Toronto, – Ontario, Manitoba and PEI would add about half a percentage point to their unemployment rates if they carry through on plans for a mandatory provincial pension plan, with negligible benefits to show for it. According to the latest report from the Canadian Federation of Independent Business (CFIB), the plan would lead to 171,000 person-years of lost work and a permanent drop in wages.
Detailed in the 2014 Ontario budget, the proposed Ontario Retirement Pension Plan (ORPP) would be phased in over two-years, starting in 2017. In Ontario, specifically, the unemployment rate would go up to 6.7 per cent by 2020 – from a status quo projection of 6.2 per cent without ORPP. Over the longer-run, lost jobs would be recovered, but at slightly lower wages.
“This plan is a whole lot of pain for very little gain,” said Ted Mallett, vice-president and chief economist at CFIB. “Employers will be forced to offset added costs by cutting staff. Eventually, the jobs will come back, but the average worker will pay in full for any added benefits. It’s a lot to go through for what is ultimately a neutral outcome.”
The plan would only apply to businesses that don’t already have a workplace pension plan. For those affected, implementation of the ORPP would take current total maximum premiums payable from $4,851 per year today (under the CPP), to an inflation-adjusted $8,138 (combined CPP and ORPP) by 2018. Half of this added cost – up to $1,644 per year – would be paid by employees.
CFIB’s analysis is based on its 2010 macro-economic study of proposed increases to the Canada Pension Plan (CPP). Projections for job losses are 160,000 person-years in Ontario, 10,000 in Manitoba and 1,200 in Prince Edward Island. The plan would have proportional implications for other provinces considering adopting it.
“Any viable strategy for retirement should have a targeted approach that gives Canadians more savings options,” added Mallett. “A one-size-fits-all strategy like the ORPP just doesn’t work.”
Read the report here.
