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FBO responds to proposed Ontario Retirement Pension Plan

A letter from Executive Director, Norm Beal


The Honourable Mitzie Hunter
Associate Minister of Finance (Ontario Retirement Pension Plan)
Ministry of Finance
6th Floor, Frost Building South
7 Queen’s Park Crescent
Toronto, ON M7A 1Y5

 

Dear Associate Minister Hunter:

Food and Beverage Ontario (formerly the Alliance of Ontario Food Processors), the voice of Ontario’s food and beverage industry, is pleased to provide comment to your consultation process regarding the Proposed Ontario Retirement Pension Plan (ORPP).

The food and beverage processing industry is a key driver to Canada’s economy and a large provider of jobs. In Ontario, the industry contributes $39 billion to the provincial economy annually and employs over 125,000 people. Recent statistics show that wages and salaries in the food and beverage sector total approximately $5.41 billion annually. A mandatory contribution rate of 1.9% would reduce net income in the sector by up to $102,333,5822. This represents a significant proportion of net income in a sector which is already low margin, labour intensive, and heavily exposed to global competition. Given that the industry is dominated by small and medium size businesses, associated costs would also be higher including those related to administration and compliance.

Both industry and government may wish to do more to ensure higher retirement incomes for future generations of Ontarians, and the economy may well absorb the costs and exhibit a modest net savings benefit over a long period of time. However, our concern remains that any disincentives to invest and job creation in the short term will lessen aggregate employment earning on which all pension contributions rest. We are also concerned that the proposed Ontario Registered Pension Plan is more generally not in alignment with the Ontario government’s agenda to create jobs and spur economic growth.

FBO recommends that the Ontario government work with other provinces in finding and securing adjustments to the improvement of the CPP and other pension reforms in order to address its issues with the pension shortfall. An already present and familiar administration of CPP would make the pension change more engaging and effective.

The government should also consider other elements of the business environment, particularly the cost of energy regarding its direct impact on the competitiveness of the manufacturing sector and the better paying jobs it provides. Energy costs have risen sharply in recent years and the government’s 2013 Long-Term Energy Plan (LTEP forecast) predicts further increases in industrial electricity pricing of over 5% annually for the next four years. The government’s plan to introduce carbon pricing could raise prices even higher in the years to come.

We encourage the government to share with stakeholders a detailed economic analysis assessing the costs and benefits of the plan and quantifying the information from both the economic and social perspectives. To better identify the middle income retirement savings shortfall the ORPP is intended to resolve, FBO also recommends government illustrate to what extent the ORPP will create new net savings, distinguish how investment and consumption will be affected, and estimate the short and long term business impacts and consequences for employment.

Finally, an analysis should be undertaken with respect to how employers intend to compensate for a 1.9% decrease in net income and whether that may include measures affecting employees such as salary changes or staff reductions.

 

Sincerely,

Norm Beal
Executive Director


MNP, “Economic Analysis: Ontario Food and Beverage Processing Industry,” 2012.
$5,385,978,000 x 1.9% assuming a 100% contribution rate