Hiking the retirement age is the wrong answer to the retirement crisis.

by Andrew Jackson Canadian Labour Congress

Raising the age of eligibility for Old Age Security/Guaranteed Income Supplement (OAS/GIS) benefits is the worst possible way to deal with the retirement income security crisis facing Canadians.

Experts such as former Assistant Chief Statistician Michael Wolfson project that one half of all middle income baby boomers face a severe cut to their living standards in old age. This is due to falling employer pension coverage (down to 25 percent in the private sector), rising household debt combined with low savings, and the big hit to "fend for yourself" RRSPs which comes from high fees and low investment returns.

The right way to deal with this looming crisis is to expand the Canada Pension Plan now to raise incomes for seniors in the future.

Half of all low income men will collect an OAS/GIS cheque for only 10 years.

The wrong way is to raise the retirement age for OAS/GIS.

Raising the retirement age will cut a basic building block of retirement security, the OAS pension of $540.12 per month which now goes out to 4.9 million Canadians aged over 65. Almost all citizens qualify.

Receiving OAS also makes seniors eligible for the GIS top up, which provides one in three seniors with a supplement which ensures they have a minimally adequate income in old age.

Raising the retirement age from age 65 to age 67 or higher would affect all future seniors, but would especially have an impact on those who would qualify for the GIS supplement. Many older workers, especially the single near-elderly, already face very high rates of poverty.

It is often argued that we have to raise the retirement age because Canadians are living longer. But raising the retirement age by 2 years will especially affect low income older workers. People in the bottom 20 percent of the workforce die 5.6 years younger than those in the top 20 percent. Half of all low income men will collect an OAS/GIS cheque for only 10 years.

Raising the retirement age would also have a negative impact on those persons age 65 who are in poor health, and cannot continue to work.

What about cost? The latest actuarial report on the OAS/GIS projects that the number of recipients will increase from 4.9 million today to 9.3 million in 2030.

But the increase in total costs that is projected is much more modest, from 2.4 percent of GDP to a peak of 3.2 percent in 2030. That is because our economy will continue to grow.

Well under 1 percent of GDP is a small price to pay to maintain a basic retirement income for all Canadians, and especially the one in three seniors who have low incomes.

Andrew Jackson is Chief Economist and National Director of Social and Economic Policy with the Canadian Labour Congress, where he has worked since 1989. He is also a Research Associate with the Canadian Centre for Policy Alternatives, and a Fellow with the School of Policy Studies at Queen’s University. During a leave of absence from the CLC in 2000-02, he was Director of Research with the Canadian Council on Social Development.