CPP Promises—More Heat Than Light

The noise bylaw passed by Halifax Regional Municipality’s Council has caused quite a fracas. None of the players come out of it looking good.

Communities throughout Nova Scotia need more housing, as quickly as possible. That is what happens when population grows by 2% or more. Halifax gets at least half of that growth—more than 10,000 people per year.

There is a constant tension between the desire of existing residents for the peaceable enjoyment of their homes and the noise that inevitably accompanies heavy construction.

The fracas began with a recommendation by HRM staff that the noise bylaw be amended to disallow rock breaking on weekends. This should have been harmless enough; it is the noisiest part of new construction.

Builders typically take a pause on weekends anyway. Most of those that currently work through the weekend might need an extra week or two to finish their rock breaking, the rare exceptions being the convention centre or the rare project that begins with the demolition of a substantial existing building.

On its own this may not have stimulated too much reaction. But council chose to also reduce the hours that building noise could occur. They begin at 7 AM, and council voted to stop work at 8 PM instead of 9:30. This might affect a minority of projects. Most building sites stop work by 5 PM or earlier.

Duncan Williams, president and CEO of the Construction Association of Nova Scotia, claims the new rules would be devastating to the construction industry. For big projects, he predicts costs could shoot up by 15-20 percent and construction could take six months to a year longer to complete. He seems to believe that construction workers would be demoralized that they can only work 13 hours a day instead of 14.5.

Working that long every day would entitle workers to time-and-a-half overtime pay, so it is hard to understand the assertion that cutting hours would add to cost. Repeated requests to the association to explain how Williams reached his conclusions went unanswered.

Municipal Affairs and Housing Minster John Lohr introduced, without consultation with the mayor or council, legislation that gives the minister the authority to nullify any HRM bylaw in whole or in part. He was quoted as saying that HRM’s changes to the noise bylaw could add up to two months to a two-year build, wouldn’t reduce the noise, and would add to the shortage of skilled trade workers.

The two-month delay calculation is overstated unless the project would otherwise have worked the full 14.5-hour day from beginning to end.

A knowledgeable source in the building trades was asked about adding to the trades shortage. He strongly disagrees: “That makes no sense at all. No one is sitting home that wants to work. To suggest workers are going to leave to go west because they can’t work till 9:30 at night? Who wants to work 14.5 hours a day?”

To no one’s surprise, the mayor and council were deeply upset. Councilor Waye Mason says staff can make exemptions for rock breaking not near residences and have already provided dozens.

He cites, as an example of those hurt by construction noise, a resident near Pepperell and Preston streets who can expect to have construction near her for 10-12 years. The weekend exclusion for rock breaking makes sense for her but the weekday limit on work will be of minimal benefit. Very few projects are active after 5 PM, let alone 8.

Council’s decision to reduce weekday hours in addition to the rock breaking limitations proposed by staff was ill-considered. The province’s response is like using a ten-ton truck to deliver a pizza. The one redeeming feature is that the authority to annul in whole or in part only exists for the first six months after the bylaw is in force, and has not happened so far.

The province and the municipality have a shared goal of rapid population growth. HRM estimates of 525,000 residents by 2027, growing to 650,000 in the following ten years. Unlike the number in last spring’s provincial budget, that is consistent with the provincial goal of doubling by 2060.

A better example of how they should work together is the Deloitte Housing Development Barrier Review. It identifies the need to complete 7,600 units per year between now and 2027, compared to the historical rate of only 3,000 per year, and prioritizes steps needed to accelerate the pace.

The panel that sponsored the report is a creature of the province but HRM is heavily involved. Cooperatively pursuing the recommendations represents the best chance to produce enough housing.

In the meantime, the two governments must have an effective working relationship. For that to happen they need to stop surprising each other.

Voters trying to understand the various positions being advocated for the Canada Pension Plan have every reason to be confused.

The initial incarnation of CPP required only 3.6% of pensionable earnings as contributions, and provided benefits to people well before they had been earned. This was eventually repaired in the nineties; otherwise, the plan would have gone broke.

Today’s CPP provides a pension at 65 of up to $12,780, for which employees and employers annually contribute a combined 9.9% of pensionable earnings. It is simple and cost-effective, but even when combined with Old Age Security (OAS) it does not provide an adequate pension.

After fruitless discussions with the federal government, Ontario proposes to go it alone. Details are not yet finalized and the scheduled start is not until 2017, no doubt reflecting a hope that federal policy will change and save them the trouble. Ontario’s plan, mandatory only for those not already in a pension plan, would require a worker to contribute for 40 years in order to receive an unreduced benefit. The only examples provided on the Ontario website are for employees who work the full 40 eligible years.

The Canadian Labour Congress (CLC) has one of the many proposals to increase the existing CPP. The CLC loves to quote a 2014 Nanos survey in which 88% of Canadians support “increasing the benefits Canadians receive through the Canadian Pension Plan.” Of course the survey does not mention the corresponding need for a substantial increase in contributions, nor the 40 year wait for unreduced benefits. (The same survey makes the shocking discovery that most Canadians would like lower taxes.)

The strongest support for improving benefits was from the oldest respondents, who would get only small benefit from the CLC proposal. There is one group who should actively oppose it. Low income workers are typically able to receive the Guaranteed Income Supplement when they retire, in addition to OAS and a small pension from the present CPP program. An increase in CPP will be largely offset by reductions in GIS. This needy group will be paying something for nothing.

As a result, some proposals for reform, otherwise similar to that of the CLC, do not require contributions or provide benefits on earnings below $25,200. These proposals have considerable merit as a cost-effective and comprehensive improvement to retirement savings for Canadians. 

But that virtue will be much clearer to actuaries and economists than to voters. Most Canadians, given a clear and detailed understanding of proposed changes, would be much more tepid in their enthusiasm for a program that takes so long to mature.

Hence, the rather vague communications from the three political parties. One can search their websites in vain for any indication of what they have in mind.

The Conservatives have argued, incorrectly, that CPP contributions are just another tax. Unlike unemployment insurance, the CPP funds have for five decades been operated entirely outside of government accounts and are only used to pay CPP beneficiaries. Having been opposed to any change, the Conservatives now say that they are willing to consult Canadians about a possible optional program.

How that might work is anyone’s guess. It appears to be just creating a different RRSP opportunity. Are there limits on how much can be contributed? Is it optional for employers too? Are contributions locked in until retirement as is the case for the base plan? This “plan” does not offer much.

The Liberals favour a mandatory program. Liberal Critic for Seniors John McCallum points out that changes would require the agreement of two thirds of provinces with two thirds of the population, so an agreement would have to be negotiated. Their position would tilt toward a large amount of excluded earnings to protect low income earners. Good.

More troubling is that they are not committed to adequate funding, which suggests that they might , as happened with the original CPP, cheat young contributors by paying older ones more benefits than their contributions have earned.

The NDP, which might be expected to follow the CLC recommendation, is so far silent about what exactly they have in mind—although it will clearly be a mandatory program. Caucus Press Secretary Greta Levy promises that “The exact figures on CPP will be announced before the election as part of an NDP government’s approach to retirement security.”

So voters actually trying to understand this complex issue don’t have much to work with.

The Conservatives are trying to fog the issue by musing about a no-hoper voluntary plan.

The Liberals appear to prefer a mandatory plan, but have not drawn any lines in the sand about how it must look. They may be willing to consider an irresponsible funding choice, or to be pushed that way by the provinces.

The NDP say they have advocated a CPP expansion for years—as well as strengthening GIS and reverting the age of OAS to 65. This adds to a growing list of expensive promises with no indication of how they are to be paid for.

Today’s CPP plan is appropriately funded and provides a cost-effective but modest portion of retirement funding. A long term reform is possible that would allow that portion to become more substantial.

The Conservatives have no real intention of making any changes. The Liberals and NDP say they do, but if they choose a wrong model they could do more harm than good.