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Ontario seeking to upstage federal government on pensions as provincial election looms

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Ontario Liberal Premier Kathleen Wynne has taken another step towards her announced intent to upstage the federal government over the Canada Pension Plan. She announced on January 22 that former Liberal Prime Minister Paul Martin has accepted her appointment to help craft a supplementary pension plan for the province of Ontario.

He will work as an unpaid adviser to Ontario Finance Minister Charles Sousa. A blue ribbon corporate pension committee has been formed to work with Martin and Sousa on implementation.

The Ontario plan is a reaction to federal government intransigence against improvements to the CPP.

Public pension advocates hope that an Ontario plan would mirror the ‘defined benefits’ nature of the CPP. But evidence is mounting that what we’ll see is something less than that--a half-baked version akin to the ‘pooled registered pension plans’ scheme that the federal government floated in late 2010 as an alternative to CPP improvements.

The prpp scheme has sat dead in the water. And that’s no loss to future pensioners. It’s a private investment scheme whose many drawbacks include its voluntary nature and the multiplicity of private plans it would spawn, all very costly and inefficient to administer.

Although the unions have long argued to expand the CPP, no unionists were appointed to Premier Wynne’s implementation committee.

Writing in the Feb. 4 Toronto Star, columnist Martin Regg Cohn explained, “Government sources say the Liberals are still considering a way to mirror the CPP’s time-tested ‘Defined Benefit’ model, with fixed (or targeted) payouts for all. It has long been Ontario’s first choice.

“But the premier also seems enamoured of a ‘Defined Contribution’ plan based on the British ‘NEST’ model that would allow Ontarians to ‘opt out’.

“As outlined in Sunday’s column, this NEST option is analogous to the retirement accounts many risk-averse corporations are switching to. But these ‘defined contribution’ plans are widely seen as glorified savings accounts because they make no promises or targets for future payouts.”

Federal refusal

Wynne’s move comes in the face of the years-long refusal of Stephen Harper’s federal Conservative government to heed popular demands for benefit increases to the CPP. The federal stand was reaffirmed at a December 2013 meeting of federal and provincial finance ministers. Federal Minister of Finance Jim Flaherty sabotaged what the provincial ministers assumed would be some formal discussion of the matter.

Some provincial governments have joined Ontario in giving a nod to the public pressure demanding pension improvements. Others, notably the Alberta and BC governments, share the federal government’s ideological opposition to livable public pensions.

Federal junior finance minister Kevin Sorenson responded to Wynne’s latest announcement on behalf of the Harper/Flaherty anti-pension regime. Singing from their one-note, ‘anti-tax’ playbook, Sorenson said, “Premier Wynne will disadvantage Ontario’s businesses with higher payroll taxes, killing jobs and deterring investment”.

The Harper government’s talking points on CPP refer to it as a tax burden, not a social benefit to society.

Coincidentally, as the finance ministers were meeting, Prime Minister Harper chimed in with his own ideological opposition to public pensions. Maclean’s writer John Geddes explained in a Dec. 19 article:

Asked by Global’s Jacques Bourbeau about the pension debate, the Prime Minister made no mention of the purported fragility of the economy and its ability to absorb a CPP premium hike. Instead, Harper went straight to the ideological heart of the matter…

 “The more worrisome group,” Harper went on, “is a group of people who have reasonably affluent lifestyles but just don’t save. They have the opportunity to do so, so I don’t think the challenge is to raise CPP taxes on everybody. It’s to try and figure out how to get the people who actually need to save to do the saving they need to do.”

Contrast the Prime Minister’s view of the problem at hand with what his finance minister said early last month when asked by reporters in Toronto about boosting the CPP. “I can see it being good in the long run for Canadians, at the right time,” Flaherty said. “But I would want to see significantly more economic growth than we have now before we imposed an additional burden on Canadian employers and employees.”

Yet Harper didn’t breathe a word about the ostensible challenge of carefully timing CPP premium increases so they occur when the economy is in better shape. He sure didn’t indicate that he thought doing so might be “good in the long run.” No, he rather bracingly defined the challenge as getting through to that minority of Canadians don’t save enough even though they “have the opportunity.”

Harper’s view on society’s responsibility to its eldest is matched by Minister of Canadian Heritage James Moore’s views on the youngest. In December, he answered a radio interviewer’s question about rising child poverty in Canada with a political catch phrase. “Empowering families with more power and resources so they can feed their own children is, I think, a good thing. Is it my job to feed my neighbour’s child? I don’t think so.” He laughed as he finished his comment.

As explained in the popular, 2013 book on pensions, ‘The Third Rail’, the number of workplaces (public and private) with pension plans in Canada declined from 46 per cent to 39 per cent between 1977 and 2010. Only 33 per cent of employees have defined benefits plans. Seventy five per cent of private sector workplaces have no pension plan. Among those that do, only 12 per cent of recipients have defined benefits.

The Canada Pension Plan pays a maximum of $12,150 annually. Benefits are determined by how much recipients pay in lifetime, workplace premiums. Premiums are 9.9 per cent of income to a maximum of $2,356.20 per year, matched by the employer.

There are two retirement benefit programs available to seniors. These are income tested and dependent on length of residency in Canada. Old Age Security pays a maximum of $551 per month, and the Guaranteed Income Supplement pays a maximum of $748 monthly for very low income seniors. 

Full CPP and OAS benefits are 40 per cent of an average wage-earning employees’ salary in Canada ($52,000 annually). Many pensioners receive less than full benefits.

The Harper government made two significant cuts to the Canada Pension Plan in 2012. It increased the age of retirement to age 67, effective in the year 2023, and it increased the penalty for those taking early retirement (available as of the age of 60). The penalty will rise to .6 per cent per month by 2016 for each month prior to age 65 (or 67 after 2023).

Surprisingly, the pension cuts in 2012 passed with barely a whimper of organized protest.

For years, trade unions and seniors organizations have demanded pension improvements. Last year, the NDP launched a public petition campaign calling on the government to introduce CPP increases. But we have not seen anything resembling the ‘grey power’ movement of 1985 that organized mass protests which forced then-Progressive Conservative Prime Minister Brian Mulroney to back away reducing inflation protection of the CPP and hinting at ending its universality.

In 2009 and 2010, momentum was building in the unions and among seniors’ groups to stage large, public protests in favour of CPP improvements. The Harper government of the day headed that off with vague promises to make improvements. In late 2010, the government ditched its promise and instead announced its dead-in-the-water ‘prpp’ plan.

Earlier changes to the CPP were made in the mid-1990s by the Liberal government of the day. As part of the massive cuts to social spending by the Liberals, then Finance Minister Paul Martin boosted CPP premiums from 5.6 per cent of salary to the current 9.9 per cent. He also gave the ok to begin investing a significant portion of the accumulated plan’s funds in the stock market.

Supplementary, defined benefits pension plans in Ontario and other provinces will be welcomed by most working class people as an improvement. But they are no substitute for significant improvements to the national pension plan.

What’s more, there are two damaging outcomes possible in the situation playing out in Ontario. One is that focus and attention is shifted off federal government responsibility to make desperately-needed improvements to the CPP. The other is that the Wynne government would create a very bad precedent by introducing a variant of the UK and federal government prpp  model.

The unions and the organizations of retired people should be engaged in a broad-based fight for an improved CPP. What better way to do this than to join that to a broader struggle to preserve postal services and reverse the cuts to unemployment insurance than now see only 37 per cent of unemployed Canadians receiving benefits.

Ontario political machinations

The Ontario Liberals pension initiative takes place as the three major political parties prepare for an election that could come as early as this spring. Wynne’s Liberals made another recent decision to appeal to working class voters by raising the minimum wage from $10.25 to $11 per hour. It had sat frozen for the past four years of Liberal governments.

The Liberals are looking to position themselves between the hard-right platform of the Conservative Party, including so-called ‘right to work’, anti-union legislation, and the tepid program of the New Democratic Party that is not very distinguishable from the Liberals.

But Wynne’s government is refusing calls from the activist campaign calling for a $14 per hour minimum wage. The committee she appointed last summer to study the minimum wage and which reported last month had no minimum wage earners on it.

One of the groups spearheading the minimum wage campaign in Ontario is the Workers Action Centre. It points out that a salary of $11 per hour is 16 per cent below the official poverty rate. The group is continuing to organize monthly actions across the province to press for $14 per hour.

For its part, the NDP has refused to commit to $14. (See also here.)

Pre-election jostling in the unions is opening rifts among its leaders, particularly over what weight to give to ‘strategic voting’. Significant numbers of union leaders what to see a lesser evil electoral strategy that would see the unions support the Liberals in ridings deemed unwinnable by the NDP.

This mirrors the failed strategy that the former autoworkers union (now merged into Unifor) has argued for years in Ontario and federally.

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