Retirement proposal could set workers back thousands per year, economist says
The wallets of workers in Ontario could bleed thousands of dollars each year if the government’s proposal for a provincial pension plan gets the go-ahead, according to a new report from the Fraser Institute.
Released by the public policy research organization on May 28, Evaluating the Proposed Ontario Pension Plan noted the true cost of a provincially-regulated retirement scheme could cost up to $3,420 a year.
According to Philip Cross, an economist with the institute and former chief economic analyst for Statistics Canada, employers will have to cut future wages or other benefits to meet the demands of the mandatory pension plan.
“Unless there’s an increase in productivity, employers can’t suddenly increase compensation to employees unless they raise prices in an increasingly competitive marketplace,” Cross explained. “However you slice it — lower wages and less hiring, or higher prices at the till — it’s bad news for Ontario workers.”
After the federal government balked on expanding the Canada Pension Plan (CPP), Ontario’s Liberal government decided to forge ahead alone, and introduced a framework for a provincial pension plan earlier this year.
Dubbed the Ontario Retirement Pension Plan (ORPP), the plan would require workers to contribute 1.9 per cent of their earnings into a retirement plan, which their employer would match. This, coupled with mandatory CPP contributions, would cost Ontarians thousands of dollars, Cross said, adding the plan is based on the faulty assumption that workers don’t save enough for retirement.
“Its sheer size and concentration will leave the fund vulnerable to a spectacularly poor investment decision…potentially offsetting any gains made by low fund management costs,” Cross added.
In order to bolster the nest eggs of Ontario’s workers, Cross said the government should instead foster strong income growth, which allows both spending and saving to increase.
