It appears that a Canada-wide deal on CPP expansion is a bust, as Ottawa was the only objector and Ontario is now vowing to go it alone. It doesn’t appear that the Ontario government has a concrete proposal as of yet, but they will develop one in the coming months. It is truly unfortunate that a countrywide deal was not possible at this point. What does this mean for Canadians? It means that if they move around the country throughout their career they will receive varying amounts of post-retirement support, given the different provincial pension schemes. This will certainly make it much more difficult to plan for retirement. However, given Ottawa’s recalcitrance, expansions by the provinces is better than nothing for middle class Canadians.
Entries Tagged as 'Pensions'
December 18th, 2013 · David Macdonald · Economy & Economic Indicators, Ontario, Pensions, Poverty and Income Inequality
The recent report of the Intergovernmental Panel on Climate Change (IPCC) should be a wake-up call for Canada. With a development model based on ever more fossil fuel extraction, Canada’s economy and financial markets are on a collision course with the urgent need for global climate action.
The IPCC, for the first time, stated an upper limit on total greenhouse gas emissions – a global “carbon budget” to keep temperature increase below 2°C. This is considered to be the threshold for “dangerous” climate change, and also the target for international climate negotiations.
Canada’s economic development model is on a collision course with the urgent need for global climate action. Worldwide, extreme weather events from drought to floods to powerful storms and record-breaking temperatures are making a powerful statement that climate change can no longer be denied.
Hurricane Sandy, which rudely interrupted a US election in which candidates ignored climate change, pushed climate action back onto the US policy agenda. Costs are piling up, with one recent estimate of $1.2 trillion per year in global damages already from climate change and related environmental costs from a carbon-intensive economy.
The C. D. Howe Institute have put out a study on later retirement by Peter Hicks, a former senior official with HRSDC and the OECD who has written a lot on the policy implications of ageing societies. I find this to be one of his less convincing efforts.
The argument – with parenthetical comments – is as follows.
1) Employment rates of older workers, including those over age 65 have been rising rapidly, and this trend can be expected to continue “without any policy action” (p.20). Indeed, employment rates can be expected to rise significantly higher and future retirees can be expected to work at least five years longer on average. (A convincing case is made that current base case scenarios under-state the degree to which older workers will retire later.)
Table 2.1 envisions a 7.5% unemployment rate this year, slightly above last year’s rate of 7.4%. That seems like an admission of failure from a budget ostensibly about job creation.
This table also projects real GDP growth rates of 2.3% in Canada versus 2.6% in the U.S. over the next five years. The higher American figure may well be realistic given that the U.S. economy is starting to bounce back from a more depressed level than Canada. However, these forecasts further deflate the Conservative talking point about outgrowing our American cousins and the rest of the world.
The Budget justifies raising the age of eligibility for OAS and GIS on the grounds that the long-term fiscal sustainability of the program is being undermined by rising life expectancy.
No estimates of savings are provided. They will be very modest.
Given that average life expectancy at age 65 is 20 years, raising the eligibility age by two years could only save a maximum of 10% of projected spending on future retirees if implemented immediately.
However, the government proposes to phase in the increased eligibility age between 2023 and 2029 which will hugely reduce any savings relative to current projections.
On March 20th, Québec’s Finance Minister, Raymond Bachand, tabled his third budget. This budget year follows in the wake of those of the last few years. The government is still insisting on transforming public service funding in accordance with the user-fee revolution logic (so dear to Mr. Bachand’s heart), developing the Plan Nord, and reforming the pension plan.
On CTV yesterday, human resources minister Diane Finley said (45 seconds into this interview): “As we go forward, we’re going to have three times the expense in Old Age Security as we do now, but we’re only going to have half the population to pay for it.”
That sounds pretty scary. If the total cost triples, with only half as many people to pay it, each Canadian would have to pay six times as much for Old Age Security (OAS)!
The Chief Actuary does estimate that the cost of OAS, in nominal dollars, will almost triple by 2030. But where is Finley getting her population figures?
Since the announcement that his government was considering raising the eligibility age for Old Age Security (OAS), Stephen Harper has backed off slightly, assuring the public that such reforms are years away. Nevertheless, media and experts of all kinds have fired into gear, speculating on the possible motivations for OAS reform, and exploring its potential implications.
One question that hasn’t received much attention – yet – is the impact of a higher eligibility age on the job prospects and economic well-being of younger workers just entering the labour force. In other words, we’ve yet to see much discussion of the intergenerational consequences and character of OAS and related social security reforms.
January 10th, 2012 · Andrew Jackson · Economy & Economic Indicators, Employment and Labour, Pensions
Canada’s population, we are frequently told, is rapidly aging. The big baby boomer cohort is headed out of the workforce, meaning that we face a future of very slow labour force growth and even possible shortages of workers. CIBC Economics has just gone so far as to argue that the Bank of Canada can afford to be more relaxed about unemployment due to demographic changes which will lower the demand for jobs.
Canada’s rate of labour force growth will indeed be slowing. Everybody gets one year older with every year that passes, and the large baby boom generation will indeed stop working some day. We do already see some shortages of workers with specific skill sets in specific areas of the country.