Chapter 1 - A Plan for Middle Class Progress
One year ago, Canadians elected a new government—one focused on strengthening and growing the middle class, and helping those working hard to join it.
Confident, ambitious countries invest in their own future. They invest in where the economy is going—and do not shy away from progress. This type of progress isn't easy—it takes smart investments in infrastructure, in technology, and most importantly, in the skills and creativity of its people.
Why the Middle Class Matters
The world over, strong economies share a common trait: a strong and growing middle class.
This is to be expected. After all, the middle class is the heart of the Canadian economy.
When the middle class does well, consumer demand is strong and businesses can invest with confidence—creating more jobs and more opportunities for more people.
With better job opportunities, middle class families are better able to invest in their children's education, save for retirement and feel more secure in their financial future.
This helps to build an economy that is not only strong and resilient, but one that leads the global charge to create the economy—and the well-paying jobs—of the future.
At the same time, economic growth—on its own—is not enough. The benefits of growth must be felt by everyone, not just the wealthiest one per cent.
Real change includes considering new and meaningful ways to measure progress.
Increasingly, Canadians view the decisions that governments make through different lenses. Canadians challenge their governments to not only create jobs and growth, but to improve their quality of life, make environmentally responsible choices, and build an economy that gives all citizens the best chance to succeed today, and for their kids and grandkids in the future.
This Fall Economic Statement reflects that deeper understanding of these various lenses—for Canada, and for Canadians.
Early Progress for Canada's Middle Class
Growing the Middle Class
Strengthening and growing the middle class to create long-term economic growth: that has been the government's top priority in its first year, and millions of Canadians are already feeling the positive benefits.
One month after taking office, the government introduced legislation that cut taxes for the middle class, and raised taxes on the wealthiest one per cent of Canadians.
This was the fair thing to do for Canadians—and the smart thing to do for Canada's economy.
As a result of this tax cut, nearly 9 million Canadians have been seeing more money on every paycheque starting last January. That's more money that middle class Canadians have to save, to invest, and to spend in their communities.
Brandon and Briana
Brandon and Briana live in Scarborough and have no children. They both earn $75,000 a year. As a result of the government's middle class tax cut, each of them will receive $446 in tax relief in 2016, for a total of almost $900. With these savings, Brandon and Briana will be able to make an advance payment on their condominium mortgage.
As one of its first actions, on December 7, 2015, the government delivered on its commitment to strengthen the middle class. It introduced a tax cut for Canada's middle class, reducing the second personal income tax rate to 20.5 per cent from 22 per cent—a 7 per cent reduction.
To help pay for this middle class tax cut, the government raised taxes on the wealthiest Canadians by introducing a new top income tax rate of 33 per cent for individuals with more than $200,000 in taxable income each year.
What Success Looks Like:
Effective January 1, 2016, Canadians with taxable income between $45,282 and $90,563 saw their income tax rate fall, leaving more money on their paycheques to save, invest and grow the economy.
In total, nearly 9 million Canadians are now benefitting from this tax cut. Single Canadians who benefit from this measure will see an average tax reduction of $330 every year, and couples who benefit will see an average tax reduction of $540 every year.
Better Opportunities for Canadian Children
Nine out of 10 Canadian families with children are getting more help today than they did one year ago thanks to the new Canada Child Benefit (CCB).
The CCB is simpler than the programs it replaced, and is fully tax-free and fairer. Benefits are determined by family income, giving more to families who need it most, and less to those who don't.
The CCB is also more generous. Families benefitting will see an average increase of nearly $2,300 in the 2016–17 benefit year, compared to the previous system of child benefits.
For these families, it means more money to spend on healthier groceries, sports and camp programs, and new winter clothes.
The CCB delivers enhanced support to low-income families, including many single parents. About 65 per cent of families receiving the maximum CCB are single parents, the majority of whom are single mothers.
For hundreds of thousands of Canadian children, the CCB is a ladder out of poverty. As they grow, it will be easier for them to stay healthy, to succeed in school, and to find and keep good work. Our kids will have more opportunities available to them, and go on to raise their own families in a country that is more prosperous and fair.
To ensure its value is not eroded over the long term by inflation, the government proposes to index the CCB beginning with the 2020–21 benefit year.
Lyndon is a four year old boy living in Victoria with his mom, Samantha, who earns $30,000 a year. Since Canada Child Benefit (CCB) payments began in July 2016, she has been receiving $533 per month, tax-free. In the 2016–17 benefit year, she will receive total CCB payments of $6,400 (which is $1,468 more than she would have received under the previous system of child benefits). With the extra money, Samantha will be able to buy more books for Lyndon as he starts school, register him for swimming at her neighbourhood community centre, and increase her Registered Education Savings Plan (RESP) contribution for Lyndon's future education.
The first CCB payments were issued in July 2016. Over 3.2 million Canadian families are receiving payments monthly. They now have increased means with which to raise their children.
What Success Looks Like:
With the introduction of a more generous and better-targeted CCB, about 300,000 fewer children will be living in poverty in 2017 compared with 2014. This represents a reduction of about 40 per cent in overall child poverty—a major step forward towards the goal of ensuring all children in Canada have a fair chance at success. Going forward, the government will closely monitor the number of children living in poverty.
Like Lyndon's family, 9 out of 10 families are receiving more in child benefits now than under the previous system of child benefits. The government will carefully track the impact of the CCB on families' disposable income.
The government will also study the impact the benefit has on opportunities that families have to save to enhance their own financial security and to invest in their children (e.g., in RESPs and take-up of the Canada Education Savings Grant and Canada Learning Bond).
The government will examine how to measure the impact of the CCB on other key outcomes.
Better Jobs and More Liveable Cities
The government is following through on its promise to make historic investments in infrastructure—in the projects Canada needs and the people who can build them.
Investments in infrastructure create good, well-paying jobs that can help strengthen and grow the middle class today, while building Canada's economy for the future.
They can also make a real difference in the day-to-day lives of Canadians—through things like shorter commute times, less traffic congestion, cleaner drinking water and more affordable housing.
To ensure that there is no undue delay in creating more good, well-paying jobs and building stronger communities, the government accelerated its efforts by investing $11.9 billion in infrastructure in Budget 2016.
Josh and Josée
Josh and Josée live in Toronto, and spend more than 90 minutes commuting to and from their downtown jobs every day—that's three hours every day that could be better spent at work, or with family and friends. By building new underground transit lines to their neighbourhood, and investing in service improvements for surface routes along major corridors, federal investments will result in reduced commute times, and allow Josh and Josée to spend less time getting back and forth to work and more time with their young family.
Paul takes his grandchildren to the waterfront almost every day for a walk or to go swimming. Since new investments have been made in his municipality's waste water and storm water infrastructure, there haven't been any waste water overflow events during major storms, making the waterfront more enjoyable and safer for his family.
Adam and Farah
Adam and Farah are two working parents who are expecting their second child. Faced with mounting child care costs, Farah is concerned that she may have to leave the workforce while her children are young—a move that would affect her career and family's livelihood in the long run. New federal investments in social infrastructure will allow Farah to continue working, knowing that her children will thrive and learn in a safe and supportive environment. Early Progress: The government has been working to deliver and expedite Phase 1 funding for public transit, green and social infrastructure to create economic growth, encourage social inclusion and improve the environment.
The government has been working to deliver and expedite Phase 1 funding for public transit, green and social infrastructure to create economic growth, encourage social inclusion and improve the environment. Projects supported in 2016 include:
- $85 million for the expansion of the Southeast Bus Rapid Transitway to support Calgarians getting to work and school on time and safely.
- $62 million for the Combined Sewage Storage Tunnel, the largest portion of the Ottawa River Action Plan, so that Canadians can enjoy recreational activities on a cleaner and healthier Ottawa River.
What Success Looks Like:
- Reduced urban congestion, with improved transit service and shortened commute times.
- Drinking water, waste water treatment and storm water infrastructure that meet consistently high standards across Canada and are resilient to climate change impacts.
- Reduced number of Canadian households in "core housing need" (living in housing conditions that are inadequate, unsuitable or unaffordable).
- Increased number of high-quality, affordable child care spaces.
- Reduced overcrowding in housing in First Nations communities.
- More jobs, which improves Canada's economic growth over the long term.
More Affordable Post-Secondary Education
In Canada, every young person should have the opportunity to go to university or college.
To make post-secondary education more affordable for more young people, the government boosted Canada Student Grants by 50 per cent for those who need it most.
That's an increase of up to $1,000 more per year for students from low- and middle-income families. For 386,000 students each year, it means more help to pay for post-secondary education and keep debt loads manageable.
To help recent graduates as they transition into work, the government also increased the loan repayment threshold for Canada Student Loans. Starting this academic year, no student graduating from college or university will have to start paying back their Canada Student Loans until they are earning at least $25,000 per year.
Anita is a third-year undergraduate student at the University of Calgary. She is from a family of four and is currently living at home. Her parents' combined income for 2016–17 is under $46,000.
Thanks to the enhanced Canada Student Grants, Anita is able to receive $3,000 this academic year in non-repayable assistance. That's an increase of $1,000 in non-repayable assistance for Anita. This increased assistance will help make post-secondary education more affordable for Anita and keep her debt loads manageable.
As a result of the Canada Student Grant enhancements, eligible students from low- and middle-income families and part-time students will receive more non-repayable assistance during the 2016–17 academic year.
What Success Looks Like:
Canadian students who qualify for Canada Student Grants will benefit from these enhancements in two ways:
First, with these Canada Student Grant enhancements, the number and proportion of students receiving non-repayable assistance under the Canada Student Loans Program is expected to increase.
Second, these enhancements, together with changes to the repayment threshold for Canada Student Loans, are expected to reduce Canada Student Loan default rates. This means a more manageable debt burden for students in need.
Renewing the Relationship With Indigenous Peoples
The government is committed to renewing the relationship between Canada and Indigenous peoples, based on recognition of rights, respect, co-operation and partnership.
The unprecedented investment of $8.4 billion announced in Budget 2016 marked a significant first step towards improving the socio-economic conditions of Indigenous peoples and advancing the process of reconciliation.
Through Budget 2016 investments, the government is partnering with Indigenous peoples to address the issues most important to them such as:
- Improving primary and secondary education for First Nations children and fostering better learning environments by investing in First Nations schools;
- Improving on-reserve water and waste water infrastructure with the aim of eliminating long-term drinking water advisories and ensuring all Canadians always have access to clean drinking water;
- Improving housing conditions in First Nations, Northern and Inuit communities;
- Supporting economic development for the Métis Nation to improve the quality of life for Métis individuals, entrepreneurs and communities and expand their economic opportunities; and
- Expanding the Nutrition North Canada program to help ensure that more families living in isolated, northern communities have access to affordable, nutritious food.
Supported by social infrastructure funding through Canada Mortgage and Housing Corporation's Residential Rehabilitation Assistance Program On-Reserve, the community of James Smith Cree Nation is in the process of fully renovating a 4-plex and a 6-plex housing unit. The units are 30 years old and the First Nation advised they had been wanting to renovate them for the last 15 years. Funding of $402,490 is being provided through a forgivable loan, enabling the community to proceed with the much-needed upgrades. Work is reported to be progressing very well.
The government has been working to deliver and expedite Phase 1 funding for social, green and other Indigenous infrastructure to improve quality of life, promote economic growth, and contribute to closing socio-economic gaps. Projects supported in 2016 include:
- Construction, service or renovation of 3,174 housing units on reserve.
- Since the commitment to end long-term drinking water advisories was made, 14 of these advisories have been removed and 195 water and waste water capital projects across Canada are now underway.
- 130 school infrastructure-related projects and 310 other community infrastructure projects.
As well, the government continues to work toward renewing the relationship with Indigenous peoples. Key initiatives include:
- Launching the National Inquiry into Missing and Murdered Indigenous Women and Girls.
- Working towards establishing a working group with the Assembly of First Nations to develop a new fiscal relationship.
What Success Looks Like:
- Healthier, stronger Indigenous communities as a result of:
- Reduced overcrowded housing conditions.
- Access to clean drinking water, improved sanitation and improved medical facilities.
- Enhanced community infrastructure, including roads and bridges, schools, connectivity, and cultural and recreational facilities.
- Better access to early childhood learning and child care.
- Sufficient, predictable and sustained funding for First Nations communities.
A More Secure and Dignified Retirement
After a lifetime of hard work, Canada's seniors have earned a secure and dignified retirement.
That security starts with a strong and stable pension plan.
Today's workforce is changing. Young people will not have access to the same types of pension plans as their parents had. To help today's youth save for their retirement, the strengthened Canada Pension Plan (CPP) will benefit individuals entering the workforce today the most. This is an important part of a long-term plan to help young people be secure in their future.
The strengthened CPP will ensure that more Canadians can spend their retirement years as they should—enjoying their health and their families, rather than worrying about making ends meet—and reduce the anxiety that many Canadians feel about their ability to retire.
Once fully in place, the CPP enhancement will increase CPP retirement benefits by between about 33 per cent and 50 per cent, depending on the worker's earnings.
To help give future seniors more security and stability, the government also restored the eligibility age of Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits to 65, putting thousands of dollars back in the pockets of Canadians as they become seniors.
Additionally, in July 2016, the government increased the GIS by up to $947 per year for the lowest-income single seniors. This will support seniors who rely almost exclusively on the OAS pension and the GIS and may therefore be at risk of living in poverty. Single senior women particularly benefit from this measure as they are more likely to live in poverty.
Maya is a young graphic designer. She's worked hard to establish herself in her field and has held several part-time and term positions, with total annual earnings of around $55,000. She's starting to think about retirement saving, but none of her employers offer pension coverage.
The CPP enhancement will help Maya prepare for retirement. On an after-tax basis, she'll contribute about an additional $14 per paycheque. As Maya changes jobs, and provinces, her contributions to the enhanced CPP will be made automatically and matched dollar for dollar by her employers. These contributions are invested in the market and will build up over her working life.
If Maya continues to earn $55,000 over her working life, in retirement she'll receive about $17,500 per year in CPP benefits in today's dollar terms—roughly $4,400, or 33 per cent, more than she would have received without a CPP enhancement. If Maya's earnings increase over her career, her CPP retirement pension could reach up to $20,000—roughly $7,000 more than she would have received without a CPP enhancement.
This pension is payable for life and grows with inflation, giving Maya the confidence that her savings will be available over her entire retirement and won't be eroded by higher prices or market volatility.
June is a new grandmother in her 50s. She worked to raise her children as a single mother and is helping raise her grandchild. She's looking forward to the financial security offered by Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits.
Restoring the age of eligibility for OAS and GIS to 65 means that June will have access to these benefits two years earlier than under previous policy, putting thousands of dollars back in her pocket just as she becomes a senior. In addition, increases to the GIS top-up for single seniors means that June could receive an additional $947 every year, once she turns 65.
Early, cooperative efforts as joint stewards of the CPP led Canada's Ministers of Finance to reach an historic agreement to enhance the CPP on June 20, 2016, in Vancouver, B.C. This enabled the federal government to table federal legislation on October 6, 2016 to bring the agreement into force, with a gradual phase-in of the enhancement starting in 2019.
Workers in Quebec do not participate in the CPP, instead participating in the similar Quebec Pension Plan.
The agreement to enhance the CPP will provide future Canadian retirees with more confidence that they will enjoy a more secure retirement and better quality of life.
In addition, the responsible implementation of the agreement, with a two-year announcement period and a seven-year phase-in, ensures that the impact on employers and employees will be small and gradual. In particular, businesses will have time to adjust to the change in contribution rates, and the government will implement it in a manner that minimizes administrative reporting requirements for businesses.
Higher monthly GIS benefits have been paid to seniors starting in July 2016.
What Success Looks Like:
Success can be measured over both the short and long term.
In the short term, success is the historic agreement reached in June 2016 by the Government of Canada and provincial governments after months of close collaboration. This demonstrated what federal and provincial governments can accomplish when they work together on behalf of Canadians.
As well, future Canadian retirees will have more confidence about their prospects for enjoying a more secure retirement and better quality of life. A gauge of success will ultimately be that Canadians increasingly feel prepared, financially, for their retirement.
In the longer term, fewer Canadian families will be at risk of under-saving for retirement. The proportion of families at such risk is expected to drop by 25 per cent due to the CPP enhancement.
The Path Forward
The government has been working hard to deliver real change for Canadians for nearly a year. In that time, significant early progress has been made—but more hard work lies ahead of us than behind us.
The pace of change is accelerating, and Canada needs to make smart decisions and sound investments today, to ensure that Canadians have access to the good, well-paying jobs of tomorrow.
In the coming months, the government will continue to build Canada's economy of the future—by attracting investment in clean technologies that will drive growth while ensuring clean air and water for our kids and grandkids, and by creating jobs and prosperity for the middle class.
This Fall Economic Statement, like the budget last spring, is about people. The government's priorities are Canadians' priorities, and success will be measured not by the investments made but by the outcomes achieved.
New measures will be introduced, so that the government can continue to make a difference in the lives of Canadians. These include new and innovative investments in infrastructure, a renewed focus on attracting investment, a strong commitment to welcoming the world's best and brightest workers, and more openness and transparency in the way government operates.
This is the future that the government is committed to build, and with continued hard work, that is precisely what it will deliver.
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