This column part of The Globe's Wealth Paradox series – a 10-day in-depth examination of our growing income inequality and the best ideas available for improving upward mobility for all.
Across Canada, a divide is growing in our cities and provinces. Temporary, contract and part-time positions are accounting for a greater share of the workforce, while permanent, full-time positions are declining. These forms of precarious employment are less likely to provide employment benefits, less likely to offer a stable income and put significant strain on workers’ ability to plan their lives and make ends meet.
In the past, citizens have relied on the standard employment relationship to provide goods like pharma care and a registered pension plan. As fewer workers are provided these entitlements, a widening gulf has emerged between workers afforded these benefits through their jobs and those who are not.
Our youngest workers, particularly those under 30, most often find themselves doing precarious work. They are entering an increasingly tight job market, with lower salaries, less job security and fewer benefits than the cohorts ahead of them. They are the generation that will be asked to service the public deficits and may not have access to the full array of public services currently on offer .
This growing divide prompts the need for a new social contract and the creation of a new middle class. In the post-war era, Canadian public policy created a social contract that guaranteed certain provisions to all citizens and workers, including universal health care, unemployment insurance and retirement benefits. It is clear that these are no longer enough to secure a sound quality of life for all Canadians, particularly later in life. Too many families are having to fund prescriptions out of pocket, while many workers nearing retirement age are faced with a significant decline in living standards as they have little to no pension secured.
A new social contract would build on many of our most treasured public policy feats. Instead of exempting outpatient pharmaceuticals from public health insurance plans, a new social contract could incorporate them into existing social programs. This would ease the financial pressure on many low-to-middle income workers and improve health outcomes by ensuring all individuals and their families have equal access to these benefits. It would also lower total drug costs as governments would be able to buy drugs in bulk for a larger population.
Retirement benefits should also be expanded to mitigate the effects of poor retirement savings and lack of private sector pension provision. In the absence of a consensus on how to expand the Canada Pension Plan (CPP), several provinces, including Ontario and Saskatchewan, are already taking steps to address this by creating their own supplementary pension plans . Saskatchewan’s current policy provides the best option by creating a voluntary, defined contribution pension plan that applies to any worker without an employer-sponsored pension plan. This would achieve similar economies of scale as the Canada Pension Plan, but would not act as a payroll tax on employers.
There is little doubt that this new social contract would come at a considerable cost to government. It may require governments at all levels to reconsider the existing benefits scheme. However, as social mobility decreases and intergenerational debt increases, it may be time to recognize that these are necessary investments for our collective prosperity.
Jamison Steeve is executive director at the Martin Prosperity Institute and the Institute for Competitiveness & Prosperity, two of Canada’s leading think tanks.