FEWO Committee Report

Can a strategy be developed to help women now and in the future have the home and working lives they want, with as little economic insecurity as possible?

INTRODUCTION

A number of witnesses encouraged the Committee to adopt a holistic framework to address the economic security of women and to recognize that broad demographic and economic trends contribute to women’s economic security. This was stressed by a witness from Human Resources and Social Development Canada, who reminded the Committee that a strong economy provides economic security for society as a whole, including women. Major social changes have also occurred since the rules for programs such as the Canada Pension Plan were developed:

Senior women are discriminated against, as far as CPP [Canada Pension Plan] is concerned, in that most of the current senior women either came through the system before the introduction of the CPP […] these senior women now draw either a minimum amount of CPP or none at all.[118]

The Committee noted that:

Building security could include gaining financial knowledge or new employment skills, having insurance against loss or adversity and being able to save in various ways for retirement or for a child’s education. When individuals are not in a position to cover their own basic economic needs themselves, government social programs and income support play a significant role in ensuring economic security.[119]

During the Committee’s consultations, witnesses pointed out how some measures and government programs affect women’s economic security. The Committee was also told that the various program elements are inter-related:

Obviously, the various elements of the retirement income system interact with each other, so changes to one part of the system may affect the operation of another part. For example, reducing the level of benefits available from the public earnings-related plan (the CPP/QPP) could increase claims on the basic income guarantee (OAS/GIS). Policies that resulted in more people saving on their own for retirement could conceivably result in reducing claims on the first tier of the system.[120]

5.1 EMPLOYMENT INSURANCE

5.1.1 Access to Employment Insurance benefits

The Committee heard that “women, overall, have lower access to employment benefits than do men, largely because of the nature of the jobs that they occupy.”[121] This includes access to Employment Insurance (EI) benefits. Witnesses suggested that the eligibility criteria made it difficult for women in non-standard work arrangements to qualify for benefits and described difficulties accessing training through Employment Insurance.

Several witnesses, like Monica Townson, reminded the Committee that the 1996 changes to the (then) Unemployment Insurance program resulted in a reduction in eligibility among women[122]:

When women lose their jobs, they generally can no longer qualify for what we used to call unemployment insurance. Back in the 1980s, 70% of unemployed women got benefits. Then in 1996 the rules were changed, and the program was renamed employment insurance. Now only about 32% of unemployed women, compared with 40% of unemployed men, get employment insurance benefits, which replace about 55% of their usual earnings when they’re out of work. In some parts of the country, coverage is much lower than that. In Ontario, for instance, only 23% of unemployed women get EI benefits.

Lucya Spencer of the Ontario Council of Agencies Serving Immigrants echoed the sentiment of several witnesses when she recommended that the government “change work-related legislation such as the Employment Insurance Act to ensure that more workers would qualify and to redress the systemic inequality faced by women.”[123] Others pointed out that increased access to EI would also extend access to maternity and parental benefits and that “increased access to unemployment benefits for maternity, adoption, and parental benefits will have a significant impact on the economic security of women in their younger years.”[124]

The Committee also heard that some groups, such as the self-employed, do not have access to Employment Insurance benefits or training. This is particularly problematic, as “many women are in non-standard work arrangements where employers treat them as independent contractors and therefore do not make CPP and other payments.”[125] These women, who do not fit the traditional model of the self-employed, do not have access to labour market training opportunities provided under Employment Insurance if their employers have not paid into EI on their behalf. This is also a concern for women in the agricultural sector, who told the Committee that “training and education programs are very closely linked to employment insurance, for which many farm women would never qualify because they don’t work off the farm.”[126]

Recommendation 13:

The Committee recommends that the federal government change the eligibility criteria under the Employment Insurance Act to increase access to benefits to persons in part-time or part-year work.

Recommendation 14:

The Committee recommends that the federal government extend eligibility for maternity and parental benefits by changing qualifying requirements to allow parents to reach back over the three-to five-year period prior to the birth of the child.

5.1.2 Access to Employment Insurance Special Benefits (Maternity, Parental, Sickness, Compassionate Care Benefits)

Ruth Rose of the Université du Québec à Montréal identified maternity and parental benefits as the most important measure to be adopted, proposing that it be made universally available, with a higher income replacement rate.[127]

When you look around the world at countries that have low rates of poverty, particularly for single mothers, they have high rates of labour force participation. That’s why I think that while we want women and men to be able to take care of their children, the most important poverty-fighting measure we can have for women is keeping their feet in the labour market when they have small children. That’s why child care and maternity benefits are so important. When you’re on maternity leave you maintain your relationship with your employer, and you maintain your income.[128]

The National Council of Welfare pointed out that “EI, maternity, and parental benefits are least accessible to those mothers who need them the most, although EI evaluations show that there are wonderful benefits for workers and children if they qualify.”[129]

Currently, self-employed persons can neither contribute to EI nor draw benefits. The Certified General Accountants Association of Canada highlighted the challenge faced by self-employed women who are ineligible for special benefits under the Employment Insurance program:

As employers, they contribute financially to the EI program. But as individuals, as we know, they’re unable to access the program. As the program expands beyond maternity benefits into issues like compassionate leave, women entrepreneurs are more and more disadvantaged. So women are still primary caregivers. The numbers don’t lie on that. We think that expanding the EI program is a necessary policy direction that we need.[130]

The Committee heard that “Quebec has recently revamped its EI program to enable it to provide maternity benefits more broadly than the federal government does, and the program has enormous support.”[131] Some witnesses suggested that a similar extension of benefits be considered at the federal level.

Its study on Maternity and Parental Benefits under EI led Women’s Network PEI to conclude “Bottom line is that the maternity or parental leave currently offered to families in Canada is a great opportunity for some, a lost opportunity for many.[132]

Recommendation 15:

The Committee recommends that the federal government amend the Employment Insurance Act to allow self-employed persons to opt into the special benefits programs under the Employment Insurance (EI) program, such as maternity and parental benefits and the Compassionate Care Benefit.

5.2 OLD AGE SECURITY AND GUARANTEED INCOME SUPPLEMENT

Old Age Security (OAS) is a residence-based pension program based on age and years of residence in Canada. It recognizes the contribution made by seniors to society, regardless of whether they were doing paid or unpaid work. Additional benefits that specifically target low-income seniors include the guaranteed income supplement, which is available to low-income OAS pensioners, and the allowance that is available to
low-income spouses, common-law partners, or survivors between the ages of 60 and 65.[133]

Because the incidence of low income among unattached women remain high, a higher proportion of women receive the guaranteed income supplement (GIS) to supplement their OAS. “In 2003, OAS and GIS, the spouse’s allowance, comprised 32% of senior women’s annual incomes, compared to approximately 17% for senior men.”[134]

Witnesses suggested that the OAS and GIS are insufficient to allow seniors, especially those who are unattached, to live above the low-income cut-off. In 2003 an unattached person who received only OAS and the GIS had an average annual income of $12,031, an amount much less than the low-income cut-off for urban areas, where the cost of living is high. [135]

Recommendation 16:

The Committee recommends that the federal government increase the Guaranteed Income Supplement (GIS) so that total Old Age Security and Guaranteed Income Supplement provides an after tax income above the poverty line.

5.3 CANADA PENSION PLAN

The Canada Pension Plan is a joint federal-provincial plan that provides retirement, survivor and disability pensions, death benefits, and orphans benefits to contributors and their families. The Plan is funded through compulsory contributions of all working Canadians between the ages of 18 and 70 who are not receiving a retirement or disability pension from the Plan.[136]

The Committee heard that the CPP had several features which generally or specifically target women: it covers all workers, including those in sectors with low rates of employer-sponsored pension coverage; it covers part-time and self-employed workers; it is portable between jobs; it provides a child-rearing dropout provision which effectively increase the value of a person’s pension benefits; it allows for credit splitting between former partners upon the dissolution of a marriage or common-law relationship to ensure that CPP credits earned while living together are split equally; it allows for pension sharing between the spouses which is potentially beneficial for tax purposes, and it includes a survivor’s pension to provide the surviving partner with additional income.

Witnesses raised a number of concerns about CPP, suggesting that:

1.      Governments should ensure automatic and compulsory sharing of pension rights under the CPP following divorce or legal separation;

2.      The CPP drop-out provisions should be expanded to compensate for time that is spent outside the labour force, or with very low earnings, raising children and providing other forms of care-giving; and

3.      Canadians should be allowed to contribute to the maximum contributions of CPP on a voluntary basis, whether or not they are in the paid labour force;

4.      The survivor benefits available to the surviving partner of a CPP recipient are too low; and

5.      Immigrants from countries with which Canada has not signed a Social Security Agreement must wait ten years to qualify for CPP and for Old Age Security.

5.3.1 Compulsory sharing of CPP pension rates following divorce or separation

The Canada Pension Plan has provisions which make it possible to split CPP credits between partners upon separation. Some witnesses, such as the National Advisory Council on Aging suggested that “Women who are divorced or separated have much lower retirement incomes than do single women and widows, as most divorced women do not claim a portion of their former spouse’s pension, despite being entitled to it.”[137] Prior to the coming into force of Bill C-36, in May 2007, it had been necessary to apply to split CPP credits within four years of separation. This time limitation is now removed, making it possible to make an application at any time after that four-year period, if both former common-law partners agree in writing.

5.3.2 CPP drop-out provisions for caregiving

The CPP Child Rearing Provision removes the years spent raising children from the formula to calculate CPP benefits. “When these years are not taken into consideration in the calculation, the impact is usually to raise the level of CPP benefits”.[138] Several witnesses suggested that other forms of caregiving should similarly be recognized by the Canada Pension Plan, such as caring for a person with a disability or elderly friend or family member. In the words of the witness from the Canadian Teachers’ Federation, “If drop-out time is legitimate for addressing issues related to young children, it should be equally legitimate for addressing drop-out periods for elder care.”[139]

Recommendation 17:

The Committee recommends that the federal government develop a drop-out provision in the Canada Pension Plan, similar to the existing drop-out provision for childcare, for people who are caring for individuals with disabilities or the elderly.

5.3.3. Voluntary contributions to CPP

Some witnesses suggested that Canadians should have the choice to increase their contributions to the maximum CPP amounts, whether or not they are in the labour force. The National Council of Welfare told the Committee

Right now if you’re a low-income worker, as many women are, then you only can contribute a certain amount. Therefore that affects the pension you receive later on. If you could contribute the full amount, and maybe get your employer also to contribute an extra amount, or contribute both the employee and employer amount yourself, this would be much more useful than actually purchasing an RRSP with the same amount of money. You would be doing yourself a much greater service to assure yourself that when you retired you had the full CPP. It would be allowing all Canadians, those who wanted to, to up their contributions to get the maximum.[140]

Recommendation 18:

That the federal government develop options, in consultation with Canadians, on how the Canada Pension Plan could be amended to allow individuals to choose to increase their contributions to the maximum CPP amounts, or to participate in the CPP if they are currently outside the labour market.

5.3.4 CPP Survivor Benefit

Several witnesses commented that the CPP Survivor benefits which are payable to a surviving spouse or common-law partner were too low. Currently, for seniors aged 65 or more, the CPP Survivor benefits are set at up to 60% of the contributor’s retirement pension. A document prepared by Women in Action identified a common concern about this level of benefit:

This means a survivor’s income from an occupational pension plan and/or CPP/QPP is reduced by 40% upon a spouse’s death. This is certainly an improvement from not too many decades ago when a woman found her husband’s pensions disappeared entirely upon his death or were cut in half. However, women who are receiving only 60% of that previous pension income may not be able to maintain their standard of living as the rate required to cover living expenses for one person is somewhere between 2/3 and 70% of living expenses for a couple. This institutionalized inadequacy may cause many widows to eventually become impoverished.[141]

The pension income of the surviving partner is currently calculated into the level of entitlement to the CPP survivor benefit. The Canadian Teachers’ Federation recommended that the surviving partner “should receive a survivor’s benefit unaffected by any other benefit paid to the individual under CPP/QPP.”[142]

Recommendation 19:

The Committee recommends that the CPP survivor benefits for seniors aged 65 or more be increased from up to 60% of the contributor’s retirement pension to 70%.

5.3.5. Access to CPP for New Immigrants

The Committee heard that residency or contribution requirements linked to CPP and Old Age Security put senior immigrants at increased risk of low income. In fact, many newcomers may not qualify for these income programs. In its brief, the Ontario Council of Agencies Serving Immigrants noted that

this wait period is reduced for immigrants from countries that have a social security agreement with Canada. Rich countries in the Global North are overwhelmingly represented in the list. Countries such as China, India and Pakistan being the source of the largest number of immigrant arrivals in the last ten years are not included. [143]

Immigrants who have lived and worked in a country that has an agreement with Canada, and paid into the social security plan of that country can therefore receive benefits in Canada, while other new immigrants do not.

Monica Townson identified a number of barriers faced by immigrant seniors in accessing CPP and Old Age Security:

For old age security you get a pro-rated benefit, depending on how long you’ve been in the country. Canada Pension Plan is based on your contributions. There are problems with the CPP for immigrants too, because the benefits are calculated based on a contributory period that starts at age 18. You may not have been in the country at age 18, but nevertheless it goes back then.[144]

Recommendation 20:

The Committee recommends that the federal government increase the number of countries with which it has social security agreements in order to provide pension coverage to a larger proportion of new immigrant Canadians.

5.4 TAX MEASURES

5.4.1 Tax measures that encourage saving

Recent retirement income policies have emphasized how important it is for individuals to save on their own. Generous fiscal assistance is provided for retirement savings through registered retirement savings plans (RRSPs). One witness[145] expressed caution about the capacity of women to benefit from tax measures that encourage savings such as RRSPs. Since the majority of adult women are now in the paid labour force, it is assumed that they are able to save for their retirement and avoid poverty in their latter years. Yet the extent to which women can save depends on their income.

In its report of 2004 entitled Pensions in Canada: Policy Reform Because Women Matter, We*ACT recommends converting registered retirement savings plans (RRSPs) and registered pension plans (RPPs) into tax credits under the Income Tax Act.

5.4.2 Income splitting

Income splitting refers to a tax savings strategy whereby a family member in a higher tax bracket transfers part of his income to a second family member who is in a lower tax bracket. The income transferred is taxed at a lower rate or not at all if the second family member’s income is low enough.

On the one hand, advocates argue that allowing income splitting increases equality among two-parent families where the two parents’ incomes differ and two-parent families where the two parents have equal incomes (such as families whose total income is comparable and between $60,000 and $90,000). This approach would be helpful for families where one spouse stays home to look after the children. The arguments in favour of income splitting point to the potential tax reduction for single-income families with children and the potential positive demographic impact of reducing of the tax burden on families where one parent stays home with the children.

On the other hand, those opposed to income splitting point to the risk of losing control over income or losing financial independence as a result of splitting income at some point in life, as well as the risk of creating a disincentive to work. Finally, the difficulty in quantifying the value of unpaid work and the value of household production are among the many issues that fuel debate on this matter.

The Canadian tax system includes various measures that prevent income splitting within families, with specific exceptions.

The Federal Budget 2007[146] reiterates the federal government’s intention to implement its Tax Fairness Plan announced on October 31, 2006, in order to ease the tax burden on Canadian seniors and help them retain more of their retirement savings. These measures include authorizing the splitting of pension income for eligible retirees.

The witnesses’ reaction to pension income splitting was mixed. Canadian Activists for Pension Splitting expressed strong support for the pension income splitting measures announced in the 2007 budget, and that:

In polls, 70% of the population of Canada support pension splitting. That goes way beyond the people who are eligible.[147]

Those in favour of this measure argue that it will produce greater equality among households:

Basically, as far as CAPS is concerned, we entered into this discussion looking at pension splitting as a matter of fairness; that is, that people drawing the same income would end up paying different rates of tax, just because of the way the income was split. We thought that unfairness had to be addressed. Whether that in fact addresses all of the issues you have raised around the table, I guess I can’t speak to that specifically, but I can say that if you don’t address simple, obvious issues of fairness like that, it may be difficult to undertake others. So as far as I’m concerned, this one puts people earning the same amount of money in the same ballpark paying the same amount of tax, and I think that’s the fairness issue we wanted to address.[148]

It was argued before the Committee however that income splitting would not help certain vulnerable groups in society.

Neither income splitting nor pension splitting means very much to newcomer families.[149]

Income splitting for farm families will not work, because there’s not enough money coming into those families to even have income splitting as a viable option.[150]