Question

f the age to qualify for CPP increases what is the potential impact on employers and employees?

Answer 1

CPP stands for a pension scheme wherein you receive a certain fixed payment post retirement for your personal expenses. If the age to qualify for the same increases, it basically means that the retirement age increases for people. The net effect of this on employers as well as for employees is as follows: -

1) For Employers: -

As an employer, our main aim is to keep our costs of staff as low as possible for business. What this then does is that it ensures that we can maximize on our per unit profits.

If the age of retirement increases for employees, it means that employers are able to retain people in the business for a longer period of time. The supply of labour force thus increases and this helps in reducing the costs of acquiring new talent which would have replaced the position post retirement of the existing staff.

Thus, we can conclude by saying that this is a win situation for an employer as they do not need to make retirement benefit payments to the person for a few additional years till he retires on one hand, and on the other hand it is possible for them to reduce their costs by retaining old talent which were hired earlier.

2) For Employees: -

Pension represents only a part of the income which a person receives. Increasing the age to qualify for pension would mean higher income and higher availability of jobs till a later age for employees. This means directly adding to their revenue over a period of time for the years extended in availing the pension scheme. The net effect is that increased profits bring in better results for people as employees. Their spending capacity increases and so does the economy grow in size with this additional income.

Thus, we can conclude by saying that increasing the age is of advantage to both employers and employees as one gets reduced cost of transition for the existing staff on one hand, and on the other employees get the benefit of being able to work for a longer time period respectively.

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