The federal government knew a long time ago that the Canada Pension Plan was in trouble.
People are living longer and creating a greater strain on the limited resources of the CPP, and without significant changes, there will come a time when the money just won’t be there for those who really need it to live comfortably in their retirement years.
P.E.I. Treasurer Wes Sheridan said it’s a Canadian Pension Plan commitment that the provincial government is keen on and will continue to push for down the road. Federal Finance Minister Jim Flaherty rejected that idea last year so the provinces of Ontario, Manitoba and P.E.I. have banded together to move on their own.
Theirs would involve a 1.5 per cent contribution coming from the employee and 1.5 per cent contribution coming from the employer. It would be a two-year phase-in notice period then a three-year phase-in bringing the entire amount up to 1.5 per cent over five years.
The plan does have merit because it would prove a much-needed boost to the income level of retired persons.
It has merit because not all retired workers have the luxury of a company retirement plan that has the capability of meeting their needs when they leave the work force, particularly in a province like Prince Edward Island where wages are low, jobs are scarce and where much of the work is seasonal and two of the main industries are farming and fishing.
The catch-22 comes in the business community where the increases are focused.
Business in the province is going to grow it needs to be able to employ more workers. But an additional payroll tax, such as the one Sheridan speaks about, may throw a roadblock up to creating more jobs.
Jonathan Greenan, president of the Greater Summerside Chamber of Commerce, put it this way: “My own view is that the long-term solution for some of the struggles that we’re having here in Prince Edward Island is to increase overall employment levels which requires us to increase private sector profits. I’m not sure that this measure accomplishes that objective, and in that sense, doesn’t get us to our long-term goal, from our view.”
The federal government needs to take the lead role in ensuring all Canadians can retire to a respectful way of life and not download this responsibility onto the provinces. They need to come up with a plan that doesn’t impede the growth of small business, the one sector that generates wealth in the economy, particularly in provinces like P.E.I.
Ottawa needs to examine its own house and determine what importance it puts on Canadian retirees and make them a priority in their financial spending decisions.