities, but they are disabled often because of inaccessible information; inaccessible buildings, homes, and apartments that are not designed for people with impairments; inaccessible public and private spaces; lack of supports and services for employment, education, and training; lack of services to remain in one's home; and stigmatizing attitudes.
People with impairments are disabled often because of societal barriers, both structural and attitudinal, which limit the types of activities they can do in their homes, at school, at workplaces, as well as other activities. The United Nations Convention on the Rights of Persons with Disabilities defines disability in terms of social factors, not so much in terms of biological factors.
People with disabilities want to be part of their broader communities, be educated, be trained, and have good-paying jobs. This requires leadership and commitment from governments, the private sector, and disability organizations to work together to bring about this change.
What are the employment realities for Canadians with disabilities? We know that people with disabilities are less likely to be employed than are people without disabilities. The participation rate for people without disabilities aged 15 to 64 years was 79.3%. For people with disabilities, this dropped to 53.6% of the population.
We know that people with disabilities have lower incomes than people without disabilities. The self-reported median income in 2010 for people with disabilities aged 15 to 64 was just over $20,000, while for people without disabilities it was just over $30,000.
We know that many people with disabilities rely on government programs for income and social supports. Among the 204,700 people with disabilities who are completely prevented from working, 43.4% reported that they received CPPD or QPPD in 2010. Among the 632,600 people with disabilities aged 15 to 64 who are permanently retired, 39.9% reported they received CPP or QPP in 2010. This program is extremely important to the welfare of people with disabilities in Canada.
With regard to the impact of Bill C-26, due to unknown sporadic employment periods, a person with a disability who was unable to maintain workforce attachment throughout their adult working life potentially will see a greater impact in terms of the benefit of the enhancement as other Canadian citizens. The impact for people with disabilities will likely be greater levels of disparity between disabled and non-disabled people in the amount received in CPP benefits Additionally, it has the potential to further impact women and girls who are typically the caregivers for both children and family members with disabilities. Women with disabilities who are also caregivers will be hit with a potential double reduction in revenues through these proposed measures if their disability and caregiving drop-out periods are in different years.
In terms of analysis, it is the view of CCD that the implementation of the measures in Bill C-26 has the potential to negatively impact Canadians with disabilities in a manner that could increase the disparity in income levels between Canadians with disabilities and other Canadians. The removal of the drop-out options in the enhanced portion has the potential to further increase the disparity between disabled and non-disabled Canadians through a publicly designed pension scheme. This would be in contradiction to the intent of the UN Convention on the Rights of Persons with Disabilities, which Canada has signed and promised to uphold. Some of these protections are important to highlight here.
Part of the CRPD preamble reads as follows: “Highlighting the fact that the majority of persons with disabilities live in conditions of poverty, and in this regard recognizing the critical need to address the negative impact of poverty on persons with disabilities”.
Article 3 talks about equality of opportunity, not about being treated the same.
Article 5, paragraph 3, says, “In order to promote equality and eliminate discrimination, States Parties shall take all appropriate steps to ensure that reasonable accommodation is provided.”
Article 5, paragraph 4, says, “Specific measures which are necessary to accelerate or achieve de facto equality of persons with disabilities shall not be considered discrimination under the terms of the present Convention.”
Article 28, paragraph 2b, says, “To ensure access by persons with disabilities, in particular women and girls with disabilities and older persons with disabilities, to social protection programmes and poverty reduction programmes”.
In conclusion, the proposed changes to the drop-out provisions in the enhanced portion of CPP and CPPD have the potential to further marginalize Canadians with disabilities. This includes those who have had to leave the workforce due to disability, those who experience potential discrimination in obtaining and maintaining employment, and those who because of disability have had to work sporadically throughout their working years.
CCD urges the finance committee to reconsider its acceptance of the current proposed changes to the CPP and CPPD programs. No revisions to the CPP program, including the retirement and disability portions, should create further barriers and inequality to Canadians with disabilities. The Government of Canada, through its commitment to the Convention on the Rights of Persons with Disabilities, has a responsibility to ensure that Canadians with disabilities are not further impacted negatively due to life circumstances beyond their control.
All federal programs should ensure provisions for those Canadians known to be living with adverse poverty, particularly those eligible for CPP and CPPD who would benefit from the inclusion of the drop-out provisions to all portions of CPP disability or retirement pensions.
Thank you to the committee for allowing us to bring this to light.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Hicks, for your thorough brief.
I neglected to ask this at the beginning. Once the bells ring, we can't continue to meet unless there's unanimous consent. The suggestion was that we would meet until the clock counts down to 15 minutes so we can hear witnesses.
Is there unanimous consent?
Liberal
The Chair Liberal Wayne Easter
No? Then we can't continue to meet.
We'll suspend until after the vote.
Liberal
The Chair Liberal Wayne Easter
We will resume.
The witnesses for the second panel at 4:40 are here. If they want to come to the table as well, if that's agreeable to the committee, we can make that arrangement.
Is that agreed?
Conservative
Liberal
The Chair Liberal Wayne Easter
Yes.
We're away. You can come up to the table, ladies and gentlemen.
We heard from Mr. Hicks, and....
Oh: the bells are going. Is there unanimous consent to continue?
Liberal
The Chair Liberal Wayne Easter
We will go until there are 15 minutes left.
Mr. Dorval is here from the Conseil du patronat du Québec.
Yves-Thomas Dorval President and Chief Executive Officer, Quebec Employers' Council
Thank you, Mr. Chair.
I will speak in French today. I will try to speak slowly to allow the translation to be effective.
Thank you very much, Mr. Chair, and dear members of this committee.
First, I'd like to highlight the fact that the Quebec Employers Council represents more than 70,000 employers who have activities in Quebec, most of whom also have Canada-wide work implications.
We are very pleased to take part in the work of this committee.
I will not discuss the elements of the bill, since you know them well.
First and foremost, I want to say that Quebec employers support the fact that you are attempting to improve the lot of their fellow citizens regarding retirement plans. They are of course concerned about the impact this could have on their businesses and their production costs, but they are very open to an update of the various retirement plans, such as the Canada Pension Plan.
We would nevertheless like to go over certain fundamental principles and make a few remarks about the Canada Pension Plan and its Quebec counterpart, the Quebec Pension Plan.
Even though it is important to encourage people to save for retirement, a universal solution does not meet the needs, and on the contrary could have a negative impact on economic activity, employment and salaries.
First of all, the need for savings is not generalized, as demonstrated by analyses made by several institutions. Certain groups of workers or citizens have more problems in this regard than others. So targeted measures are necessary in order to improve the financial health of individuals.
In fact, the improvements proposed in the bill recognize, to some extent, that the problem is not generalized, since it does propose relatively targeted solutions, but in our opinion they are not targeted enough.
We would like to talk about the government's decision to take low-income workers into account. The government wants to improve the federal working income tax benefit, which is a refundable tax credit for low-income workers, so as to diminish the impact of the increase in contributions to the Canada Pension Plan for those workers.
All of the people we consulted felt that this is a complex solution. It does not have the merit of being as clear as exempting or excluding low-income workers who could be targeted in this very simple way. Rather than creating a refundable tax credit mechanism, you could, for example, set a percentage of the maximum allowable earnings, and state that anyone having a salary under that threshold would be excluded. This would simplify things for those people, and target that group better.
In fact, this concerns the Government of Quebec, as it intends to propose alternate solutions in that area. If the provinces and the federal government could agree on this, all of the provinces would probably agree to take part in the same type of project.
For workers with higher incomes, you should opt for other solutions to encourage them to save more using the various tools that exist.
Additional payroll charges could reduce the capacity of individuals and businesses to keep the economy turning, and could lead to a decrease in salaries and the number of jobs, which is not the objective being sought here.
We must nevertheless admit that the increases proposed in the bill, and the way in which they are staggered over time, takes into account enterprises' capacity to pay. And so we want to emphasize that the bill shows good intentions. The eventual shock is taken into account, but it is a fact that there is an impact when a premium must be paid. In fact, the figures that circulated in Quebec confirmed that the amount individuals and businesses would have to pay could amount to more than $3 billion, which could not be allocated to expenditures.
This money would be invested either by those who invest pension plan funds, or by the people who will receive the benefits. However, we know that it will take between 20 and 30 years before this money begins to circulate in the economy. In short, there will be impacts and we have to point that out. That is what we wanted to say today, while however acknowledging the fact that employers are not opposed to certain improvements.
Also, new mandatory retirement contributions may simply substitute public savings for private savings. That should not be the objective. I invite you to consult the reports of certain experts on this. That is what I did. They have some very clear graphs that show that after a certain number of years, the amounts that would accumulate in this new fund would even surpass the amounts accumulated in the current plan, the Canada Pension Plan.
The removal of what we would normally find in private industry is significant, and the concentration of savings entrusted to the state, regarding its management, is even greater.
Another...
Liberal
President and Chief Executive Officer, Quebec Employers' Council
I apologize for that.
There is also the matter of transparency with regard to the people who are going to put money aside. They will have to be told that it will take close to 40 years before they can count on that money.
We should also consider—and it is unfortunate that we don't take this into account in all of these discussions—that we underestimate the assets or savings that people set aside, outside of pension plans. We particularly want to direct your attention to the fact that owning a home is also a very effective way of saving for retirement and generating more savings. In this regard, the new rules that will make access to property more difficult, and are being applied more and more frequently, run precisely counter to the ultimate objective of this bill, that is to say to encourage savings for later.
We feel that other tools exist, such as owning property. That said, we understand that there are issues in some regions of Canada. In Quebec, however, that is really not the case. Consequently, any measure that makes ownership more difficult for Quebec citizens is going to slow down investments in housing that could be used for savings at a certain point in their lives.
My last point is the adjustment for Quebec. All things being equal, we really want to encourage all of the groups to consider the fact that in Quebec, we are already paying more, in percentage terms, to defray the costs of the Quebec Pension Plan, for various specific reasons. Increasing that expenditure would affect the citizens and employers of Quebec even more.
Thank you, Mr. Chair.
Liberal
The Chair Liberal Wayne Easter
Thank you.
We'll turn to Ms. Schirle from Wilfrid Laurier University. She is here as an individual and is joining us by video conference from Waterloo.
We apologize for the wait, Ms. Schirle. Go ahead.
Dr. Tammy Schirle Associate Professor, Department of Economics, Wilfrid Laurier University, As an Individual
I'm glad you could come back to give me an opportunity to speak with you today. Thank you.
I will take this opportunity to flag some general concerns I have with Bill C-26, with a focus on individuals with low earnings. Over the past few years, several researchers have expressed concerns that an expansion of the CPP's existing structure, alongside the provisions for the guaranteed income supplement, would imply a very low rate of return on contributions for individuals who enter retirement with low average earnings.
The planned changes to CPP and the Income Tax Act, as set out in Bill C-26, take some steps to mitigate those concerns. First, an expansion of the working income tax benefit is included in this bill. Most importantly, this will help some individuals with low earnings cover their additional CPP contributions. This has several other benefits.
As a method of prefunding retirement income through the current generation's tax revenues, rather than relying on programs funded by future—
Liberal
The Chair Liberal Wayne Easter
I don't want to interrupt, but your words are being translated, and you're going a little too fast for them to keep up, so slow down a little.
Associate Professor, Department of Economics, Wilfrid Laurier University, As an Individual
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—
Liberal
The Chair Liberal Wayne Easter
Ms. Schirle, I'll have to interrupt again. We do have to run to a vote. We're a distance from the House of Commons.
Associate Professor, Department of Economics, Wilfrid Laurier University, As an Individual
Certainly.
Liberal
The Chair Liberal Wayne Easter
We'll have to suspend for the moment. We have no choice.
The meeting is suspended until after the vote.
Liberal
The Chair Liberal Wayne Easter
We'll continue.
Again, my apologies, Ms. Schirle. Please go ahead and finish your remarks.
Associate Professor, Department of Economics, Wilfrid Laurier University, As an Individual
Thank you very much.
Instead of trying to repeat myself, I will just quickly summarize some of the points I made. I will also note that my speaking notes are available online, as are some informal notes to questions that I commonly receive about CPP.
To summarize what I was saying, first, I'd like to highlight that there are clear merits to using something like the WITB in refunding the contributions of low earners. I am very concerned, however, about gender equity goals not being met by the WITB, and that requires further consideration.
I think there are merits to not including drop-out provisions in the expansion of CPP. I was expressing concerns with cross-subsidization in the program via survivor benefits, in particular the maximums that are placed on combined benefits.
At that point, I was ready to conclude, really, so that's where I'll continue. If given the opportunity to make recommendations here, I would focus on two things. First, continue with efforts to clearly link individual contributions and benefits, avoiding intergenerational and intragenerational transfers in the CPP. Such transfers can be more transparently and effectively developed in other programs. Second, administer the refund of CPP contributions to low earners separately from the WITB and define eligibility by individual earnings. This should be administered through the tax system to minimize administrative costs. The refund of CPP contributions should be clearly visible to those who are receiving it.
I do thank you for your attention. I'm happy to take any questions you might have.
Liberal
The Chair Liberal Wayne Easter
Thank you very much. Again, we apologize for the confusion.
We'll turn now to the National Pensioners Federation, Herb John and Susan Eng.
Go ahead, Mr. John.
Herb John President, National Pensioners Federation
Thank you.
My name is Herb John, and I am the president of the National Pensioners Federation. With me as our counsel is Susan Eng.
The National Pensioners Federation is a national, non-partisan, non-sectarian organization of 350 seniors chapters, clubs, groups, organizations, and individual supporters across Canada, with a collective membership of one million seniors.
While seniors need help with their health and financial concerns today, they are also concerned about the financial security of tomorrow's seniors. Without reservation, National Pensioners commends the federal and provincial governments on reaching a historic agreement to increase the Canada Pension Plan. We welcome the proposal in Bill C-26 to implement the increase and to amend the Income Tax Act to facilitate deductions for the increased CPP and QPP contributions, but especially for the increase to the working income tax benefit to allow low-income Canadians to participate.
National Pensioners held our annual convention this year in Vancouver, where the delegates applauded this rare example of federal and provincial co-operation. It is important to note that none of the people in that room will benefit from the increase to the CPP. Rather, they are concerned that their children and grandchildren do not have workplace pensions—two-thirds of working Canadians do not—and see the increased CPP as vital to helping them save for retirement. They know how hard it is to make ends meet in retirement, even though some of them have workplace pensions.
The CPP increase is coming just in time. No new defined benefit pension plans have been established in years. Many workplaces that have defined benefit plans are switching to defined contribution plans in which the investment risk is entirely borne by the employees. This is happening even in the unionized environment. GM, Ford, and FCA auto workers made an unprecedented concession to allow companies to close the doors on their defined benefit plans and to require new employees to participate in a defined contribution plan.
Many of our members have also been affected by business bankruptcies like Nortel's, which left the pensioners with heavily reduced pensions, if they had anything left at all after the dust settled. This is an ongoing result of not having legislated protection of pension plan assets during bankruptcy. The sustainability of the CPP, clarified by the fact that the chief actuary has declared that the CPP will be able to pay CPP benefits for at least the next 75 years, is very important to seniors, again, for their children and grandchildren.
The changes announced, which are the first increase in half a century, will take years to phase in. Even so, the increase is modest and, while very welcome, does not ensure Canadians an adequate retirement. What it does do is bring the maximum CPP benefit to $20,000 in 2016 dollars, which is approximately equivalent to the poverty line. National Pensioners would recommend that a review of future increases, including a voluntary layer to the CPP, be initiated as soon as possible, especially given the length of time it took to get this increase.
I will now turn it over to Susan Eng, who has further recommendations for the committee.
