There are two accepted axioms in health care:
1. The older you get, the more health care you use.
2. Wealth is closely linked to health, or what policy wonks like to talk about as the “social determinants of health.”
It is therefore curious that the Federal government is stalling on reforms to the Canada Pension Plan (CPP), a situation that would improve the economic outcome of seniors and presumably also have an impact on their use of the health system in retirement years.
We know that most Canadians are without supplemental private pension plans.
It is estimated that even with maximum CPP earnings at $12,500 per year, the average senior would face a shortfall of $6,200 to meet their basic needs.
This demographic bulge in baby-boom seniors would also be contributing less to the economy in the future on such limited pension income.
Therefore, it is logical to improve the Canada Pension Plan – a defined benefit pension plan – to raise the bar for most seniors so they don’t have to live out their “golden” years in poverty.
An enhanced CPP would have to be paid for jointly by employers and employees.
The good news is that Canada spends less than most of its OECD counterparts on social security and payroll taxes at 5.5 per cent of our overall economy – not that it ever dawns on the ever aggrieved Canadian Federation of Independent Businesses that comparatively they already have it good.
One such scenario worked out by Finance Canada would increase pension payouts from 25 per cent of the average industrial wage to 35 per cent and increase maximum pensionable earnings to $75,150 from $50,100. The cost of doing that would still leave Canada at the bottom of the G-7 industrialized nations in social security spending at 6.3 per cent of GDP.
Discussion has centered around phasing in such improvements over five years to minimize the impact on a fragile economy.
While Canada boasts stronger economic growth than most other G-7 nations, Federal Finance Minister Jim Flaherty argues it is not yet strong enough to make this small adjustment.
Finance Canada states there could be a very small and short-term impact on the economy, potentially reducing employment by 0.1 to 0.3 per cent. By increasing CPP benefits it would in the longer term “bring economic benefits by increasing retirement income and consumption possibilities for seniors.”
While the Federal government would stand to lose more in taxes as a result of higher CPP premiums, it would also pay out less as higher earning seniors would no longer qualify for the Guaranteed Income Supplement.
What nobody is estimating is how much would also be saved in health care costs by an aging population that is more economically able to look after itself.
Support for an enhanced CPP is strong. The Province of Ontario supports such reforms, as does Canadian Association of Retired Persons (CARP). Labour is proposing Flaherty go further and double the CPP payouts.
In a manner typical of the Harper government, Flaherty is insisting on unanimity from the provinces to enact such changes even though he is only obliged to seek the approval of two-thirds of the provinces representing at least two-thirds of the Canadian population. Flaherty knows that his ideological soul mates in the Saskatchewan government are far more concerned about shilling for the business community than protecting the income of seniors.
The other contradiction is that while Flaherty professes to be so concerned about the economic impact of improving the CPP, he has no problem about the impact of public sector austerity on Canada’s economy, encouraging the provinces to erase their deficits (and shed jobs) while he does the same.
OPSEU Diablogue 