CFIB on CPP: A Reality Check
On Monday, Catherine Swift of the Canadian Federation of Independent Business (CFIB) was on TV expressing outrage that doubling the Canada Pension Plan (CPP) would entail mandatory contributions equal to 20% of earnings.
Her logic is that a self-employed person currently contributes 9.9% of pensionable earnings. That figure doubles to 19.8%. ThisÂ argument misses a couple of points:
Employees Pay Half
While a self-employed businessperson contributes 9.9% of their own pensionable earnings, a business with employees contributes only 4.95% of their pensionable earnings. The employees contribute the other half.
CPP Premiums Would Not Double
Because additional premiums would be invested to finance additional benefits, doubling future benefits would entail less than a doubling of premiums. As noted in publicly-available documents, the labour movementâ€™s proposal would increase employer contributions from 4.95% to 7.8%.
For an employer, CPP premiums would increase by 2.85% (i.e. 7.8% – 4.95%). I am not surprised that the CFIB would lobby against any additional cost for business. But it is important to putÂ this costÂ in perspective.