pension max to jump up, lower incomes already

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/canadians-will-see-less-take-home-pay-starting-jan-1/article2285163/

Workers are seeing their EI premiums rise by five cents per $100 of insurable earnings to $1.83 on Jan. 1, while the maximum insurable pay increases to $45,900 from $44,200. In addition, the maximum pensionable earnings rise to $50,100 from $48,300.

“Between the employer and employee, you have $6,630 of payroll taxes. That’s the price of hiring a Canadian.”

A spokesman for federal Finance Minister Jim Flaherty said the government has ushered in significant tax relief since 2006 and that the tax burden of Canadians is now the lowest in 50 years.

“There will (also) be absolutely no increase to the CPP contribution rate,” added Chisholm Pothier, Mr. Flaherty's director of communications. “What is being adjusted is the maximum CPP contribution room only, something that happens every year to account for inflation.”

He noted that the maximum CPP benefit increases by $320 to $11,840 in 2012.

( In addition, the maximum pensionable earnings rise to $50,100 from $48,300. )

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D - a few points.

Payroll taxes discourage employers from hiring new workers. In theory, flexible hire 'n fire policies would still encourage hiring new workers instead of maxing out overtime for existing ones (also an expense). But such policies would leave workers with no steady source of long-term income, and they would stop buying luxury goods, as well as obtaining house mortgages. A GAI (guaranteed income) program could mitigate this, and still reap the benefits of a flexible labour force. Unlikely to happen though.

So that is a 3.7%

Whereas the increase in CPP-able earnings is more like 1%.

D - I guess the future favours a low-inflation, German-style approach to monetary policy. Otherwise the pensioners either find their effective income decreased by inflation, or the CPP fund rapidly becomes unsupportable due to adjustment-to-inflation and huge strain on a small worker base.


D - then there is concern about what happens to the stock market when Boomers start to cash out.

http://www.arbitragemagazine.com/features/boomers-capital-markets-crash/

If baby boomers retire and sell off their assets, this will drive down stock prices causing a fall in the markets worldwide. The basis of this argument is that the baby boomer generation represents a large cohort with their retirement savings tied up in the financial markets. When they try to sell all their assets to prepare for retirement, they will be selling to a younger and much smaller cohort who will simply not have the demand to meet the supply. Economics 101 tells us that when supply is greater than demand, prices must fall.

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D - one need not talk about sensational crashes. If stock market returns remain stagnant or low for a few decades, then the CPP fund may become untenable to support intergenerationally.
Do you suppose retired Boomers will accept pay cuts? From c. 2/3? When CARP -their lobby group - if pushing for a shift to more like 3/4 income payout?
Do you really suppose a CUT instead, to, say, 1/2 or 3/5, would be politically tenable? Financially necessary, maybe, but that's not the same thing.
The CPP fund, after paupering the GenXYZ (particularly the Z gen, which will pay the largest share of their working career income from beginning to end), would need inevitably succumb to these forces. It would, after gen XYZ has paid in at dear cost, not be able to continue past the death of the last Boomers. GenX shares some qualities with 'Baby Boomers', and might gain some use of high CPP payout rates, particularly Freedom-55 GenXers who would be able to function on par with age-then-65 Baby Boomers. In other words, the richest of the Xers.

Not a very cheery scenario, huh?
I just read today about the Italian gov't debt sales not going as well as hoped. And the Americans are bleeding jobs again. We're not out of the woods yet.
This year's end, the future is not so bright that I need to wear shades, as the song goes.
This year, I need low-light amplicifation Starlight goggles to see a silver lining on all those dark clouds.