TRUDEAU’S CPP INCREASE FOR WIDOWS MUST BE AN APRIL FOOL’S JOKE

 

TRUDEAU’S CPP INCREASE FOR WIDOWS MUST BE AN APRIL FOOL’S JOKE

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice – financialfairnessforsingles.ca).

Liberal Prime Minister Justin Trudeau’s CPP increase for widows must be an April Fool’s joke except it is not an April Fool’s day.

Justin Trudeau in one of his campaign promises has promised astounding 25 per cent increase to the Canada Pension Plan (CPP) for widows or widowers and would receive up to $2,080 in additional benefits every year with the increased survivors’ benefits under the CPP and Quebec Pension Plan (QPP).

Trudeau said losing a partner is one of the hardest things to endure, and this added support will help during the period of grief.  “Seniors have built the Canada that we know and love today. And they deserve to enjoy their golden years to the fullest,” Trudeau said “Our parents have worked so hard and sacrificed so much to give us a good life,” Trudeau said.  “Once they get to retirement they shouldn’t have to worry about their savings running out.”

Apparently the only persons who experience grief and/or who have worked so hard  and therefore deserve more are the married and married parents.

Apparently this would take effect when person is widowed but at what age?  (Updated October 1, 2019)

WHO IS INCLUDED AND WHO IS NOT

Included:

Married seniors with and without children who have deceased spouses and can check off that magic box ‘widow’ on their income tax forms.

Excluded:

Singles never married, no children

Singles who have adopted or are parents of children (sometimes willingly or unwillingly through horrible circumstances)

Divorced/separated persons with and without children

Common law persons with and without children – are they considered to be ‘widowed’ or just common law?

MOST PENSIONS BENEFIT MARRIED THE MOST

At present time, the CPP plan already benefits married the most.  Singles who have worked for forty years while contributing to CPP can die at one day after the age of 65 and receive only the flat rate death benefit of $2,500.  This amount has been in place for many years, is not indexed for inflation and doesn’t begin to cover funeral costs.  Their entire lifetime CPP contributions except $2500 will be forfeited without any benefit to the estates of single persons.

Combined survivor and retirement pension at age 65 in 2019 already equals $1,154.28 for both widowed and singles.  Why does Trudeau believe widowed should receive more CPP benefits and have better lifestyles than singles?  After all widowed are now ‘single’ and should have to live the same frugal lifestyle of many singles.

Public and private service pensions are taxed, but both spouses will be able to pension split and maybe receive less OAS clawback while one spouse or both spouses are receiving pensions.  There also is the possibility of receiving multiple pensions – surviving spouse of the deceased employee will receive pension to which he/she has not contributed as an employee plus receive his/her own pension.  With 25 per cent survivor CPP increase this is just another example of compounding of benefits on top of benefits for the wealthy and the married, both in married and widowed state (regressive tax expenditures).

Elizabeth May, Green Party applauds social justice but has lobbied to repeal legislation that denies pension benefits to spouses who have married after the age of 60 or retirement even though these newly married spouses haven’t contributed one dollar to that pension plan.  Now as widowers they will also receive a whopping additional 25 percent CPP bonus at age 75 after being married for only 15 years or less.  (Many pension plans have this clause for newly married elderly persons in their pension policies).

CONCLUSION

Where is the critical thinking on the part of politicians? Do they really think all Canadians are stupid and can’t do the math?  Which political party should one vote for when they all are like ‘pigs at the trough’ making unrealistic vote getting promises that benefit wealthy and married the most and don’t include Market Basket Measure and declaration of assets in financial formulas?  Where are the Elizabeth Warrens’ of the Canadian political world who have financial formulas that provide social and financial justice for all, not just the wealthy and the married?

Only the married at the time of being widowed would ever get an astounding 25 per cent CPP widow pension increase.  The Canadian senior population is not made up of just married/widowed persons.

Reader opinion letters in newspapers on this subject are interesting to read.  They are mostly slam Trudeau or present a sense of entitlement by the married with no critical thinking of how the rest of the population will be affected..  For example, one of the few very comments about persons not able to benefit like LGTB couples, the comment was “a spouse is a spouse is a spouse”.  In other words, everyone who is not married be damned.

Trudeau, who touts gender equality, indigenous people rights, etc., has flagrantly financially discriminating on the basis of marital status.

Selective socialistic privileging of election promises like this one only lead to the rise of anger and rising populism.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

FINANCIAL REPRIEVE FOR INFANT DEATHS (MOTION 110) DISCRIMINATES AGAINST OTHER FAMILY DEATHS

FINANCIAL REPRIEVE FOR INFANT DEATHS ((MOTION 110) DISCRIMINATES AGAINST OTHER FAMILY DEATHS (updated April 29, 2018)

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

The original opinion letter of this blog post was published in local newspapers.  Because only a certain number of words can be published in newspapers, please note that the content of this blog post has been expanded to include additional information.

MOTION 110 – FINANCIAL REPRIEVE FOR INFANT DEATHS

A Federal Conservative MP has submitted to Parliament via Motion 110 (motion-110) a proposed financial reprieve for parents who lose infant to death, particularly SIDS.  The motion proposes investigation to ensure parents do not suffer undue financial or emotional hardship due to government programming design, particularly from Employment Insurance Parental Benefits.  He believes these families are affected by “bureaucratic oversight”.

PARENTS OF INFANT DEATHS SHOULD NOT RECEIVE FINANCIAL PRIVILEGING

How is revoking of parental benefits any different than revoking of senior death benefits?  If payment of benefits continues after month in which senior is deceased, these benefits have to be repaid.

Regarding bereavement leaves, why should parents of deceased infants receive more than what other families receive in bereavement processes?  If employed, most Canadians (if they are so lucky to have these benefits) receive up to one week of bereavement leave.  Continued difficulties with bereavement process are dealt with through sick leave, then short term and long term disability.  These same benefits are not available to those who are not employed at time of infant’s death.

Conservatives continually want to cut taxes but keep adding benefits.  Who is going to pay for yet another benefit that purposely privileges special interest groups, lobbyists, families and married or coupled households over singles and the poor?  Many government programs do harm due to design.  One example, if privileged benefits are given to parents of infant deaths, then same privileging should be given to estates of singles never married, no kids who die, including tragic deaths, before receiving Canadian Pension Plan (CPP) benefits.  In just ten years of employment with maximum $2,500 annual CPP contributions or $25,000, deceased single person’s estate will only receive a $2,500 death benefit.  Total of $22,500 contribution is forfeited to be used by the survivors of married or coupled households.  Imagine what the total might be for forty years of CPP contributions (?$90,000)!  Singles face righteous anger and despair because of financial discrimination and social injustice heaped on them when they are made invisible by “bureaucratic oversight”.

It should also be noted that Employment Insurance (EI) contributions at approximately a maximum of $850 for 2018 is also forfeited by singles if they never use EI during their lifetime of being employed.  These contributions are used by parents for EI Parental Benefits and those who use EI benefits multiple times during their employment lifetime.  For ten years of employment it is possible that singles will forfeit up to $8,500 and for forty years up to $34,000.

LOST DOLLARS LIST TO DATE

The above two examples of contributions forfeited by singles show that amount can equal up to $90,000 (CPP) plus $34,000 (EI) for a total of $124,000.  Our LOST DOLLARS LIST TO DATE already includes potential forfetting of EI dollars.  CPP dollars will be added to the list (lost-dollar-value-list) with potential lost dollar value for lifetime now totalling approximately $643,000.

In article “Income support rates in Alberta continue to soar” (social-assistance-rates) a stunning, almost unbelievable, statistic states that in January, (2018) 69 per cent of recipients were individuals, 23.5 per cent one-parent families, 4.9 per cent couples and 2.6 per cent couples without children.  The income support program helps those who do not have resources to meet their basic needs, including food, clothing and shelter.  NINETY TWO (92) PER CENT requiring income support were singles and lone parent families!

CONCLUSION

Government and social policies need to include singles in the definition of family.  It is time for families to realize that their children even when they become adult single children deserve the same financial inclusion as children during child rearing years.

Singles face financial discrimination every day when they have to forfeit their financial contributions (which are required by mandatory government policies) to married or coupled persons with and without children.  This can total not just hundreds or thousands, but hundreds of thousands of dollars.

Conservatives (and perpetuated by Liberals) continue to talk only about the middle class and implement policies and benefits that benefit the middle class and the wealthy most.  They also continue to talk about ‘family’. However, their definition of family doesn’t include singles or poor families.

Conservative ideologues and far right Christians like Stephen Harper (Canadian Conservative Prime Minister), Conservative 40 year rulers in Alberta, and Sean Hannity (staunch supporter of Trump, derider of Obama and owner of 20 shell companies containing approximately 870 housing units) continue to gaslight about helping families, but instead, make themselves even richer.

Politicians need to be held accountable for formulation of policies that privilege certain segments of society such as married or coupled households with and without children over singles and poor families.  Motion 110 is an abject example of financial discrimination based on the emotion of infant deaths over tragic deaths of other family members.  Changes in financial formulas should include review of how changes will affect all members of families, not just married or coupled households with and without children.

As one segment of society, singles do not deserve to pay more and get less than their married or coupled counterparts with and without children.

The death of an infant should not be financially treated any differently than deaths of other family members.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

FEDERAL BUDGET TOPICS: MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

FEDERAL BUDGET TOPICS:  MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

The January, 2018 blog post addressed the first part of the budget proposal for a housing allowance as one solution to the housing crisis.  This blog post is the second part of a Federal Budget proposal as presented to a Conservative Member of Parliament .  

TANGIBLE VERSUS INTANGIBLE TERMINOLOGY OF MIDDLE CLASS AND FAMILIES

All political parties and society spew terminology of middle class (who-is-the-middle-class) and families ad nauseum.  Middle class and families are intangible terms.  Nobody, including political parties, can define what ‘middle class’ is and ‘families’ politically is an emotional term, often excluding singles (never married, no kids) from the definition.  Singles are basically invisible.  Many of the wealthy think  they are middle class.  For God’s sake, stop talking about the middle class (middle quintile) if you are not going to include the poor (bottom fourth and fifth quintiles), and replace ‘families’ with ‘household’ terminology.  The word “household” includes everybody, even singles.

INDEXED LIVING WAGE

Fact Check:  Recent Liberal revision of Canadian Pension Plan will increase CPP pensions for the wealthy, but not for the poor, because the minimum wage is not increasing proportionately to CPP increases.  Schizophrenic political financial formulas will ensure increasing disconnect between CPP increases and minimum wage because CPP is controlled federally, but minimum wage is controlled provincially.  TFSAs are indexed but not minimum wage.

LICO for 2015 (statcan.gc.ca/census-recensement/2016/ref/dict/tab/t4_3-eng.cfm) as defined by Statistics Canada shows Low Income Cutoff of $20,386 (equivalent to $11 minimum wage per hour for 35 hour workweek) for one person household, $24,811 for two persons household, $30,895 for three persons household and $38,544 for four persons household for large urban centre population centres 500,000 persons or more.

However, Living Wage studies show it is impossible to live a decent and respectful lifestyle on $11 minimum wage per hour.

The time has come for governments to stop handing out giveaways to the wealthy and surreptitiously making singles and poor families even poorer.  Implementation of an indexed living wage financial formula based on equivalence scales or Low Income Measure (LIM) would ensure greater financial fairness for all Canadians.

Nobody says this better than Andrew Coyne in excerpt from  “Why Minimum Wages are Harmful:  

‘Rather than blithely decreeing that employers must pay their employees an amount the rest of us think appropriate, and hoping it all works out for the best, the option is open to us as a society to put our money where our mouths: to finance a decent minimum income for all with our taxes – which unlike wages are not so easily avoided.  Maybe this latest increase in the minimum wage will prove less harmful than feared, but it is certain to be more harmful than the alternative:  a minimum income, socially guaranteed and socially financed.’

An indexed living wage could be financed if government benefit programs such as Guaranteed Income Supplement (GIS), Old Age Security (OAS), child benefit and pension splitting programs were replaced with a guaranteed living wage program based on equivalence scales or LIM along with elimination of financial loopholes such as Tax Free Savings Accounts (TFSA) for the wealthy.

SELECTIVE SOCIAL DEMOCRACY

All political parties continue to practice selective social democracy (selective) benefitting the upper middle class and wealthy most.

Supporting documentation:

https://www.statcan.gc.ca/pub/75-006-x/2015001/article/14194-eng.htm Changes in wealth across the income distribution, 1999 to 2012

Assets and wealth – In 2012, families in the top fifth income quintile held 47% of all wealth held by Canadian families (and the 5% of families located at the top of the income distribution held 21%). Families in the fourth quintile held 23%, while middle income quintile families in third quintile held 16%. The second income quintile held 10% of total wealth, while families in the bottom quintile held 4%.  (Fourth Quintile average wealth $641,000 and median wealth $388,200.  Fifth Quintile average wealth $1,300,000 and median wealth $879,100.)  In other words, about 40% of Canadian families held 70% of all wealth.  Governments keep talking about the middle class (20% of population), but never talk about the bottom two quintiles or 40% also known as the poor.

Many Canadians are fed up with the selective social democracy practised by both Conservatives and Liberals which benefit wealthy, upper middle class and married over single marital status persons and poor when they don’t need it.  The fourth and fifth quintiles or 40% of Canadians have assets and wealth over $750,000 (about $650,000 in 2012), yet they are able to still get OAS, max out TFSA accounts, pension split, and have huge inheritances while paying less tax.  Once again, the poor and many singles are being forced further towards poverty because they cannot achieve the same levels of wealth.  Self serving Conservatives accuse the Liberals of social democracy when Conservatives are guilty of the same selective social democracy.

When handing out benefits assets and wealth, not just income levels, need to be included in financial formulas.  Income levels are already a part of income tax returns.  It would be very easy to add question about assets, wealth and home ownership (i.e. five broad categories) in income tax returns and adjust financial benefits accordingly. (TFSA is an egregious program which benefits wealthy the most.  In thirty years and 3.5 percent compounded interest return, couples will have $600,000 in their financial portfolios, all tax free, and that is just TFSAs.  TFSAs are not included in income, so a person with a $600,000 TFSA can claim poverty and receive GIS and OAS.  A limit needs to be placed on TFSA assets and TFSA assets need to be counted as income).

Example of selective social democracy (boutique-tax-credits) – Family with four children has paid for house and one spouse working.  These parents in their thirties already have a net worth of $500,000.  They are able to receive Canada Child Benefits to the point where they can fully contribute to Tax Free Savings Account and increase their wealth.  Why is this family receiving child benefits without income plus assets and wealth being taken into consideration?  Poor families should be the only ones entitled to child benefits when they do not have the assets and wealth that this family has.

Poor families and singles have been made to be financial scapegoats and sugar-daddies to the upper middle class and wealthy by the Conservatives and the Liberals.

PROTECTION OF PENSIONS IN BANKRUPTCIES

If corporations and private enterprise cannot control their own financial affairs and shareholder greed during hard times and bankruptcies so that their employees are the biggest losers, then governments need to take responsibility to implement procedures and policies to offset employee losses (pensions).  And governments need to stop bailing out corporations like Bombardier.

“Workers Deserve Better” by Hassan Yussuff (federal-government-can-and-must-put-pensioners-first

‘The aftermath of 2008 financial crisis and recession has been littered with the shaken futures of those who once worked for seemingly unshakeable Canadian…..icons like Sears…..We hear lots in the news about these giants, but pensioners are losing out when smaller companies shut down, too.The lesson from every one of these examples is clear: workers and pensioners should not and must not be at end of the line when companies go under.

All of these workers have every right to feel betrayed by their former employers. Especially when they see executives walk away with rich bonuses, their careers, savings and retirements intact. But it isn’t just the companies who have betrayed these workers and so many thousands before them, it’s the federal government.

The federal government can and should be doing more for pensioners. For starters, it can support legislation being proposed by the NDP that recommends changing bankruptcy laws so that pensioners are first in line, not last, when it comes to paying down creditors. The same has been proposed by the Bloc Québécois.  Critics argue that putting pensioners first in line would leave lenders less inclined to help companies in crisis. But that argument isn’t good enough given how many people’s futures have been shattered. It also ignores the reality that lenders have ample resources to inform the risks they take. Workers, on the other hand, have no option but to trust that their employers won’t just walk away from their obligations to employees.

The federal government can and must ensure bankruptcy laws put pensioners at the front of the line. And it can go one very important step further: working with the provinces and territories to create Canada-wide mandatory pension insurance. Such a system would guarantee monthly pensions up to $2,500 whenever an employer with an underfunded pension plan, like Nortel or Sears, files for bankruptcy. It would be paid for by pension funds, a fair trade-off, given their tax-exempt status.

Pension insurance isn’t just about protecting pensioners. It helps companies with no prospects of recovery or needing temporary help. It’s not a new idea. The United States and the United Kingdom are among other countries with nationwide mandatory pension insurance. Today, in Canada, only Ontario has a mandatory fund. Created in 1980, it guarantees pensions to a maximum of $1,000 per month. That’s expected to increase to $1,500 per month.

Mandatory insurance is required for most of the important assets Canadians have. We are required to insure our vehicles, our homes, and even our jobs — employers must pay into Employment Insurance and Workers’ Compensation to operate. Mandatory insurance exists because some things are critical to protect. And as Canada’s unions have long argued, pensions are among the most critical assets anyone will ever have.

The federal government must demonstrate it has the courage to stand up for pensioners.  Thousands dedicate their working lives to trying to make the companies they worked for successful, and they deserve to be treated with respect and dignity, not told they’ll have no choice but to work through retirement and turn to government services for support.’

 

“Sears Canada Legacy:  private profits and socialized losses” by Jen Gerson (sears-canada):

‘While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million…..

Instead,…. Sympathies (are) reserved for the likes of….the 72-year-old retiree is now pulling shifts at Home Depot after working for 35 years selling appliances for Sears. Thanks to the nature of bankruptcy, his defined benefit pension is likely to be cut by as much as 20 per cent — although the lawyers and actuaries are still working out the details.

While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million. While its executives enjoyed dividends, they also accepted multi-million dollar retention bonuses in the company’s closing months.  Maybe those incentives weren’t quite high enough. In the end, they didn’t seem to do much good. Regardless, none of them now need worry about how to make ends meet…..

However, if fair-minded businesses wish to reduce the cries of more onerous regulation, stories like senior employees don’t play well. Every senior pensioner who must trek back to Home Depot in his twilight years is going to raise questions about whether or not treating pensioners as secondary to other kinds of creditors in cases of bankruptcy is a fair ordering of priorities.

It’s not hard to imagine a world in which executive retention bonuses and dividend payouts are made contingent on fully funding pension plans, for example. If corporate boards are not willing to hold their executives to account, they should not be surprised to find a government eager to do so.

Ontario has attempted to ameliorate the plight of bankrupt pension plans by creating the Pension Benefits Guarantee Fund, which guarantees the first $1,000 of pension income lost in such a case; that figure has been set to rise to $1,500…..The PBGF strikes me as well-intentioned, but still fundamentally problematic. It’s using taxpayer funds to secure individual benefits at the expense of a province that is already deeply indebted.

Further, it gives us yet another example of privatizing profits and socializing losses; of placing those who were least responsible for Sears’ decline—( employees) on the hook for his bosses’ failures.

In the end, that could be what defines Sears’ legacy, far more so than mouldering catalogs and storied corporate histories.’

POSITIVE GOVERNMENT ACTIONS

It is only fair that if criticisms are doled out, then positive government actions should also be acknowledged where due.

Income sprinkling – The federal Liberals have done the right thing by modifying the income sprinkling loophole.  For example, dividends that would have been received by the primary owner of the private corporation, would instead be paid to the spouse, partner or kids of the primary shareholder, who are often in lower tax brackets; therefore, the family’s total tax bill would be reduced.  Since singles in their financial circle are basically financially responsible to themselves,‘Income sprinkling’ is of less benefit to single marital status entrepreneurs so they will pay more tax.  Singles get nothing that is comparable.  Modification of income sprinkling ensures financial fairness for singles.

Increasing the GIS supplement for single seniors is a positive, but still not enough – As the Conservative MLA knows, this author has lobbied for financial fairness and inclusion of singles in financial budgets.  The federal Conservatives did propose an increase for poverty stricken single seniors, but then were voted out and replaced by federal Liberals.

The Liberals in Budget 2016 proposed to increase the GIS top-up benefit by up to $947 annually for the most vulnerable single seniors starting in July 2016, which will support those seniors who rely almost exclusively on OAS and GIS benefits and may therefore be at risk of experiencing financial difficulties.

This enhancement more than doubles the current maximum GIS top-up benefit and represents a 10% increase in the total maximum GIS benefits available to the lowest-income single seniors. This measure represents an investment of over $670 million per year and will improve the financial security of about 900,000 single seniors across Canada.

While this is a step in the right direction, poverty stricken senior singles will receive only $947 annually while families with children are receiving Canada Child Benefits sometimes equaling thousands of dollars annually.  Financial fairness for all Canadians regardless of marital status with and without children would be ensured by having housing allowance and indexed living wage programs based on equivalence scales as outlined above.

CONCLUSION:

It is time for governments to stop the selective social democracy where the upper middle class and wealthy receive benefits and tax breaks they don’t need.  Assets and wealth in addition to income need to be included in financial formulas when handing out government benefits.  Corporations need to be held to greater accountability regarding bankrupt pensions and low income levels of their employees.

A housing allowance, indexed living wage, and government subsidized child care (as well as paid for first and second year of post secondary education- added Feb. 26/18) would help to alleviate the housing crisis and poverty resulting in singles and poor families being pushed even further into poverty.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

POOR ALWAYS PLACED AT A DISADVANTAGE

POOR ALWAYS PLACED

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

The columnist’s opinion letter prompted the author to submit an opinion letter to a major local newspaper which was published.  Due to space and time constraints the last statement of the author’s opinion letter can be interpreted in several ways.  The conclusion discusses these interpretations.

COLUMNIST’S OPINION LETTER PUBLISHED IN MAJOR LOCAL NEWSPAPER

RE: Government hypocritical on minimum wage, Oct. 2. (hypocrisy)

‘What sort of person could possibly begrudge someone getting a raise when they only make 12 lousy bucks an hour?

Probably someone who’s been hanging onto the coattails of the deep thinkers over at the Fraser Institute, or maybe ingratiating themselves with those tall foreheads inhabiting the C.D. Howe playpen. Such folks talk as though the blood drained from their thin veins a long time since.

Nope, here in Calgary, on this glorious fall morning, some fine people will be starting work with an extra spring in their collective step, knowing a nice $1.40-an-hour raise is coming, with the minimum wage jacked up to $13.60, alongside the promise it’ll hit $15 in another year.

I wish them well and, honestly, a veritable pox on those who’d deny them otherwise.

Of course, some small-business owners might decide they can’t afford this new, higher wage, so instead, they’ll work extra unpaid shifts themselves and maybe cut some poor soul from the payroll altogether. No blame should be levied there, either. Walk a mile in those shoes.

Oh, then there are those big, international corporations – the McDonald’s and Amazons of this increasingly global and heartless world. The more the cost of labour goes up, then the more bottom-line reasons to invest in robots and automation. Such reactions are inevitable – on a worldwide scale, it’s why we don’t produce much of our electronic gadgets, clothes or food because someone, somewhere, does it much cheaper, and the price we’re willing to pay supersedes patriotism everytime and everywhere.

Countless economic studies – conducted, of course, by those who’ve never seen a minimum wage pay packet since mommy and daddy shelled out for that first go-round of college – have never successfully nailed the effect of such ordained raises on subsequent employment. Usually, the conclusions mirror the political viewpoint of the group paying for the study.

Let’s face it: any relevant data here in Calgary to be gleaned in the upcoming 12 months after this latest increase would be washed away in the wake of a jump to $70 in the price of a barrel of oil. There are too many factors involved, so politicians merrily fill the gap…..

…..Politicians love spouting one-sided rhetoric. Take Alberta’s NDP Labour Minister who’s pushing this minimum wage strategy.

“Through talking to economists, business people, low wage workers and other stakeholders, we’ve come to the decision all hard-working Albertans deserve enough to support themselves.”

Hypocrite is what I say to her and all the rest of the dreary clan on both the provincial and federal stage. Because if $13 bucks an hour is not a living wage – and I wouldn’t argue otherwise – then why do these people steal from those poor souls making such a pittance?

They call it taxation. On the federal level, you start paying tax at about $12,000 a year. So, assuming you make a paltry $13 an hour and work 40 each week, your annual income is about $27,000 a year. Oh yes, Ottawa wants its sweet pound of that sad flesh.

Now the NDP Labour Minister and her saintly crew aren’t quite as grasping, to be fair, but once $15 an hour is reached, then the yearly sum will be over $30,000 and a third will be subject to provincial income tax.

So what sort of person gets up on a platform with flunkies to the right and hangers-on to the left and proceeds to lecture everyone about how the lower paid need a living wage and then takes part of such an increase and pockets it themselves? After all, where does a politician’s salary come from if not from tax revenue?

What sort of person? A politician, that’s who.’

BLOG AUTHOR’S OPINION LETTER PUBLISHED IN A MAJOR LOCAL NEWSPAPER

The columnist calls the NDP Labour Minister hypocritical for pushing the minimum wage strategy.  He states government through taxation steal from those poor souls making such a pittance.

Fact check:  when the almighty Alberta Conservatives (financial-discrimination-based-on-minimum-wage-controversy) brought in the flat income tax, they raised the provincial tax from 8% to 10% for the lowest income level.  The poor never had an Alberta Advantage.

Fact check:  those with low lifetime income will have a pittance of CPP pension retirement pillar (canada-pension-plan) because CPP contributions are based on wage levels.

Politicians, corporations and the wealthy always win because they pull the financial purse strings.

CONCLUSION

Because of time and space constraints the last statement  ‘Politicians, corporations and the wealthy always win because they pull the financial purse strings’ would likely leave the reader thinking this blog author was agreeing with the columnist regarding taxation, minimum wage, and NDP hypocrisy.  The columnist fails to mention the Alberta NDP also replaced the Conservative Party flat tax with a progressive tax system while increasing the minimum wage.

It is the opinion of this author that the Alberta Conservative Party when implementing the flat tax placed low income persons at a financial disadvantage while benefitting the wealthy more.  The Alberta NDP has, in fact, done the right thing by replacing the 10% flat tax with a progressive tax and at the same time increasing the minimum wage incrementally to $15 per hour.  The poor will receive an increase in income (impact-on-cpp-enhancements) at same time the wealthy will pay more tax.  By increasing the minimum wage for the poor and tax for the wealthy, the unfair financial spread between the two groups is narrowed.

ALBERTA PROGRESSIVE TAX  2017 IMPLEMENTED BY ALBERTA NDP PARTY

  • First $126,625 10%
  • >$126,625 to $151,950 12%
  • >$151,950 to $202,600 13%
  • >$202,600 up to $303,900 14%
  • >$303,900 15%

CANADIAN FEDERAL PROGRESSIVE TAX 2017

  • 15% on the first $45,916 of taxable income, +
  • 20.5% on the next $45,915 of taxable income (on the portion of taxable income over $45,916 up to $91,831), +
  • 26% on the next $50,522 of taxable income (on the portion of taxable income over $91,831 up to $142,353), +
  • 29% on the next $60,447 of taxable income (on the portion of taxable income over $142,353 up to $202,800), +
  • 33% of taxable income over $202,800

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

POLITICAL STATEMENTS AGAINST THE NDP PARTY ARE BLATANTLY FALSE AND FINANCIALLY DISCRIMINATORY

POLITICAL STATEMENTS AGAINST THE NDP PARTY ARE BLATANTLY FALSE AND FINANCIALLY DISCRIMINATORY

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

A recent opinion letter in a local newspaper prompted this blog post.  The letter again targets the Alberta NDP party for socialism of the rich instead of the Conservative party.  “Westhead must be too busy to read history books” (since) he states: ‘Albertans do want to return to the past; but not to this misfit ideological premise about socialism for the rich and austerity for everyone else that the NDP conjured.  While Mr. Westhead mistakenly believes there was socialism for the rich in Conservative Alberta, his solution is a failing socialist ideology for all.  Your government has downloaded a debt, taxes and policies that are a burden to families….voting Conservatives in again in 2019 – Alberta will return to the free enterprise, socially reliable province it once was”. He is referring to many Harper oil pipelines (good) and NDP carbon tax (bad).

Re statements on socialism and left-wing politicians, analysis shows federal and provincial Conservative and Liberal policies surreptitiously and purposefully eliminate the middle class, thus practising selective social democracy (socialism).  Advertently or inadvertently, future class system will consist mainly of the poor, upper-middle class and wealthy while favouring married or coupled family units with multiple ‘marital manna benefits’.

During federal Conservative and Liberal party reigns, even while reducing social programs helping vulnerable populations of aboriginals and veterans, introduced programs like TFSAs (Harper 2009) pension splitting (Harper 2007) and OAS clawback (Harper 2011) particularly benefit the wealthy and married or coupled family units.  In OAS clawback only about five percent of seniors receive reduced OAS pensions, and only two percent lose entire amount.  Why should married or family units who have never had children (double income, possible double TFSA and RRSP) be able to ever use pension splitting, no OAS clawback plus tax avoidance schemes for couples while singles get nothing comparable?

During provincial Conservative party forty year reign and oil boom, just 1,048 new affordable housing units in Calgary were built over the past 14 years.  Two thirds of shelter beds in Canada are filled by people who make relatively infrequent use of shelters and are more likely forced into shelters by economic conditions (due to structural factors, the state of housing and labour markets that destine the very poor to be unable to afford even minimum-quality housing).  In 2001, Alberta Conservatives brought in 10% flat tax, raising the tax rate from 8% to 10% for lowest income Albertans.  There never has been an Alberta Advantage for the poor.

Federal Liberals have continued Conservative benefit programs like Canada Child Benefit in perpetuity which is based on income and number of children, but not net worth and assets, so families may receive large tax free child benefits and continue increasing wealth even while already having huge assets.

Elimination of the middle class is also evident in Liberals’ proposed Canada Pension plan enhancements without an increase in minimum wage (canada-pension-plan).  Persons with highest YMPE of $82,700 (massive jump from 2016 $54,900) and forty years of contributions may receive 33 percent CPP benefit or about $2,300 per month, while those making a minimum wage of $15 per hour, $30,000 annual income with forty years of contributions may receive about $800 per month. CPP pensions are dependent on salaries.  CPP contributions are not collected on boutique tax credits.  Low salary equals low CPP retirement pensions.

Calculations of a simplistic nature on $10 minimum wage and 2,000 hours shows that Alberta family with two children and each spouse earning $20,000 without any other deductions or benefits will pay about 15% Federal tax and 10% AB tax for a total of $5,000 each and receive full Canada Child Benefits (CCB) of $12,800.  Family income will equal about $42,800.  CPP pension at age 65 in 2016 dollars may equal about $5,000 per person annually.  If $15 minimum wage or $30,000 each  is applied, total Federal tax and AB tax will be $7,500 each.  Family income will equal $57,800 with full CCB $12,800 benefits since reductions only begin at $30,000.  CPP pension might equal about $7,500 per person.  

Above calculations easily show increased minimum wage income for a poor family benefits everyone through collection of increased taxes, less dependency on government handouts, greater financial well being and CPP retirement benefits for the income earner, and the economy through increased spending on goods and services.

Schizophrenic political systems exist where CPP pension enhancements are controlled federally, but minimum wages are controlled provincially.  The continued unwillingness of government and business to promote minimum wage increases to indexed living wages means the poor will remain in poverty even with pension systems that are supposed to improve financial quality of life as seniors.  The new NDP childcare program is the right thing to do, but it should be balanced by reductions of other boutique credits.  However, this is impossible, again because of provincial versus federal control.  Continuing to add monetary programs for select family groups will continue to drain the financial system if boutique tax credit programs and tax avoidance schemes where upper-middle class and wealthy benefit the most are not eliminated in their entirety.  Net worth and assets need to be included in any financial program so that the poor and lower class benefit the most from these programs.

The effects of this ‘income redistribution’ and ‘culture of dependency’ that the right claims they are not guilty of will result in future generations being ridden with high taxes because of high debt level to service these programs.  Where are the economists and financial advisors for the government so that outside the box solutions for financial equality of Canadians regardless of marital  status and using a balanced approach so that all financial programs are reviewed against each other for financial validity and fairness?  Canadians deserve much better financially from their political parties.

Upside-down financial systems and marital manna benefits have created a nanny state where families want it all and once these benefits are in place, it is very difficult to eliminate them because of voter entitlement.  Upper middle class and wealthy married/coupled persons have been made irresponsible by their own politicians and government.  The right keep talking about overspending, but they fail to mention that their boutique tax credits have resulted in upper-middle class and wealthy not paying their fair share of taxes.

Financial silos (tax-credit) are filled to the brim for families and married persons, but remain empty for singles and the poor.  Pipelines and boutique tax credits without steady rise of minimum wage and greedy oil salaries without tax avoidance capabilities means less tax revenue to fill financial coffers, less food on the table and demeaningly low CPP pensions in retirement for the poor.  Every political party has been guilty of vote getting tactics.  Canadians are fed up and disheartened by the divisive nature of politics which seems to serve only the political parties and their wealthy constituents.

(This post was updated on November 30, 2016).

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 2 of 2

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 2 of 2

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

Part 2 of 2 of ‘Doing the math…’ provides further discussion on the comments of the financial analysts in Part 1 of 2.  Regarding the Canada Child Benefit, it is difficult once again to understand the financial intelligence of politicians and government and whom they consult when formulating their policies.

Repeated again from part 1 of 2 are the following scenarios from “Doing the child benefit math” by Jamie Golombek (financialpost), Financial Post, September 30, 2016 showing financial evaluation performed by Jay Goodis from Tax Templates Inc.  This evaluation shows the impact of CCB on various levels of income in 2016, the after-tax cash they would keep along with their effective tax rates.

‘Scenario 1 – Low-income family

A Manitoba family has two kids under five and two working parents, each earning $15,000 of employment income. They are eligible for the entire CCB of $12,800; after paying CPP, EI, and a bit of tax, they net $39,560 of cash.

What would happen if one parent was able to work more, or was to get a higher paying job, such that she now made $25,000 — an increase of $10,000?  While she’s still in the lowest federal and Manitoba tax brackets, once you factor in the loss of CCB, the additional tax, CPP, and EI, her take-home extra cash is only $5,563, resulting in an effective marginal tax rate of a whopping 44 per cent (39 per cent if you ignore the additional CPP and EI contributions.)

As Goodis observed: “The CCB skews the progressive tax system and imposes a high effective tax on low income earners with children.”

Scenario 2 – Median-income family

A British Columbia couple has two children under the age of five. Their family’s income, consisting solely of employment income, is $76,000 split equally between each spouse. Their $12,800 of CCB is reduced to $7,448; and after federal and provincial taxes, CPP, and EI, the family nets $69,135 of cash. In other words, even with the clawback of some of their CCB, the couple has kept 91 per cent of their earned income.

Scenario 3 – High-income earner

Finally, consider an Ontario professional with three kids, two under five and one teen, earning $200,000 annually.  His CCB will be about $750 for the year.  If he were to earn an extra $1,000 of income, he would keep only just under $400 of it, resulting in an effective marginal tax rate of just over 60 per cent once loss of CCB is taken into account.’

DISCUSSION

Several points of interest will be discussed in regards to the Canada Child Benefit:  1)  income tax and marginal tax rates with increased income, 2)  CPP contributions and pensions, and 3) the effect of minimum wage and Canada Child benefit on the economy and future entitlements like the Canada Pension Plan (CPP).

NOTE:  The marginal tax rate is the tax rate paid on last dollar of income and rate likely to be paid on next dollar of income-it is usually more than what is actually paid in tax because basic exemptions like CPP contributions and EI, and other benefits on provincial level, GST rebate, etc. have not been taken into consideration.

  1. INCOME TAX RATES FEDERAL AND PROVINCIAL (cra)

The following shows the likely actual federal and provincial tax rates shown in the three scenarios (the federal and provincial rates used in the calculations are shown at the end of the post).

Taxes paid do not show other possible deductions taken off (CPP and EI), non refundable tax credits and additional benefits (GST rebate) added on to income:

income-tax-rate-scenario-1-to-3

In scenario 1 (low-income family), the financial analyst makes the statement that if one spouse earned an extra $10,000 she would pay an effective marginal  tax rate of a whopping 39 per cent factoring in the loss of the CCB and without additional CPP and EI contributions.  Her take-home extra cash is only $5,563.  However, with calculation of possible additional actual tax rate of $2,580, and reduction of $12,800 CCB by $896, her take home income with the additional $10,000 would be $10,000 minus $2,580 minus $896 for CCB for total extra cash of $6,524.  Whether it is an additional $5,500 or $6,500 why is this not considered to be a good thing, when even though she has more income tax deductions and small decrease in CCB, she has much more money to spend on her family while benefitting the Canadian economy through additional use of goods and services and additional income tax to be used for public services?

In scenario 2 (middle-income family), the financial analyst states that ‘ even with the clawback of some of their CCB, the couple has kept 91 per cent of their earned income’.  That is a very good rate of return all because of tax-free CCB.  Another reason why they are able to keep such a large per cent of their earned income is that Province of BC has a 5.06% tax rate on first $38,210 while Manitoba in Scenario 1 has a provincial rate of 10.8% on first $31,000.

In scenario 3 (high earner) the financial analyst states that with just an additional $1,000 income the person will only take home an extra $400 using the marginal tax rate.  For poor people, the reaction might be “so what?” when take home income is already at level of $8,000 to $10,000 per month plus he has been able to use Liberal reduced income rate of 1.5% for income between $44,401 to $89,401 that scenario 1 and 2 have not been able to use.

For single person, income after tax would be approximately $30,377 or about $15 per hour.  This does not equal living wages to prevent homelessness for singles, examples of which are usually greater than $15 per hour (singles-finances).

  1.  CPP CONTRIBUTIONS AND PENSIONS

In scenario 1 (low-income family) it has been estimated that this family will have about $7,500 annual CPP benefits.  With the addition of just $10,000 income (and YMPE), resulting extra CPP contributions and reduced $896 CCB annual benefits, the CPP (using 2016 rates) annual benefits will jump from about $7,500 to $10,000.  This should be viewed as a good thing as the extra CPP benefits outweigh the reduced CCB benefits and will reduce poverty in retirement.

  1.  THE EFFECT OF MINIMUM WAGE AND CANADA CHILD BENEFIT ON THE ECONOMY AND FUTURE ENTITLEMENTS LIKE CPP
  • The more poor are taken out of poverty, the greater the benefits to everyone because the poor will be using less government boutique tax credits and handouts (CCB).
  • Increased minimum wage benefits income earners in retirement years through increased CPP contributions during working years.
  • Increased minimum wage benefits everyone through collection of increased taxes, financial well being of income earner, and the economy through increased spending on goods and services, thereby, increasing value to the economy.
  • Boutique tax credits that benefit only certain segments of society (families and married or coupled persons) and failure to increase the minimum wage are financially discriminatory and detrimental to low income persons and singles.

CONCLUSION

Why do we continue to allow politicians and governments to make bad financial decisions like forever increasing boutique tax credits,  increasing the wealth of the rich and not increasing the minimum wage when it can clearly be shown that increasing the minimum wage benefits everyone?  The creation of financial silos (financial-illiteracy) where one financial decision is made (example:  CPP enhancements) without looking at how this impacts other financial processes makes for very bad financial decisions.  ‘Selective’ social democracy (selective) where some family groups benefit more than other family groups only produce financial discrimination while benefitting the upper-middle class and the wealthy most.

The upside down financial decisions where boutique tax credits are brought in by one political party, eliminated or changed on election of another political party and increasing CPP benefits, but not increasing the minimum wages at the same time does nothing to provide financial stability for Canadian families, married or coupled persons and singles.

Outside the box and critical thinking like tri-partisan (all political parties) cooperation in financial decisions for all Canadians would create better decision making across the board and prevent schizophrenic political processes like CPP increases being controlled by federal governments and minimum wage increases being controlled by provincial governments.  All Canadians deserve better from their politicians and governments in financial decision making.

INCOME TAX RATES by FEDERAL AND PROVINCE (cra)

income-tax-rates

 

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 1 of 2

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 1 of 2

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

The Canada Child Benefit (CCB) consists of tax-free monthly payments that began in July, 2016 and provide maximum annual benefit of up to $6,400 per child under the age of six, and up to $5,400 per child ages six through seventeen.  This benefit is income-tested (but not net worth and assets tested), such that the amount depends not only on the family income, but also on the number of children and their ages.  (These amounts start being reduced when the adjusted family net income (AFNI) is over $30,000 and also is dependent on number of children in the family.  On the portion of adjusted family net income between $30,000 and $65,000, the benefit will be phased out at a rate of 7 per cent for a one-child family, 13.5 per cent for a two-child family, 19 per cent for a three-child family and 23 per cent for larger families. Where adjusted family net income exceeds $65,000, remaining benefits will be phased out at rates of $2,450 and 3.2 per cent for one-child family,  $4,725 and 5.7 per cent for two-child family, $6,650 and 8 per cent for three-child family and $8,050 and 9.5 per cent for larger families on the portion of income above $65,000).

The following scenarios from “Doing the child benefit math” by Jamie Golombek (financialpost), Financial Post September 30, 2016 shows financial evaluation performed by Jay Goodis from Tax Templates Inc.  This evaluation shows the impact of CCB on various levels of income in 2016, the after-tax cash they would keep along with their effective tax rates.

Scenario 1 – Low-income family

A Manitoba family has two kids under five and two working parents, each earning $15,000 of employment income. They are eligible for the entire CCB of $12,800; after paying CPP, EI, and a bit of tax, they net $39,560 of cash.

What would happen if one parent was able to work more, or was to get a higher paying job, such that she now made $25,000 — an increase of $10,000?  While she’s still in the lowest federal and Manitoba tax brackets, once you factor in the loss of CCB, the additional tax, CPP, and EI, her take-home extra cash is only $5,563, resulting in an effective marginal tax rate of a whopping 44 per cent (39 per cent if you ignore the additional CPP and EI contributions.)

As Goodis observed: “The CCB skews the progressive tax system and imposes a high effective tax on low income earners with children.”

Scenario 2 – Median-income family

A British Columbia couple has two children under the age of five. Their family’s income, consisting solely of employment income, is $76,000 split equally between each spouse. Their $12,800 of CCB is reduced to $7,448; and after federal and provincial taxes, CPP, and EI, the family nets $69,135 of cash. In other words, even with the clawback of some of their CCB, the couple has kept 91 per cent of their earned income.

Scenario 3 – High-income earner

Finally, consider an Ontario professional with three kids, two under five and one teen, earning $200,000 annually.  His CCB will be about $750 for the year.  If he were to earn an extra $1,000 of income, he would keep only just under $400 of it, resulting in an effective marginal tax rate of just over 60 per cent once the loss of the CCB is taken into account. (His status is not stated, assume he is a single parent?)

child-benefit-math-3-scenarios

ANALYSIS

With a fuller analysis of the information the following assumptions can be made:

  1. Minimum wage-most minimum wages in provinces range between $10 and $11 per hour, so it is hard to imagine that family in scenario 1 (low-income family) only makes combined income of $30,000.  At 2,000 annual hours of work per year per person, each person’s hourly rate only equals $7.50.  One must assume they are working part time jobs and are unable to find full time work.  Net income after deductions and with CCB of $39,560 still equals net hourly wage of only about $10 per person.   (The other possibility is that this family is wealthy by having huge net worth and assets that are not considered in the CCB and, therefore, do not need to work at full time jobs). For scenario 2 (medium-income family) the net wage after deductions and with CCB earned per hour equals about $17 per person.  For scenario 3 (high-income earner) and assumed 50% tax plus $750 CCB on $200,000 the net wage earned per hour equals about $50 per person.
  2. Income tax reductions-in scenario 1 (low-income family) get none of the 1.5% Liberal tax reduction because each of their incomes do not fall in the $44,401 and $89,401 range.  The same applies to scenario 2 (medium-income family).  Scenario 3 (high-income earner) gets the 1.5% tax deduction for income between $44,401 and $89,401.  Only upper middle-class families with individual spouse’s income over $44,401 to $89,401 would quality for income tax reductions in these scenarios.
  3. Canada Pension Plan (CPP)-both scenario 1 and 2 families will not receive maximum CPP retirement benefits because their individual incomes fall below the 2016 YMPE $54,900 individual income level.  In scenario 3 (high-income earner), he will earn full CPP benefits.  (Fact:  Canada Child benefit tax-free income will not require CPP contributions, so income excluding CCB was used for calculation of CPP retirement benefits.
  4. Canada Child Benefit (CCB)-For scenario 1 (low-income family) this family receives full Canada Child Benefits.  For scenario 2 (medium-income family) reduction is $4,275 and 5.7% for $76,000 income for total $5,352 CCB reduction. Reduction for scenario 3 (high-income earner) is $18,200 minus $6,650 and 8% for $200,000 income which equals total $17,450 CCB reduction.
  5. Understanding other calculations-For scenario 1 (low-income family) it is stated that an additional $10,000 in income would ‘produce take-home extra cash of only $5,563, resulting in an effective marginal tax rate (tax rate paid on last dollar of income and rate likely to be paid on next dollar of income-it is usually more than what is actually paid because basic exemptions, etc. have not been taken into consideration) of a whopping 44 per cent’. (Fifteen percent federal income tax on $10,000 equals $1,500, about 12% Manitoba provincial tax equals $1,200 and 13.5% Canada Child Benefit reduction on $10,000 equals $1,350 for a total of $4,050 not including additional CPP and EI payments).In scenario 3 (high-income earner, ?single parent) it is stated that with only an additional $1,000 income he would keep just under $400 of it, resulting in an effective marginal tax rate of just over 60 per cent once the loss of the CCB is taken into account.  When one takes into account that he is possibly taking home over $8,000 per month, it is likely that he will be able to max out his RRSP and TFSA accounts and will have maximum CPP benefits on retirement at age 65 if he works 40 years as well as RRSP and TFSA accounts to supplement his retirement income).
  6. Under-reporting of actual benefits received-Marginal tax rate-Since Canada operates on tax brackets, taxpayer will pay more tax when more is earned. However, it’s worth noting that tax rate paid is based on the income in each bracket. So the marginal tax rate doesn’t reflect the total that is paid on income. In fact, what taxpayer actually ends up paying, in terms of a percentage of income, is probably going to be lower than the marginal tax rate.  It should be noted that further possible provincial child assistance and family employment, GST rebate benefits and basic exemptions are not included in these examples.  Therefore, each scenario likely has more benefits than have been described in the examples.

CONCLUSION

As stated above by the financial analyst, statement is repeated here again:   “The CCB skews the progressive tax system and imposes a high effective (marginal used in these examples) tax on low income earners with children.”  Unfortunately, they create financial silos by including only one benefit without taking into consideration of the effect of other benefits.  In this post, attempt was made to include Liberal income tax deductions and possible retirement benefits to provide a better ‘across the board’ analysis of how upper-middle class families and wealthy benefit most.

While many families may view the CCB to be a wonderful program, boutique tax credits when taken into consideration with other programs can be shown to be less financially beneficial to low income and middle income families, especially with a stagnant minimum wage.  A stagnant minimum wage (minimum-wage) with a Canada Child Benefit may provide a better income for low income families for twenty or twenty five years during child-rearing, but will result in lower Canada Pension Plan benefits for seniors during their twenty years as seniors.  A higher minimum wage during child-rearing years will result in a higher income during child-rearing years, lower CCB along with higher CPP during senior years.  It is in the eye of the beholder and financial analysts to determine which is the better scenario.  A higher minimum wage appears to be the better scenario.

Another negative thing that can be said about the Canada Child Benefit program is that reductions of the benefit appear to decrease slightly with the addition of each child (resulting in a little more CCB being paid out with addition of each child).  This progression in CCB reductions appear to not follow equivalence scales (finances) where it is shown that cost of living per family does not increase times each additional child, but rather decreases per addition of each child.  (Example: cost of living square root equivalence scale one adult 1.0, two adults 1.4, two adults one child 1.7, two adults two children 2.0, two adults three children 2.2).  In scenario 2 (medium-income family) CCB benefit would be $3,598 for 1 child under 5, $7,448 for 2 children under five and $11,670 for three children under 5.  So, in fact scenario 2 family with three children would receive $292 more per child than family with one child even though equivalence scales show the cost of living per child is less for three children than it is for one child.

As has been stated in past blog posts, both the Liberal and Conservative parties, while handing out marital manna benefits and family benefits, have at the same time handed out benefits that favor upper-middle class families and wealthy the most. (Singles get none of these family credits and are unable to purchase homes and max out RRSP and TFSA accounts unless they have substantial incomes.) Some of these benefits include Liberal income tax reductions, maximum CPP benefits and exclusion of net worth and assets testing while failing to increase the minimum wage to an indexed living wage.  Politicians and governments continue to financially discriminate against singles and the poor while allowing the upper-middle class and wealthy to increase their wealth.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

STAGNANT MINIMUM WAGE AND LOW INCOME IMPACT ON CPP ENHANCEMENTS

STAGNANT MINIMUM WAGE AND LOW INCOME IMPACT ON CPP ENHANCEMENTS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

Occasionally there are events or things in life that will ‘rock you to your core’, ‘knock your socks off’, or ‘set you back on your heels’.  On writing for this blog, one of these things or events is the minimum wage or low income and what an impact this has on financial lives of the poor and low income regards to proposed CPP enhancements.

From Department of Finance, “Background on Agreement in Principle on Canada Pension Plan Enhancement” (fin.gc) for proposed enhancement of CPP states the following:

‘Today, middle class Canadians are working harder than ever, but many are worried that they won’t have put away enough for their retirement.  Each year, fewer and fewer Canadians have workplace pensions to fall back on.  To address this, we made a commitment to Canadians to strengthen the Canada Pension Plan (CPP) in order to help them to achieve their goal of a strong, secure and stable retirement……

There will be gradual 7-year phase-in below the Yearly Maximum Pensionable Earnings (YMPE), followed by a 2-year phase-in of the upper earnings limit….

The maximum amount of earnings subject to CPP (from 2023 to 2025) will be increased by 14%.  The upper earnings limit will be targeted at $82,700 upon full implementation in 2025…..

In 2023, the CPP contribution rate is estimated to be 1% higher for both employers and employees on earnings up to the YMPE.  Beginning in 2024, a separate contribution rate (expected to be 4% each for employers and employees) will be implemented for earnings above the then prevailing YMPE.

All working Canadians will benefit from an enhancement of the CPP. This enhancement will increase income replacement from one-quarter (25%)  to one-third (33%) of pensionable earnings.

As the CPP enhancement will be fully funded, each year of contributing to the enhanced CPP will allow workers to accrue partial additional benefits. In general, full enhanced CPP benefits will be available after about 40 years of making contributions. Partial benefits will be available sooner and will be based on years of contributions.’

The following information regarding the middle class has been taken from (theglobeandmail):

A 2013 internal government document, entitled “What We Know about the Middle Class in Canada,” draws the lines more precisely, deeming the middle class as those whose after-tax income falls between 75 per cent and 150 per cent of the national median – which, using 2012 figures, would include any family taking home $54,150 to $108,300 a year.  “Family,” however, is a catch-all demographic that includes couples of all ages, with or without children, single or double-earners, and single parents. Single people are excluded entirely – one of the fastest growing groups in Canada and a big chunk of the middle class – whose income, using the same government calculation above, would fall between $21,150 and $42,300…..This is one reason why so many millionaires (44 per cent of those who responded to a recent survey by CNBC) outrageously define themselves as middle class when, in fact, once your personal income closes in on $200,000, you leap into the top 1 per cent of earners in Canada….(and top twenty per cent have salaries over $116,000).

Average income (before taxes and transfers) by quintile, all family types, 2013

  • Lowest: Up to $13,000
  • Second: $13,100-$37,000
  • Middle: $37,000-$66,500
  • Fourth: $66,500-$111,600
  • Highest: $111,600 and up

Source, Income Statistics Division, Statistics Canada

What the numbers say: Income levels have fluctuated over the last four decades, with lasting growth concentrated among the wealthiest. In 2011, the incomes of the bottom three quintiles were still lower than in 1976, adjusting for inflation. The top 40 per cent had jumped ahead, with the largest gains made by the top 20 per cent. Compared with 1976, they were the only Canadian households who saw their share of income rise….

What the numbers say: Between 1999 and 2012, the median net worth of Canadian families rose nearly 78 per cent, from $137,200 to $243,800. Most of this wealth is concentrated in housing, especially for lower-income groups. This new wealth wasn’t evenly distributed, however. Gains were higher, the wealthier the family. While median net worth grew by 107 per cent for the richest families, for the bottom 20 per cent it rose just 14.5 per cent. Within the middle class, richer Canadians also did better – the upper middle income saw their worth grow by 90 per cent; the lower middle income by 60 per cent…..

Baby boomers are working longer than expected, debts are rising, and grandma’s housing bonanza is pricing her grandchildren out of the real-estate market, especially in big cities where the best jobs are increasingly concentrated. Paul Kershaw, who studies generational equity at the University of British Columbia’s School of Population and Public Health, has calculated that Canadians in their late 20s and early 30s will have to save, on average, five years longer to produce a down payment, and work one month a year more than their peers in 1976 to cover their mortgage. And according to a June report from the Canadian Centre for Policy Alternatives, thirty-somethings are the only age group with a lower overall net worth in 2012 than they had in 1999…..’

READER COMMENT on above article:

‘This is the reality of Canadians in their twenties and thirties.  They are buffeted on the one hand by a regressive Service Sector (Service Sector-more than fast food outlets- includes banking, insurance, and information technology) senior management style reminiscent of pre industrial revolution feudal management and owners who believe that the 15% federal tax is excessive and should be demolished.  On the other hand these all important Canadians under forty years are hopelessly burdened by the same senior management who are responsible for policy that has created unmanageable long term student debt, unconscionable large mortgages with no long term rate matching to amortization and no defined benefit pension plans….the existing Bank Act and Insurance Act as well as Competition Law provides ample power for an enlightened government to bring fairness to our most important asset – Canadians under forty years old’.

MoneySense (middle-class)data based on Stats.Can. 2011 figures – Middle 20% pre-tax income for unattached individuals is $23,357 to $36,859 and for families of two or more $61,929 to $88,074.

In 2013, Stats.Can. data shows median after-tax income for unattached singles over 65 to be $25,700 and under 65 to be $29,800.  For female lone parent families $39,400, for two parent families with children $85,000 and senior families $52,500.

Living Wage Dollars (politicians) (a basic wage that keeps poor working Canadians off the streets) for 2013 Guelph, Wellington and 2012 Grande Prairie range from $19,284 to $25,380 for unattached singles and $56,796 to $62,844 for two parent, two children family unit.  Living Wage for Guelph/Wellington for 2015 has been set at $16.50 for family unit of two parents and two children. The City of Vancouver employee living wage for 2016 is $20.64.  The calculated living wage for Toronto family unit of four for 2015 is $18.52.

Minimum wage in 2015 (minimum) in provinces looked like this – British Columbia $10.25, Alberta $10.20 ($11.20 in Oct. 2015), Saskatchewan $10.20, Manitoba $10.70, Ontario $11.00, Quebec $10.35, New Brunswick $10.30, Nova Scotia $10.60, Prince Edward Island, $10.35, Newfoundland $10.25, Yukon $10.72, Northwest Territories $10.00, Nunavut $11.00.  For 2016, provincial minimum wage ranges from $10.65 to $13.00.  Very few provinces index minimum wage to inflation.  The Alberta NDP party who came into power in 2014 promises to raise minimum wage to $15 by 2018.

The following table shows CPP contribution and benefit rates from 1987 to 2025.  Future proposed rates are shown in yellow.  It is interesting to note that the maximum CPP pension payout does not equal 25% of the YMPE.  Rather it seems to average around 24%.  Where did the remaining dollars go – perhaps for administrative costs?  Payout for 2025 has been calculated at 32% rather than 33%.

cpp-enhancements

ANALYSIS

  1. Minimum wage or living wage in relation to CPP enhancement – A minimum wage averaging between $10.00 and $11.00 in Canada or approximately $20,000 and $22,000 annual wage for 2,000 worked hours per year means these employees working for forty years will receive virtually nothing in CPP payments in comparison to those employees whose maximum CPP YMPE will be $82,700.  If the estimated amount of CPP after forty years of contribution for $82,700 maximum YMPE will equal about $2,000 per month, then the CPP benefit for $20,000 annual salary could be estimated to be 25% or $500 per month.  Even with a living wage of $20.00 per hour or $40,000 annual salary for 2,000 worked hours will possibly only equal 50% or $1,000 (equivalent to rent or mortgage) CPP benefit per month.  Just what incentive is there for the poor and low income to work when the YMPE will rise to a level that is higher than the middle quintile income of  $37,000-$66,500 and when one of the criteria is working for forty years?  While it is understood that incomes will likely rise over the next forty years, past history has shown that it will repeat itself by not increasing the minimum wage to a living wage equally in proportion to CPP contributions and benefits.  Ever singles and early divorced singles without children deserve better when they  have worked for forty years, never used EI, never used family benefits like maternity or parental benefits, child rearing dropout credits, child benefits and widowed person benefits along with all the marital manna benefits (pension splitting). Question to be answered:  Will the minimum wage along with OAS and GIS rise to same level that CPP YMPE will rise and will they be indexed to same level (33% would be nice) so that CPP, OAS and GIS benefits for the poor and low income will be at least a living wage level throughout their senior lives?
  1.  Upper-middle class will benefit the most while the poor and low income Canadians have been left out of the formula – Politicians and governments continue to coddle the middle class and especially the upper-middle class (so stated by financial government officials themselves in above article “middle class Canadians are working harder than ever”).  The Canadians who will benefit the most from the proposed CPP YMPE are the top two quintiles earning $82,000 and up per year (fourth quintile $66,500-$111,600 average income for all family types as shown in above statistics).  As the CPP YMPE rises at a level that is exponentially higher than the average income level of the middle class, so will the CPP payouts rise at a level that is exponentially higher for the upper middle class.  In the table shown above, the yearly YMPE has risen at a relatively steady rate for each year.  Examples:  The YMPE rose $600 for years 2000 to 2001, $1,200 for 2015 to 2016 and proposed $1,100 for 2022 to 2023.  The YMPE will take a dramatic jump of $7,100 ($67,800 to $74,899) for 2023 to 2024 and $7,800 ($74,900 to $82,700) for 2024 to 2025.  The YMPE, which used to be more ‘middle of the road’ middle class, will now rise to upper middle class levels just like all other defined benefit plans in this country, the higher the salary-the higher the benefit.   (Widowed persons of higher income deceased spouses also benefit more from these plans, but have not made contributions equal to the pension payouts, even though as widowed persons they are now technically single).  It almost certainly can be guaranteed that annual incomes will not increase by that amount for any of the lower income groups and especially for the poor and low income groups.  Pension plans in this country have been made schizophrenic and financially upside-down when they are controlled by the federal government, but minimum wages are controlled by the provinces, while ensuring the wealthy will get wealthier and the poor will remain poor.
  1.  Four things that need to happen to eliminate financial discrimination of CPP enhancements – What is the incentive for ever singles, early divorced singles and poor families to work when government, politicians and businesses purposely implement financial policies that work against them?? Four things need to happen – one. raise minimum wage to a living wage with indexing; two, exponentially increase indexing of OAS and GIS to same level of $82,700 CPP YMPE; three, eliminate marital manna benefits that privilege high income families such as pension splitting and revise programs such as OAS recovery tax so they truly do progressively eliminate OAS according to income for the upper-middle class; and four, review all retirement benefits and retirement programs in totality and with each other (both on federal and provincial level) to prevent creation of financial silos that privilege the wealthy few.

SOLUTION

In addition to the above four items, how about adding six years of CPP benefits to total years worked for singles (ever singles and early divorced singles, excluding widowers), equivalent to child rearing dropout credits? (Added Sept. 26, 2016 but then, singles already work forty years so that idea won’t work.  So how about applying the equivalence scale of 1.4 to the CPP benefits that singles have earned while working)?  It is a known fact that it costs unattached singles more to live (senior-singles-pay-more) than married or coupled family units.  The Canada Revenue Agency knows who singles are as they have indicate themselves as such on their income tax submissions.  Now, wouldn’t that be a novel idea to eliminate financial discrimination and promote financial fairness for singles?

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

CAUSE AND EFFECT OF FINANCIAL POLICIES PROMOTING FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

CAUSE AND EFFECT OF FINANCIAL POLICIES PROMOTING FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This blog has attempted to describe some of the many government, politician, business and family financial policy decisions that lead to financial discrimination of singles and the poor.

The question that can be asked is:  “Is there a  cause and effect relationship to these decisions?”

From Wikipedia and other online sources (study) the definition of ‘cause and effect’ is follows: – Causality (also referred to as causation, or cause and effect) is the agency or efficacy that connects one process (the cause) with another process or state (the effect), where the first is understood to be partly responsible for the second, and the second is dependent on the first. In general, a process has many causes, which are said to be causal factors for it, and all lie in its past. An effect can in turn be a cause of many other effects.

A cause-effect relationship is a relationship in which one event (the cause) makes another event happen (the effect). One cause can have several effects. Cause-Effect Criteria – In order to establish a cause-effect relationship, three criteria must be met. The first criterion is that the cause has to occur before the effect. If the causes occurred before the effects, then the first criterion is met.  Second, whenever the cause happens, the effect must also occur.  Consequently, if the cause does not happen, then the effect must not take place. The strength of the cause also determines the strength of the effect when criterion two is met.  The final criterion is that there are no other factors that can explain the relationship between the cause and effect.

A cause is why something happens.  An effect is what happens.

While no scientific ‘cause and effect’ relationship (i.e. fishbone diagrams) has been applied in this blog, certainly many of the financial discriminatory effects of policy decisions (or causes) have been described.  Some of these effects are listed below.

Boutique tax credits

  • Every political party has introduced tax credits to give financial benefits to certain members of the population more than others. June 16/16 (credit)

Business policies

  • Financial decisions by businesses such as not wanting to have minimum wage increase and not wishing to pay proposed increase of CPP employer contributions continue to help disintegrate the financial well being of singles and the poor. Sept. 12/16 (canada-pension-plan)

CPP

  • Financial discrimination of the CPP plan.  Aug 31/16 (plan)

CPP enhancements

  • Financial discrimination of CPP enhancements includes higher income earners only paying 8 percent instead of 11 percent CPP contributions on earnings between $72,000 and $82,700. Sept 12/16 (canada-pension-plan)

Family tax credits

  • Marital manna and family tax credits given over the years have continually increased the financial discrimination of singles and the poor.  Many of these benefits have been implemented by the Federal Conservative government over the last decade and perpetuated by the Federal Liberal party since coming into power in 2015 as well as provincial parties.  Aug 2/16 (credits)

Housing Affordability

  • Just 1,048 new affordable housing units in Calgary have been built over the past 14 years; the need for affordable housing was great in 2002 and it remains so today (most of these years were under provincial forty year reign of the Conservative party). July 17/16 (housing)
  • Homelessness – Two thirds of shelter beds in Canada are filled by people who make relatively infrequent use of shelters and are more likely forced into shelters by economic conditions (due to structural factors, the state of housing and labour markets that destine the very poor to be unable to afford even minimum-quality housing)…attacking housing affordability from the other side, by reducing housing costs, would also be effective….vast majority of homeless shelter users are single. May 23, 2016 (homelessness) and July 17/16 (housing)

Housing Upside Down Pricing and Financing

  • Upside down pricing of housing where purchasers of smaller units pay more per square foot means they will proportionately pay more house taxes, education taxes, mortgage interest and real estate fees on less house and less take home pay. Nov. 19/15 (upside-down)

Income tax privileging for the middle class and the wealthy

  • Tax cuts on both federal and provincial levels have targeted the middle class and the wealthy while making poor pay same amount or more in taxes.
  • Alberta flat tax of 10 percent increased from 8 percent for low income. May 23/16 (homelessness
  • Federal tax by federal Liberal party decreased by 1.5% for those earning between $45,282 and $90,563. Aug. 23/16 (family)

Lost Dollar value

  • Lost dollar value list was created to show lost dollars experienced by singles because married or coupled persons are able to achieve more financial benefits.  Some of these include pension splitting, reward programs and Employment Insurance (EI). April 10/16 (value)

Marital manna benefits

  • 1% spousal lending rate, spousal RRSP, TFSAs times two with no cap on total amounts accumulated over years are all within legal limits of financial laws – Six Reasons….(six)

Marrying for money pays off

  • Study shows persons who marry and stay married accumulate nearly twice as much personal wealth as a person who is single or divorced.  Jan. 17/16 (pays)

Maternity and parental benefits

  • Studies have shown that middle class and wealthy families benefit more from maternity and parental benefits.  Many poor families cannot afford take full maternity and parental leave.  August 23/17 (family)

Minimum wage/living wage

  • Decisions and arguments to not increase minimum wage or implement living wage have a dramatic impact on financial well being of singles and the poor.  May 4/16 (discriminatory) and Sept. 12/16 (canada-pension-plan)

Net worth and assets

  • When net worth and assets are not included in family benefit formulas, benefits are often given to those who need these benefits less (middle class and the wealthy) than the poor who have less net worth and assets.  August 17/16 (assets)

OAS recovery tax (OAS clawback)

  • OAS clawback benefits wealthy couples and some widows the most.  OAS for couples only begins at net income of $145,618 ($72,809 per person) thus allowing them to receive full OAS of $13,760 as a couple.  Not many senior singles (except some widowed persons) who could ever hope to achieve a net income of $72,809. Aug. 29/16 (oas)

Pension splitting

  • Pension splitting benefits only wealthy married or coupled family units.  Singles don’t get to pension split. Jan. 31/16 (government) and May 4/16 (selective).

Reward programs, company perks, money benefit programs, and fee schedules benefit families the most

‘Selective’ social democracy

  • There has been much that is good about democratic socialism, but there also has been some negative outcomes .  One outcome is ‘selective’ democratic socialism where certain members of society receive more social benefits than others. May 4/16 (selective)

Senior singles pay more

  • Senior singles often ‘pay more, get less’ because they are not included equally in financial formulas.  Singles also help support widowed persons and survivor pension plans. Dec. 22/15 (senior) and June 2/16 (retirement)

Singles not included or improperly identified in family definition

  • Ever singles (never married, no kids) are often not properly identified in family definitions.  Widowed persons and single parents are not ever singles.  Widowed persons and single parents are afforded some benefits that ever singles do not receive.  Dec. 2/15 (false) and Aug. 7/16 (definition)

CONCLUSION

It is very clear from the many examples above that government, politician, business and family financial policy decisions are often made in isolation and in financial silo fashion.  Continuation of these practises without a clear path to proper evaluation of all ‘across the board’ financial formulas and their ‘cause and effect’ on each other will only lead to perverse financial privileging of the middle class and wealthy while continuing financial discrimination of ever singles, early in life divorced singles, single parents and the poor.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

CANADA PENSION PLAN ENHANCEMENTS WILL DO NOTHING TO ELIMINATE FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

CANADA PENSION PLAN ENHANCEMENTS WILL DO NOTHING TO ELIMINATE FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

The last post discussed how the CPP plan in its present format financially discriminates against singles and the poor.  CPP is part of the Pillar 2 plan of Canada’s retirement income system for seniors.  The last post (program) showed how Canadian seniors will not receive full CPP benefit if they have not made full work contributions for forty years and if they do not have full Yearly Maximum Pensionable Earnings(YMPE) contributions for those forty years.  Canadians most likely to not receive full CPP benefits are those who have not worked for forty years or have not been able to make full contributions because of low income.  Senior singles also pay more and get less in seniors benefits (pay-more).

Recently there has been much discussion about CPP contributions and benefits being enhanced because Canadians are not saving enough for their retirement.  Apparently, the enhancements will include increasing the amount of required CPP contributions and, in return, the amount of CPP benefits received.

Enhancements include:  Once fully implemented in 2025, the total CPP contribution rate (which is shared between employees and employers) will increase from the current rate of 9.9 per cent to 11.9 per cent of eligible earnings up to a maximum of $72,500. In addition, earnings between $72,500 and $82,700 will also be subject to mandatory CPP contributions at a lower rate of 8 per cent.

CPP retirement benefits will also be increased. The replacement rate for pensionable earnings will increase from 25 per cent to 33 per cent. According to the Department of Finance, it will take “about 40 years” for the full increase in retirement benefits to be phased in.  The Department of Finance has stated that like the current program, future benefits will be based on the years of contribution and actual contributions.

The significance of these changes is astounding.  Future benefits will remain the same based on the two principles of the years of contributions and actual contributions, in other words, same old, same old.  The premise remains the same – individuals with highest YMPE will receive the most CCP, while those at lower income levels will receive the least CPP benefits because they have not been able to make maximum CPP contributions.

The YMPE will be be raised to between $72,500 and $82,700 (up from $54,900 or approximately $25 per hour in 2016).  Based on approximately 2,200 hours of work per year, $72,500 equals approximately $33 per hour and $82,700 equals approximately $38 per hour.  In other words, the more income an individual makes, the more CPP benefits they will receive.

In 2013, the minimum wage was around $10 in all provinces. In constant dollars, this rate was similar to the rate observed in the late 1970s.  It is only in the last several years that the minimum wage has increased somewhat.   Historically, Alberta’s minimum wage went from $8 in 2007 to $9.95 in 2013.   In addition to the stagnant wage, the Alberta income tax rate in 1999 went from a graduated rate based on income to a flat tax of 10%.  The tax rate for  the middle class and wealthy was changed to 10% while the rate for lower income individuals went up from 8% to 10%.

The 10% tax rate remained in place for about fourteen years until 2015, when the NDP came into power and reverted the flat tax system to a graduated system.The current minimum wage rose to $11.40 in October 2015 and is set to rise to $12.20 in October 2016.  This is has all been a result of the NDP party coming into power in Alberta after a forty year reign by the Progressive Conservative party.

At the present time, the difference between Alberta’s minimum wage today of $12.20 per hour and the present CPP YMPE rate of $25 per hour is striking.  What this means is that the middle class and wealthy working for forty years will be able to attain greater CPP wealth than the person earning a minimum wage who has faithfully worked for 40 years.  Why wouldn’t those working at minimum wage be angry and in utter despair at policy decisions that don’t financially include them with fairness and equality?  If ordinary persons without math degrees can figure this out, why can’t government, policy makers and businesses?

In order for there to be financial fairness, the minimum wage has to rise at same rate as the increase  the CPP YMPE rate!  Think that is going to happen, don’t hold your breath!

PROBLEMS:  

  • Governments and businesses give many excuses as to why minimum wage should not be raised
  • Businesses don’t want to pay the proposed increases of their required CPP employer contributions because they say it will impact their businesses-they are threatening to go to contract and part time employees.
  • Currently only two provinces index their minimum wages based on the Consumer Price Index, thus offering guaranteed protection from wage erosion. Currently, there is no accountability for those actually determining the minimum wage.
  • With new proposed enhancements earnings between $72,500 and $82,700 will also be subject to mandatory CPP contributions, but at a lower rate of 8 per cent.  Why is it that higher income earners always get the reduced rates?  Why should those earnings between $72,500 and $82,700 get a lower rate of 8 per cent?  What is the factual basis for choosing a lower rate for income range between $72,500 and $82,700?
  • Minimum wage or a living wage and income tax rates are two very important factors that help determine quality of financial life for singles and the poor.  So why is that politicians, governments and businesses always give better rates to higher income earners (middle class and wealthy than lower income earners and to families over singles)?  Those at lower income levels are more often made to pay more while getting less.  Examples of this are increasing minimum wage at pitiful rates and making lower income earners pay the same income tax rate while decreasing rates for the middle class and wealthy as described above (Alberta Conservative government).   The present Liberal party did same by reducing taxes only for the middle class, but not reducing rates for the poor.
  • Upside down finances continue to be perpetuated (finances) so that the poor are forcibly made to remain poor by the upside down financial decisions by government and politicians.  Why don’t single persons deserve a full CPP benefit if they have been faithfully employed for forty years, (never used EI, never used maternity/paternity benefits, etc.) but have not been able to contribute full YMPE because of a lower income?

CONCLUSION

The policy decisions by government for CPP enhancements past and present have created a pillar whose base is cracked and breaking.  The only way most ever singles, early divorced singles, single parents and the poor can ever hope to reach the maximum CPP YMPE is by working multiple jobs.   Married or coupled family units may have the option of both spouses working and receiving two CPP pensions.  The indexing of a minimum wage or a living wage is paramount in avoiding financial discrimination in CPP enhancements for singles and the poor. To do anything less is a blatant violation of the human and civil financial rights of poor and low income Canadians.

THE MINIMUM WAGE IN CANADA

An excellent article “The Minimum Wage in Canada” by the Canadian Labour Congress, April 2015 gives an excellent perspective on minimum wage (minwage).

Some of the details of this article include the following:  

“A profile of minimum wage workers will show that the stereotypical teenage employee is not the reality and many individuals are struggling to provide for their families on minimum wage incomes. Common concerns about increases to the minimum wage, such as a rise in unemployment rates, the financial impacts on small business, and alternative policy changes to address poverty will be discussed in order to break down the myth that an increase to the minimum wage will have detrimental economic impacts…..

British Columbia froze its minimum wage at $8.00 an hour for almost a decade.  During this freeze period minimum wage earners were put under increasing financial strain as inflation restricted their ability to consume.  Currently only two provinces index their minimum wages based on the Consumer Price Index, and are offered guaranteed protection from this type of wage erosion….

There are two clear considerations that must be made when evaluating the adequacy of the minimum wage in Canada….Letting the real value of the minimum wage deteriorate just creates a cycle of poverty….

For those who oppose increasing the minimum wage in Canada, there are several arguments used to justify maintaining low rates. …The amount of people earning the minimum wage has remained under 10% of the total working population. This is not a large enough portion of the population to make a difference; if most people already earn above the minimum wage there’s no need to increase it. One thing often used to strengthen this argument is that, of the small number of minimum wage workers that exist, the majority are teenagers or students who are not attempting to support a family. Instead, they are working for personal money or for the experience and will soon move up the job ladder. The first major issue with this argument is that it blatantly accepts discrimination as a reason to pay someone low wages. Age is one of the prohibited grounds outlined in Section 15(1) of the Canadian Charter of Rights and Freedoms which guarantees all citizens equal and fair treatment under the law. To say that the wages of adults should be prioritized over the wages of young workers is a clear violation of this right. The purpose of setting a minimum wage is to create a sense of equality for vulnerable workers of all ages. Second, teens account for less than half of the minimum wage earners, so there are quite a few adults in Canada earning the lowest legal wages. Young adults may not have been active in the labour market for long but they are just that, legal adults who have financial responsibilities. Some do attend a post-secondary institute; however, that does not mean they are working out of choice. Not all young people have the financial support of their families to help them pursue their education. They rely on their paid employment to cover the ever increasing costs associated with education. ….The reality is that minimum wage earners are not one specific group of people and they definitely do not fit the stereotype of a few teenagers and students getting their first jobs. ….

The philosophy associated with our economic system is the constant need to keep costs as low as possible, which also means low wages for much of our workforce …. The theory is that as wages increase operation costs, employers are forced to find other ways to make up the difference. ….Although Canada’s unemployment rate has made some recovery since the 2009 recession, as of August 2014 it was still 7.0%…. Given the current economic climate, this argument suggests that the potential repercussions that increasing the minimum wage might have on unemployment rates, could seriously affect Canadian society. After examining the economic research available on the connection between unemployment and minimum wage increases, it is difficult to say with conviction how the two factors are related, if they are at all….. According to The World Bank’s World Development Report 2013: Jobs, there is no known universal impact of the minimum wage on unemployment rates. In order to say with certainty what the impact actually is, individual countries would have to closely monitor the labour market and compile vast amounts of research (World Bank, 2012). Our opinion on the matter is very similar. Based on the research that has already been done, there is too much contradicting evidence to say with confidence what the real effects on unemployment rates are.

A proposed alternative to increasing the minimum wage is to instead increase the basic personal tax exemption…..This policy does not introduce more money into the economy, it simply redirects it from government revenues to individual households. ….The redistribution of money does not make Canadians better off, it only continues to subsidize the low wages offered by employers…..

Minimum wage workers are more likely to be employed with a large firm than a small company; a troubling trend that requires further examination.  This recognition that large scale companies are more likely to pay the minimum wage than small businesses raises some serious concerns about who is utilizing minimum wage laws and why. ….However, some of Canada’s largest companies continue to offer many of their staff members only the minimum wage despite their recent success and profitability…..

Individuals earning low wages are the least likely to be meeting all their needs, so when their wages increase instead of saving their new income they use it to purchase the goods they have been lacking. This directly contrasts the wealthy who are more likely to save or invest additional income than inject it back into the local economy.

Minimum wage laws can actually benefit communities. Studies have shown that because individuals cannot afford to financially support their households on the minimum wage, they often turn to social services for assistance ….This means that the taxpayers are essentially subsidizing the low wages of a company that makes billions in profits. Additionally, when large firms move into an area and offer low priced goods, it drives down the wages of workers employed at small firms that need to reduce costs to stay competitive….. In some cases, not only will wages in the area drop but small employers will be forced to close—eliminating jobs altogether.

Even with most provinces attempting to conduct neutral reviews on the minimum wage rate, the final decision still remains politically motivated. One team of researchers found that, while the proximity of an election did not influence the decision to alter the minimum wage, the political ideologies of the government in power did. The New Democratic Party in particular were more likely to have a higher minimum wage rate in place than other parties (Dickson & Myatt, 2002). A 2006 study (Green & Harrison, 2006) found similar trends relating to the minimum wage and political agendas; conservative governments would let the minimum wage stagnate and centre-left parties would approve increases but neither were willing to make drastic changes. ….The issues at play when debating the appropriate minimum wage rate are complex, as it is not exclusively an economic policy….. Rather it is the ideology of “universal fairness” that generates support ….. This attitude is further portrayed by research that suggests the public perception of poverty is not to blame the victim. One study found that respondents, instead of citing the self-destructive behaviours of individuals like laziness and the inability to adhere to a budget, were more inclined to believe structural factors were the major contributors to poverty. This included social and economic factors like low wages (Love, et al, 2006). Individuals also recognized that employment no longer guaranteed people the means to escape poverty, as wages are often insufficient and, while workers are often willing to work more hours, full time positions are becoming more rare (Love, et al, 2006). The reality is that minimum wage policy is an economic, political, and social matter. As Canadians we must decide what we need from our minimum wage rates, then determine how to balance all these factors to achieve that goal. Decreasing wage inequality should be the first priority, as minimum wage policies have the potential to prevent extreme poverty. Increase the wages of other low paid workers and allow individuals to accumulate more financial support (World Bank, 2012). We must decide what quality of life we feel all Canadians deserve. Should full-time workers only be able to meet their basic needs like food and shelter, or are they entitled to a lifestyle that also considers their social and political well-being when determining basic living standards….? It is not possible to set the minimum wage based solely on economic factors because these broader social implications are the end results for Canadians.

Currently, there is no accountability for those actually determining the minimum wage.

This is not an issue that only affects businesses, so the human aspect needs to be given more priority in the minimum wage debate. While it is important for our economy to remain stable, we must also ensure the needs of workers are being met. They should be able to enjoy a certain standard of living; however, full-time employment is no longer a guaranteed escape from poverty. It is time to evaluate what our society deems fair, and compensate minimum wage workers accordingly. Raising the value of labour at the bottom, is a raise for everyone in Canada”.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).