The Divisive Politics of Pensions
by Katherine Scott, Canadian Council on Social Development
Let’s be clear: There is no pension crisis in Canada. The stories in the news this week about the future sustainability of seniors’ benefits have caused heartache and stress. To what end? Just two years ago, a study done by the OECD for the federal Department of Finance concluded that “Canada does not face major challenges of financial sustainability with its pension schemes.”
Let’s assume that the Prime Minister was simply trying to open a debate when he mused at the World Economic Forum that Canada was considering raising the age of retirement to 67 in order “to ensure the sustainability of our social programs and fiscal position over the next generation.”
If that was the PM’s objective, it has certainly not led to a constructive discussion about how best to modernize our income security programs to address the needs and realities Canadians face today – or can expect to face tomorrow. The fact of the matter is the future economic security of seniors is a real issue. For the first time, after 30 years of progress, rates of poverty among seniors has grown. Polls tell us that seniors – and near-seniors – are very concerned about their economic future. Low interest rates mean that the incomes of many are barely keeping ahead of inflation. Others are losing ground. Yet the costs of the basics continue to rise, not to mention health care.
Canada doesn’t need to raise the age of retirement to encourage labour force participation among Canadians over 50. Seniors – and near seniors – are already speaking with their feet. The labour force participation rate among Canadians aged 55 to 64 has been on the rise for years now, even before the 2008-09 recession.
It is the growing gap between the haves and have-nots that is the real issue here. Increasing the age of retirement only hurts low- and modest-income Canadians who depend on seniors’ benefits to pay the rent and put bread on the table. Well-heeled professionals may well choose to work on well beyond age 65. The situation is much different for the cleaners in their office buildings.
And what of eligibility for other programs like the Guaranteed Annual Income – or provincial drug plans – or home care supports. Raising the age of retirement would inevitably result in additional costs to provinces for welfare and other programs. When it comes to downloading, the poor are always at the end of the line.
If cost constraint were really a pressing issue, there are other options to explore that wouldn’t threaten low-income seniors: Changing the "clawback" percentages, or lowering the income threshold for the clawback (currently set at $69,000), or income-testing for OAS by family income rather than individual income, could accomplish the same goals.
The challenge of population aging is very real. The population over age 65 is expected to grow from 12% today to 25% by 2030 – and then hover near the 25% mark until 2061. It demands a real discussion about thoughtful options on income support, employment, health care and community supports – all of the challenges and opportunities that these demographics represent – for the young and old.
The threat to raise the age of retirement serves only to drive a stake between the generations. It is no way to start a conversation.