Middle income Canadians to take bigger hit when CPP premiums go up Friday, because of the pandemic

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The reason is due to the pandemic’s effects on the labour market and how the YMPE is calculated.

The formula to calculate the earnings limit relies on increases in the average weekly earnings recorded over the year ending June 30, compared to the same figure during the preceding 12-month period.

Over the course of the pandemic, average weekly earnings have increased, but not because people are earning more.

More lower-income workers lost their jobs between March and June than higher-wage workers meaning there were fewer low-wage workers as part of the calculation. The federal chief actuary’s office says that’s why the overall increase is larger than originally projected

The reaction

Dan Kelly, president of the Canadian Federation of Independent Business, estimates that anyone around the maximum earnings limit will effectively see a 9.3 per cent increase in premiums, beyond the just over five-per-cent bump baked into law.

“That’s going to be hundreds of dollars of new CPP premiums out of paycheques of middle-income Canadians not because they got a raise, but because the formula has not had a COVID adjustment,” Kelly says.



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