February 20, 2015—A new survey of business owners from the Greater Oshawa Chamber of Commerce (GOCC) and the Ontario Chamber of Commerce (OCC) shows that the implementation of the Ontario Retirement Pension Plan (ORPP) could have negative consequences for the Ontario and Durham Region’s economy.
The survey indicated that only 26 percent of businesses in Ontario believe they can shoulder the financial burden associated with the ORPP. If faced with mandatory increased contributions under the ORPP, 44 percent of surveyed businesses indicate that they would reduce their current payroll or hire fewer employees in the future.
In light of these findings, the Greater Oshawa Chamber joined a coalition of nearly 50 chambers of commerce and boards of trade from across the province calling on the Government of Ontario to reconsider its proposed approach to boosting Ontarians’ retirement savings and assess the extent to which the implementation of the ORPP will negatively impact Ontario’s economy.
“Businesses consistently tell us that they cannot afford this new, mandatory cost on top of rising electricity prices and other cost pressures,” says Allan O’Dette, President and CEO of the Ontario Chamber of Commerce. “To provide clarity to the business community and the public around the potential impact on jobs, investment, and the broader economy, the government must conduct a comprehensive and publicly available economic analysis of the new pension plan before it moves forward with implementation.”
The ORPP, which aims to boost Ontarians’ retirement savings, will require employers to match employee contributions to the new plan. Employers that provide defined benefit pension plans will be exempt from these contributions, but the majority of employers in Ontario will have to pay into the ORPP, regardless of the retirement savings plans they currently provide to their employees.
The Chamber submission expressed a collective concern that the government’s proposed approach to tackle the so-called “undersaving challenge” could have unintended negative consequences for the province’s economy.
In the submission to the Government of Ontario, the coalition pointed to evidence that the vast majority of Canadians are on-track to maintain their standard of living in retirement and that the ORPP will punish employers and employees who are already contributing to their secure retirement future through non-defined benefit workplace retirement savings plans.
In particular, the submission questioned whether a blanket solution like the ORPP is the most effective means of boosting retirement savings for the minority of Ontarians who need it most. Recent analysis from McKinsey & Company and others suggest that a more targeted approach that focuses specifically on undersavers would be most effective.
“Durham Region’s economy is still in recovery,” says Bob Malcolmson, CEO & General Manager of the Greater Oshawa Chamber, “with youth unemployment in double digits in the region now is not the time to introduce a new cost to doing business.”
The Chamber is also worried about the cumulative impact that the ORPP, when combined with other new costs, will have on Ontario’s business climate and job creation. Over the next two years, Ontario’s electricity rates are expected to rise by 16 percent. Ontario is set to put a price on carbon, which will impact employers. Ontario’s WSIB premiums are among the highest in the country.
With these factors in mind, the submission makes two broad recommendations:
“The ORPP is a blanket solution to a problem that requires a targeted approach," adds O'Dette. "A better approach would be to target the minority of households that are undersaving, like Pooled Registered Pension Plans.”
The Chamber is concerned that the ORPP could cause employers to reduce their contributions to offset the new cost, or scrap their existing plans altogether.
“This should not be about forcing individuals to save for retirement on the backs for small business,” adds Malcolmson, “the young people starting out are saving what needs to be addressed is educating the people in their 30s and 40s to save for retirement.”
The survey was conducted by the Ontario Chamber of Commerce in late January and early February 2015 and had 1,136 respondents.
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