Changing incentives lead those over 60 to work past retirement age
Canada does not need to raise its age of retirement, despite the large demonstrations in France over the government's proposal to increase the retirement age.
In an interview with BNNBloomberg.ca last Thursday, James Orlando, the director of TD Economics, noted that while aging demographics pose a problem to businesses in Canada, the potential impact has been mitigated by immigration and individuals choosing to work at later ages. Additionally, because of changing incentives, there has been a marked rise in the number of persons in the 60 to 70 age range who choose to work longer.
“The fact that we have so many people coming in, we've done such a good job of attracting immigration, [that] has enabled us to be able to afford the supports to the older population of Canada,” Orlando said.
According to him, if these modifications weren't implemented, the federal government would have to set aside additional funds to assist those who probably would have retired sooner.
“The fact that we've done things like eliminating the mandatory retirement age in certain provinces, the fact that we have a system in place where we've incentivized people to delay receiving things like Canadian Pension Plan benefits or even delaying Old Age Security benefits, that incentivizes people to not draw on [those benefits] but also work longer.”
Learn how raising the retirement age would benefit Canadians in this article.
In a phone interview with BNNBloomberg.ca on Friday, Bill VanGorder, the chief operating officer and chief policy officer of the Canadian Association of Retired People (CARP), said that as individuals live longer, they are no longer opting to retire at age 65.
“And they shouldn't be forced to [retire at 65] in fact, we need them to keep working, because there's a lack of employees right across the country,” VanGorder said.
Old Age Security (OAS) benefits were increased by 10% in the 2023 federal budget for Canada. The budget had "extremely little in it for seniors" and was "extremely disappointing," according to VanGorder, who also claimed the 10% rise was expected. The increase will be available to anyone over the age of 75, which VanGorder said he finds worrying.
“Once again, they're making a two-tiered system for old age people. People between [age] 65 and 75 are not eligible for it,” he said.
According to VanGorder, younger age groups tend to be more active, whereas older age groups frequently lead more sedentary lifestyles.
“Our feedback that we're getting from our members and other older Canadians across the country is that the pressures of the increased cost of living these days are actually hitting the younger people, age 65 to 75, more than the older group [age of 75 and older].”
In an interview on March 29, Lisa Raitt, co-chair of Coalition for a Better Future, vice-chair of global investment banking at CIBC Capital Markets, and former minister of natural resources, estimated that this year's costs for OAS payments and government-guaranteed income will total about $60 billion.
OAS expenses would increase by around 50% to $90 billion by 2027, according to Raitt.
She said that taxes will be used to pay for the escalating expenses of OAS because there is presently no "special trust" in place to do so.
Long-term care will become a serious issue that demands greater attention as Canadians age, according to Raitt. However, she does not support a "payroll type tax," which is how Germany and some regions of the U.S. finance long-term care.
As long as doing so has no negative effects on the federal government's fiscal anchor, the debt-to-gross domestic product (D/GDP) ratio, Orlando said the federal government will likely be able to continue funding existing programs in the long run, including retirement.
“For as long as debt to GDP is not increasing on an unsustainable path, then the ability for the government to be able to keep funding the programs they have in place is there,” he said. “So you're not having a day of reckoning where you have to make significant changes to your policy system for so long as you're able to make these ratios improve over time.”
