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Alberta Pulling out of CPP thoughts

I think the idea here is simply to be polarizing. Then again, maybe the Premiere of Alberta is actually an idiot.

Let's start with the simple; creating a separate Provincial CPP replacement is a gamble. Period. The strength of CPP comes from the size of the pool, both in terms of money and participants. Yes, an aging population hurts. But it hurts more slowly with a larger pool of people. Alberta's population will eventually age as well. Their birth rate is lower than 2 and changes like this make it immigration a harder sell which is how most Provinces are currently offsetting aging populations. With a smaller pool of contributors this shift will hit harder and faster.

The other problem is the "ask". The claim that Alberta is owed more than 53% of the pool is absurd. That number is an inaccurate fantasy. There is quite literally no way it represents the actual, relative contributions of Albertans to the fund. 

Some quick Googling yields the following results:

  • Canada's population = 38.25m
  • Canada's avg wage = $59 300
  • Quebec's population = 8.7m
  • Alberta's population = 4.7m
  • Alberta's avg wage = $75 354
We don't need to be super accurate here because the difference won't be anywhere near 53% but we do need to remove Quebec because they don't participate in CPP and constitute a large portion of the population.

So, Canada - Quebec = 29.55m people. The average age was within spitting difference for all provinces so we'll just use this to compare rough contributions.

Of that, Alberta represents about 16%. And, Alberta's wages are about 27% higher than the rest of the country on average. Let's round it up to 30% because Alberta is included in that average as well.

And then scale up their 16% by 30% gives us about 21%. Notice how that number is NOWHERE NEAR 53%?

While the actual math is complicated, I will point out; I've been super generous by simply multiplying their population by their wage gap. Why? Well, since Albertan's are typically higher earners, and CPP amounts are based on income amount, their payouts from CPP are also higher on average. Which means that per person. And, given that the average age isn't markedly lower, this means that they are proportionately taking that money back out at the same rate. 

Realistically, the original 16% is probably still closer to the truth of a fair amount. I simply added the wage difference to the mix to show how far from reality that 53% number is. And to top it all off, I haven't heard anything to imply that there is any exit clause in CPP. So, they are likely at the mercy of the other participants in the pool for getting ANY money on the way out the door.

Now, I imagine that there will some good faith should this ever get to negotiations. Other Provinces may have considered this in the past or may be considering it now that a decent chunk of income is leaving the pool and they would like to set a reasonable precedence. Ultimately however, Alberta's best case scenario is to leave with a pool of money to leave it in a similar position as CPP. So, if there are benefits longer term it will only come from the gamble paying off. Short term the fund will simply be smaller and less diversified and thus at greater risk.

It COULD work out for Alberta. But I doubt it will. 

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