Cuts to Old Age Security will impoverish young and old workers alike
Ever since Stephen Harper announced that his Conservative government is considering cuts to retirement security programs such as the Canada Pension Plan (CPP) and Old Age Security (OAS), Canadians young and old have been following this issue with great interest.
In a speech to the Canadian Club on February 21st, Human Resources Minister Diane Finley shifted the government’s initial message to a focus on punishing younger Canadians in what is clearly an attempt to drive a wedge between youth and older workers.
In a recent paper published by the Canadian Centre for Policy Alternatives (CCPA), Monica Townsend demonstrates that the Harper Government is ignoring the advice of the pension experts that it enlisted to study the pension system. Townsend cites a 2010 report on Canada’s pension system, commissioned by the Department of Finance for the federal and provincial finance ministers’ Research Working Group, that says “long-term projections show...the public retirement income system is financially sustainable.” The paper concludes "there is no pressing financial or fiscal need to increase pension ages in the foreseeable future.”
The recent statements by Prime Minister Harper and his cabinet ministers regarding retirement security should concern younger workers for three reasons.
First, today's youth may be forced to work longer if the age of eligibility for OAS increases from 65 to 67 years old.
Second, cutbacks to retirement security programs will likely push elderly family members and friends into poverty and these Canadians may become reliant on their children for direct assistance with their income security. The great recession of 2008-2009 showed us that payouts from retirement security programs such as CPP are not adequate and need to be enhanced so that seniors can retire with dignity. This is entirely realistic as the aforementioned pension study noted that Canada’s public income system is financially stable and a doubling of benefits can be achieved without having to double premiums.
Third, employers are increasingly reducing contributions to their employee pension plans and undermining the role of OAS in replacing pre-retirement earnings will force workers to save additional amounts on their own. Many Canadians cannot afford to invest more of their income in retirement savings.
Despite the doom and gloom predicted by the Harper government, spending on OAS will rise from 2.3 percent of GDP in 2010 to 3.1 percent in 2030, an increase of less than 1 percent. Cutbacks to OAS will not only affect older workers and seniors, but will also pressure the younger generation to replace the funding of retirement security programs with individual investments that many people cannot afford. Quite simply, the Harper government's belief that cuts to OAS are in the "interests" of youth is a misguided, divisive, and dangerous idea that will impoverish young and older workers alike.