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%. This 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 movement’s proposal would increase employer contributions from 4.95% to 7.8%.

Conclusion

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 put this cost in perspective.