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.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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