Arthur: What is the good news story about aging in Canada?
James Struthers: Well, there are actually two good news stories. The first is that Canadians, both male and female, on average are living longer and enjoying a longer span of good health after retirement. A man at 65 can now anticipate, on average, 18.1 more years of life, a gain of 2 years compared to a decade ago. A woman the same age will enjoy 21.3 more years, which is a gain of 1.3 years compared to 10 years ago. The second good news story is that far fewer Canadians aged 65 and older are living below the poverty line compared to forty years ago, and compared to almost all other nations. In 1971, 37% of Canadians aged 65 and over were living on less than half the Canadian median income adjusted for family size, which is how Statistics Canada defines low income, or a poverty line. Today, less than 6% fall into this category. That's the second lowest poverty rate for seniors among the world's 26 wealthiest nations. Only the Netherlands has a lower rate at 2%. The American poverty rate for seniors of 65 and over, by way of comparison, is four times higher than ours. So, that's a great success story, and one that often doesn't get noticed.
Arthur: We're hearing a lot of doom and gloom about Canada's aging population, including that baby boomers are about to cause a pension crisis. Why aren't you buying it?
Struthers: Canada's public pension system is actually very robust, and as I've already mentioned, very effective in combating poverty among those 65 and over. Even when the last of the baby boom retirement wave peaks in 2030, Canada's Chief Actuary estimates that spending on Old Age Security and the Guaranteed Income Supplement will rise to only 3.1% of GDP compared to 2.2% at present and by 2050 it will be back down to 2.7%. Due to increases in the contribution rates and investment practices made a decade ago, the Canada and Quebec pension plans are also very solvent over the next 75 years. So, no worries there. The real problems are on the private pension side. Only 38% of employed Canadians have a workplace pension. In the private sector, it is less than 25% and only 31% of tax filers are making contributions to RRSPs. So, the problem isn't that baby boomers are going to cause a pension crisis. The problem is that a majority of Canadians now working won't be able to count on an adequate retirement income. They won't be living in dire poverty after 65, it's true, but they also won't be enjoying incomes sufficient to replace half of their maximum pre-retirement income, unless pension coverage is expanded significantly. And since private pension plan coverage has actually been declining over the last thirty years, only the expanding public pension benefits will fill the gap.
Arthur: Who wants Canadians to believe our growing number of seniors will cause a pension crisis and why?
Struthers: Proponents of what has been called 'apocalyptic demography' use images of a looming pension crisis or boomer health care crisis as arguments for downsizing the role of the state and increasing privatization of retirement savings and health services. In other words, they want to create a sense of fiscal panic to win support for downsizing what we should expect from government programs and policies. Yet it's clear that it is the private pension and RRSP system which has been failing to live up to promises and expectations made since the 1980s. Taken together, they are not meeting the retirement income needs of Canadians at present, and with the growth of contingent and part-time work, they are less likely to do so in the future. The American example also shows clearly how much more expensive and inefficient private delivery of health care services really is to an economy.
Arthur: What changes do you see needing to be made to the Canada Pension Plan?
Struthers: We should build on success. The maturation of the Canada and Quebec pension plans (CPP/QPP) over the past thirty years, together with indexing of Old Age Security and significant increases to the Guaranteed Income Supplement, have played a major role in reducing poverty among Canadians over 65. We are world leaders in this regard. The next step is doubling the benefit rate of the CPP/QPP from its current 25% of the average industrial wage to 50% in order to fill the pension gap left by declining private pension plan coverage. This will require higher contribution rates, to be sure, but the increased income security in retirement for all Canadians will be more than worth it. The CPP and QPP form the largest and most administratively efficient pools of pension capital in Canada. They have a proven track record and will do the best job in meeting the income security needs of the next generation of Canadian retirees.
Struthers is a professor in Trent's Canadian Studies Department and an active researcher on social policy in Canada. He is currently working on a multinational research initiative looking at how to enhance long term residential care.
