It wasn’t the deal many seniors, unions and labour groups were hoping for. Canada’s finance ministers left their meeting in Meech Lake, Que., with a simple promise to pursue the conversation in June.
But the mere fact that pension reform is back on the political radar screen is an accomplishment, given Jim Flaherty’s reluctance to increase contributions to the Canada Pension Plan (CPP), which provides for the old days of Canadian workers with guaranteed pension benefits.
You can credit the political change in Quebec, which has shifted the balance of power in the federal-provincial discussions on the thorny pension issue.
Like Alberta, Quebec had strong reservations about any enhancement that would translate into higher contributions for employers and employees – both groups equally fund the CPP and its Quebec equivalent, the Régime des rentes du Québec. But under the left-leaning PQ, Quebec is now aligning itself with its Ontario neighbour.
Queen’s Park has long campaigned for a more generous pension system, given that Canadians are not saving enough for a slew of good and not so good reasons. Caring for an aging population will represent a huge financial burden for the provinces down the road.
The PQ government has also changed the way the province is preparing itself for a wave of retirements that will have a profound impact on the province’s economy. But Quebec’s recent about-face on “experienced workers,” the euphemism the government uses for workers aged 65 and up, is a lot less auspicious than its new openness toward an enhanced pension fund.
Finance Minister Nicolas Marceau believes it is important to keep able and motivated Quebeckers at work longer than before through incentives. “We will have to take action to encourage our experienced workers to keep their positions, while discouraging people to leave the work force early,” Mr. Marceau said in a Radio-Canada interview on Monday.
His recent budget, however, tells another story.
Mr. Marceau’s predecessor, Raymond Bachand, introduced measures in the 2011-12 budget that were aimed at keeping employees working. The government offered a $3,000 tax credit on personal income, which was to rise to $10,000 by 2016. To encourage employers to hire workers 65 and over, the province offered a payroll tax rebate whose maximum per worker was to reach $1,000 in 2016, up from $400 in 2013.
What did Mr. Marceau do? In his first budget, he capped the tax credit on income at $3,000, a decision that will generate $100-million in savings over three years. And he deferred “for an indefinite period” the payroll tax rebate, which is the French equivalent for “Forget it!” The payroll tax rebate was to cost the government $50-million over two years.
In this era of austerity, it is difficult to argue against budget cuts. Yet Quebec is a distinct society in more ways than one, as it is facing a particularly grim demographic trend.
While the majority of OECD countries is faced with an aging population, the problem is acute in Quebec. By 2014, the province’s population aged 15-64 will actually start to contract.
Quebec’s labour pool will shrink 3.3 per cent between 2010 and 2030, expects the Institut de la Statistique du Québec. In comparison, the province’s closest trading partners, the United States and Ontario, will see their labour pool grow 10 and 12.3 per cent, respectively, in the same period.
Quebec will only have 2.9 workers per retiree in 2026, as opposed to 7.9 workers 40 years ago.
Compounding the problem, Quebeckers retire close to two years earlier that other Canadians.
The consequences are manifold and go well beyond the waste in talent. The pressure on the Régie des rentes du Québec (RRQ) is intense, especially since the repercussions of the Caisse de dépôt et placement du Québec’s catastrophic 25-per-cent loss in 2008 are still being felt. Contributions to the RRQ are already set to increase in 2017 so that the pension fund won’t start depleting itself by 2039.
And the expected labour shortages, which are already felt in a number of industries, are threatening the province’s economic growth.
If the United States is facing a fiscal cliff, Quebec is facing a demographic cliff – with a similar urgency to act.
Unfortunately, this is a faceless cause. There are no rating agencies to put a gun to the government’s head. No mass protests in the streets of Montreal to pressure the government into action. And no votes to be won, likes the ones highly subsidized daycare spaces can attract.
So while Mr. Marceau is now open to a more generous pension system, Quebec continues to age ungracefully.Report Typo/Error