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Forced Savings: The hidden costs of expanding public pensions

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Macro-econometric analysis of the CPP/QPP expansion

 

For better or worse, the Canada and Quebec Pension plans will start undergoing changes in 2019 aimed at expanding the levels of benefits over the next 40 years, balanced out by premium increases over the next seven. Although the long-run net economic impacts had been always expected to be neutral, there is good reason to question the federal government’s assessment that the enhancements would only have minor negative impacts on short-term employment and GDP.

New macro-econometric analysis shows that the initial effects are likely to be four-and-ahalf times greater than what the Department of Finance indicated publicly. Rather than temporarily constraining employment by only 0.07 per cent from status quo projections in the mid-2020s, the hit is more likely to be negative 0.32 per cent—equivalent to 64,000 jobs.

In addition, our analysis shows the government could have tempered the ultimate beneficiaries of the pension benefits—rather than split the costs with employees and employers.

Read the full study: Forced Savings: the hidden costs of expanding public pensions