Fraser Institute says move will cut funding for startups, growth
Canadian businesses will suffer when the federal and provincial governments introduce larger employee contributions to the Canada Pension Plan.
That’s the forecast of the Fraser Institute which says that forcing workers to contribute more will inadvertently cut $114 billion from the investment pool by 2030.
The higher payments begin January 2019 and will be phased in over 7 years.
“A shrinking pool of domestic investment means there will potentially be less money available in Canada to finance start-up businesses, the maintenance and expansion of existing operations, and investments in new machines and technology—all of which are critical for improving the economy and the living standards of workers,” said Charles Lammam, director of fiscal studies at the Fraser Institute and co-author of Expansion of the Canada Pension Plan and the Unintended Effect on Domestic Investment.
That’s because data shows that, when investing privately, Canadians tend to invest in Canada (82.2% in 2016/17) while 83.5% of the Canada Pension Plan Investment Board’s holdings were outside Canada.
“We’re not suggesting that governments impose domestic investment requirements on the CPPIB—but our analysis highlights an unintended consequence of forcing Canadians to increase their CPP contributions,” Lammam said. “Governments across Canada could help offset the looming reduction in domestic investment by pursuing policies that encourage both domestic and foreign investment in Canada.”
