Critique of the Canada and Quebec Pension Plans Reforms Report

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It is imperative to note that the Canadian and Quebec pension plans (CPP and QPP) were originally meant to take care of supplementary savings bearing in mind that saving skills have been a major challenge among several Canadians.

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Those who are agitating for CPP and QPP reforms must be missing an extremely critical point in their argument. They seem to be laying a lot of emphasis on one side of the debate. It is obvious that ithe f these pension plans are revised upwards, pension contributors will dearly suffer.

The increments will indeed not favor workers who are already under the burden of the reduced wage bill. If there was a need to boost the savings of workers, the most important step to take would be to improve the average earnings of the same workers by a significant margin.

Any attempt to double or even slightly increase the current pensionable amount will be injurious to the pension contributors.

In 2010, CFIB conducted a research study on the likely impact of increasing both the CPP and QPP ratios. It was found out that such an attempt would inevitably impede job growth rates.

It is prudent to note that if the rate at which employment is growing is slowed down, then the entire economy will equally be affected. Any other economy that seeks to advance has to devise viable methods of boosting job growth.

In addition, a simple cost-benefit analysis of doubling the current pension contributions will reveal that the net effect will be retrogressive towards the well being of the entire economy.

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In other words, the economic benefits of increasing the current pension levels will be lower than the associated losses.

The wage rates will also be affected if pension contributors are compelled to save more than the current rates.

Even though the report has not tabled any conclusive evidence of how future wages and salaries will be affected, it is definite that gross reduction in income will be experienced by workers since there are no wage or salary increments that will be meted on their net pay.

In addition, employees are also remitting other mandatory levies to the government. Remittances in form of taxes cannot be adjusted in favor of employees so that they can save more. Therefore, proponents of this reform are hardly in touch with the reality that workers face on a daily basis.

The report notes that the 10-10-10 proposal is quite lenient compared to the earlier proposed plan, it is vital to note that the repercussions are still the same. None of the proposals is favorable to the pension contributors since their income levels will still have to go down.

Perhaps, the report could have drawn clear comparisons between the past and current proposals on the pension plans with the aim of justifying how pensioners will be affected in case any of them is duly implemented.

Nonetheless, it is indeed factual that the income levels among various individual contributors will solely depend on the dollar costs as documented in the report. This does not, however, lower the current premiums that are being paid to the national government’s pension scheme.

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It implies that the net burden of having to contribute additional premiums will still rest with employees. Needless to say, it would be prudent if the report could have given a quantitative analysis of the projected impacts on benefits and the total premiums collected.

Even though the arguments on the aforementioned two aspects seem to be sound, there is a lack of solid proof that implementing the current proposals will indeed jeopardize the expected benefits.

The public attention has also captured by the fact the 10-10-10 proposal may increase the benefit level by about forty percent. If indeed such a huge margin of benefit will be realized when the proposed pension structure is implemented, then this report may be missing some vital data.

However, this does not refute the fact that pension contributors will still have to be affected in terms of reduced earnings.

Proponents are largely focusing on the end benefits after retirement without considering the current impacts. The report should have explored the expected future benefits instead of completely refuting the proposals.

One of the strengths of the report is that it earlier made use of a focused macro-econometric modeling method in exploring the likely effects of increasing the premiums payable to QPP and CPP.

The model also investigated the benefits that would be accrued if the initial proposal could have been implemented. However, it laid a lot of emphasis on the past proposal which was not similar to the current one.

If such a model was applied in parallel to the 10-10-10 proposal, it would have given a vivid picture of the impacts of both the QPP and CPP in terms of increased premiums. Both the spin-offs and phasing in associated with the current increments are quite complex in terms of implementation.

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In other words, the macro-econometric model provided the most fundamental starting point towards understanding both the benefits and costs of adopting and impending the proposed additions.

The report also documents that employers will be equally affected. This cannot be ignored at all. It is inevitable that employers will also have to contribute towards the increased premiums as required by employment statutes.

If there will need to employ more workers in the future, most employers will find it difficult to do so largely due to the high costs associated with remittance of additional premiums.

At this point, the proposed reforms should be vehemently rejected because if they are put into effect, the generation of new employment opportunities will be brought into a halt.

Even though the report has not justified this claim, it is obvious that the net impact will occasion declined job opportunities at the expense of growing the economy.

On a final note, it is pertinent to emphasize that the report has various limitations even though the arguments presented are justified. For instance, the report lacks a thorough analysis of the macro-econometric model especially in regards to the 10-10-10 proposal.

The description given using the aforementioned model may not fully convince the audiences who are not familiar with such type of econometric analysis. Besides, the proposed reforms tend to focus on future benefits especially after retirement.

The beneficiaries, in this case, are expected to be those indicated in the profile of the contributor. The report does not offer a balanced argument in terms of the benefits that may be accrued after retirement.

Even though the current contributors will be negatively impacted, the report should have discussed the alleged 40% benefit that may be enjoyed if the current premiums are raised.

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IvyPanda. (2020, March 5). Critique of the Canada and Quebec Pension Plans Reforms. https://ivypanda.com/essays/critique-of-the-canada-and-quebec-pension-plans-reforms/

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"Critique of the Canada and Quebec Pension Plans Reforms." IvyPanda, 5 Mar. 2020, ivypanda.com/essays/critique-of-the-canada-and-quebec-pension-plans-reforms/.

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IvyPanda. (2020) 'Critique of the Canada and Quebec Pension Plans Reforms'. 5 March.

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IvyPanda. 2020. "Critique of the Canada and Quebec Pension Plans Reforms." March 5, 2020. https://ivypanda.com/essays/critique-of-the-canada-and-quebec-pension-plans-reforms/.

1. IvyPanda. "Critique of the Canada and Quebec Pension Plans Reforms." March 5, 2020. https://ivypanda.com/essays/critique-of-the-canada-and-quebec-pension-plans-reforms/.


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IvyPanda. "Critique of the Canada and Quebec Pension Plans Reforms." March 5, 2020. https://ivypanda.com/essays/critique-of-the-canada-and-quebec-pension-plans-reforms/.

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