Published: April 3, 2019
EDMONTON — Albertan workers contribute far more to the Canada Pension Plan than its retirees take out, says a new Fraser Institute study, suggesting the rest of the country benefits greatly from the prosperity in Wild Rose Country.
The report comes at a time when Jason Kenney’s United Conservative Party is planning, if it wins the election on April 16, to pick a fight over equalization payments, another federal program to which Albertans contribute disproportionately.
Unlike equalization, though, provinces can opt out of participation in the CPP; Quebec already has.
In 2017, 16.5 per cent of all CPP contributions came from Alberta workers, while just 10.6 per cent of CPP expenditures made their way back to the province. The difference between what was paid in and paid out was $2.9 billion in 2017, the most recent year for which data are available. (Alberta paid in $8.1 billion and received $5.2 billion.) Between 2008 and 2017, Albertans have contributed $27.9 billion more to CPP than retirees in the province have received back.
“What we were trying to do is really use a case study to illustrate the disproportionate contributions Albertans make to national programs,” said Jason Clemens, one of the study’s authors, in an interview on Tuesday.
Ontario is the next highest contributing province in Canada. Over the same period, from 2008 to 2017, Ontario paid in $7.4 billion more than it received back — more than $20 billion less than the loss in Alberta, and that’s in a province with more than 14 million people, compared to Alberta’s roughly four million.
However, Ontario’s fortunes turned around in 2017. The province contributed about $24 billion, but received back about $25 billion.
British Columbia paid in $8.2 billion in 2017, and received back $8 billion.
Were Alberta to drop out of the CPP — which Clemens says they’re not recommending — other provinces would have to pick up the slack by raising individual contribution rates. Were the province to withdraw, Albertans could pay as low as 5.85 per cent into an Alberta pension plan, while the rest of the country would need to up their contributions from 9.9 per cent (the 2017 contribution rate) to 10.6 per cent, the study says. The federal government already raised the contribution rate (shared equally by employers and employees) to 10.2 per cent in January, and plan to increase it to 11.9 per cent by 2023.
There are three main reasons why Albertans pay more into CPP than what retirees get out of it. More Albertans are of working age — between 15 and 64 — compared to the province’s overall population, than in other provinces in Canada.
Among that group, there are traditionally higher employment rates in Alberta. “Which means they have a higher share of the population that’s working,” Clemens said.
And, as is a partial explanation for higher equalization contributions, Albertans simply make more money than workers in other provinces, so the province has more contributions per worker. What the study does, Clemens said, is point out to the rest of Canada the contributions Alberta makes to federal programming, and it helps explain why Albertans feel left behind by the federal government and other provinces.
“The hope would be back to the discussion of, there’s a give and take,” Clemens said. “The rising frustration in Western Canada, particularly in Alberta, is legitimate, in terms of what is the balance right now of the give and take?”