Sunday, September 27, 2015

Will you be encouraged to work after 67?

Two questions raised by   in a recent article bear some consideration. The first question is about poverty in the over 65 crowd.

She states, that based on a the Luxembourg Income study the Canadian middle class is the richest in the world along with Britain, and richer than our American counterparts! Great news for the middle class, however, the elderly poverty rate has been rising since the mid 1990’s and then there are the bankruptcy rates for the over 65 crowd to consider.

The conference Board of Canada states that by 2050, the number of people aged 65 and older will more than triple, to 1.5 billion worldwide. Aging presents a significant challenge to the long-term sustainability of public finances through increases in demand for public pensions, health services, and long-term care in Canada and its peer countries. Together, rising life expectancy and low fertility create a demographic pincer movement, the impact of which is sharpened by increasingly early retirement. In Europe, there are about 35 people of pensionable age for every 100 people of working age. If present demographic trends continue, there will be 75 pensioners for every 100 workers in 2050.

Canada, like its peers, has a greying population. In 2030, an estimated 23 per cent of the Canadian population will be over age 65, double the share in 1990.

Elderly poverty is both a social and a fiscal problem that will be exacerbated as higher percentages of populations in developed countries move into the over-65 demographic. Poverty rates among the elderly tend to be highest among women, particularly widows over the age of 75. This is largely due to pension allowances that have traditionally been linked to employment history

Should we be concerned because in   Canada,  the poverty rate  amongst seniors is now at 6.7 per cent.  Canada’s publicly supported retirement security system comprises a universal component (Old Age Security), a negative income tax (Guaranteed Income Supplement), and an earnings component (Canada/Quebec Pension Plan). The first two establish an income floor that is available to all, regardless of participation in the paid labour force. Canada over time has reduced the poverty rate amongst seniors.

Dalhousie University economics professor Lars Osberg has called the reduction in the elderly poverty rate over the past three decades “the major success story of Canadian social policy in the twentieth century.

According to OECD data, Canada’s elderly poverty rate increased from 2.9 per cent in the mid-1990s to 6.7 per cent in the late 2000s. The biggest jump occurred in the group of elderly people living alone—most likely widowed women.

Statistics Canada, however, has Canadian data going back to 1976. Using this data set, Canada’s elderly poverty rate fell by an extraordinary 25 percentage points—from 36.9 per cent in 1976 to 12.3 per cent in 2010.
The pronounced decrease in Canada’s elderly poverty rate has largely been attributed to the implementation of the Canada Pension Plan and Quebec Pension Plan in 1966. Pensions as a proportion of disposable income among Canada’s elderly more than doubled between 1980 and 1996, from 21 to 46 per cent.6 The first cohort to receive full public pensions turned 65 in 1976. The generation that followed became the first beneficiaries of private occupational pensions that were expanded between the 1950s and the 1970s.

According to a recent Statistics Canada report, the increase in the low-income rate for seniors indicates that their income has not risen as quickly as the income of non-seniors. The report’s authors suggest that a possible factor behind the slower growth of seniors’ income was the slowed growth of government transfers to seniors: Starting from the early 1990s, the median government transfers to seniors increased at a slower rate relative to the period before the early 1990s. Indeed, from 1976 to 1994, the annualized growth rate of median government transfers to seniors was 8.7 per cent, while from 1995 to 2009, the annualized growth rate was 2.0 per cent.

If current trends continue, the sustainability of public pensions and Old Age Security may be at risk and that may mean an increase in poverty amongst seniors.

There are a number of ways to offset the labour force and fiscal pressures that will arise as a result of Canada’s aging population: The one favoured by the Conference Board of Canda is to develop policies and practices to increase the labour force participation of older people

Indeed, most developed countries have introduced policies and organizational practices that target older workers, including:
reducing incentives for workers to take early retirement
encouraging later retirement and flexible retirement
passing legislation to counter age discrimination
helping older workers find and keep jobs

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