An old Chinese proverb says that the best time to plant a tree is 20 years ago and the second best time is now. That describes the opportunity that we have missed by not acting before now to expand the Canada Pension Plan.
The federal government claimed recently in its Throne Speech that it wants to help consumers and the middle class. But Ottawa is dragging its feet on the most important pocketbook issue of them all -- that of providing decent, secure pension income for all Canadians when they retire.
Fortunately there is a solution at hand in the form of an enhanced CPP. The labour movement has been advocating since 2009 for a modest, phased in and achievable proposal to double future benefits under the CPP on a fully-funded basis. The increased contributions to support this improved CPP would be phased in over a period of seven years. For about the price of one cup of coffee a day we could have been on the way to providing real retirement security but we have squandered four years.
The need is urgent. Only 38.8 per cent of all employees are covered by a workplace pension plan, most of them are our members. But millions of Canadians simply can't save enough on their own to retire. Most businesses are not offering workplace pension plans anymore, and many are shedding their existing plans. A growing number of people can find only party-time work, which seldom involves their employers partnering in providing pension plans.
Even a modest increase in CPP contributions would produce thousands of dollars a year in extra, pre-funded benefits for Canadians when they retire. Under our proposal, the basic pension floor for retirees in the future would rise from the current level of $12,150 a year to a far more liveable $24,300.
The finance ministers have been talking since 2009 about improving the CPP, but every time they get close to an agreement, the federal government changes the rules or cancels the meetings. For some reason they want Canadians to use individual retirement savings plans offered by the financial services industry. They know that the Canadian mutual fund industry charges among the highest management fees in the world. They charge fees that are more than 2 per cent on average, which skims off 40 per cent of your savings over a lifetime.
Some provincial governments are proposing designs for improving the CPP. In September, PEI's Finance Minister Wes Sheridan defined what would constitute a "modest" increase to the CPP. Ontario has also been a staunch advocate of improving the CPP but has become so frustrated with Minister Flaherty's resistance that it is threatening to set up a plan of its own. That is not the answer either.
Provincial finance ministers plan to meet on their own on November 1. At that meeting, they should survey the room and if enough of them agree, then they and their premiers should insist that Ottawa immediately table legislation enabling CPP improvements.
No doubt the financial services industry and special interest groups such as the Canadian Federation of Independent Business will plead that the economy is too fragile to accommodate even a modest increase in CPP contributions. The same people predicted disaster when then Finance Minister Paul Martin increased CPP contributions in the late 1990s to put the plan on a more secure footing. He acted and received the required support from the provinces despite the objections of British Columbia and Saskatchewan at the time. The Canadian economy actually improved and employment grew notwithstanding the dire predictions.
The alternative to improving the CPP is for Canadian government to use the Guaranteed Income Supplement (GIS) to continue subsidizing businesses that don't offer pension plans to their employees. If we do nothing to improve pensions now, the GIS tab to taxpayers will grow from $9.9 billion today to $22 billion by 2030 and $31 billion by 2040.
Abraham Lincoln once said, "nearly all men can stand adversity, but if you want to test a man's character, give him power." The federal Conservatives are refusing to use their power to provide a vehicle for financial security for all Canadians.
So we applaud the Provinces for taking the lead and showing the character of leadership.
The time has come to plant that new tree that will, over time, grow the financial security that all Canadians deserve after a lifetime of work.
Ken Georgetti is president of the 3.3-million member Canadian Labour Congress.
