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Improving the Labour Market Incentives of Canada's Public Pensions

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  • Kevin Milligan
  • Tammy Schirle

Abstract

This paper examines the incentives for retirement imposed by Canada's public pension system. A series of simulations clearly illustrate the various components of the pension system that create incentives and disincentives among older Canadians for continued work. We find the largest work disincentives are generated by the income-tested Guaranteed Income Supplement, as it interacts with the Canada/Quebec Pension Plan and with earned income to give the least well-off a reduced financial return to working. We then illustrate how various policy reforms would alleviate some aspects of the incentives problem and partially remove barriers to continued labour market participation among older Canadians.

Suggested Citation

  • Kevin Milligan & Tammy Schirle, 2008. "Improving the Labour Market Incentives of Canada's Public Pensions," Canadian Public Policy, University of Toronto Press, vol. 34(3), pages 281-304, September.
    • Handle: RePEc:cpp:issued:v:34:y:2008:i:3:p:281-304
    DOI: 10.3138/cpp.34.3.281
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    References listed on IDEAS

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    1. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "The retirement incentive effects of Canada's Income Security programs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 261-290, May.
    2. Michael Baker & Jonathan Gruber & Kevin Milligan, 2004. "Income Security Programs and Retirement in Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 99-152, National Bureau of Economic Research, Inc.
    3. Pierre Pestieau & Jean-Philippe Stijns, 1999. "Social Security and Retirement in Belgium," NBER Chapters, in: Social Security and Retirement around the World, pages 37-71, National Bureau of Economic Research, Inc.
    4. Peter Diamond & Jonathan Gruber, 1999. "Social Security and Retirement in the United States," NBER Chapters, in: Social Security and Retirement around the World, pages 437-473, National Bureau of Economic Research, Inc.
    5. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1.
    6. Michael Baker & Jonathan Gruber & Kevin Milligan, 2007. "Simulating the Response to Reform of Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 83-118, National Bureau of Economic Research, Inc.
    7. Palmer, Edward, 2000. "The Swedish pension reform model : framework and issues," Social Protection Discussion Papers and Notes 23086, The World Bank.
    8. Janice Compton, "undated". "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada.
    9. Jonathan Gruber & David A. Wise, 2007. "Introduction to "Social Security Programs and Retirement around the World: Fiscal Implications of Reform"," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 1-42, National Bureau of Economic Research, Inc.
    10. Didier Blanchet & Louis-Paul Pele, 1999. "Social Security and Retirement in France," NBER Chapters, in: Social Security and Retirement around the World, pages 101-133, National Bureau of Economic Research, Inc.
    11. Jonathan Gruber & David A. Wise, 2007. "Social Security Programs and Retirement around the World: Fiscal Implications of Reform," NBER Books, National Bureau of Economic Research, Inc, number grub07-1.
    12. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "Simulating the Response to Reform of Canada's Income Security Programs," NBER Working Papers 9455, National Bureau of Economic Research, Inc.
    13. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
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    Citations

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    Cited by:

    1. Colin Busby & William B.P. Robson & Pierre-Marcel Desjardins, 2009. "Stress Test: Demographic Pressures and Policy Options in Atlantic Canada," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 120, November.
    2. Finn Poschmann & Alexandre Laurin, 2014. "Who Loses Most? The Impact of Taxes and Transfers on Retirement Incomes," e-briefs 189, C.D. Howe Institute.
    3. Alexandre Laurin & Kevin Milligan & Tammy Schirle, 2012. "Comparing Nest Eggs: How CPP Reform Affects Retirement Choices," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 352, May.
    4. Kevin Milligan & Tammy Schirle, 2018. "Retirement Incentives and Canada’s Social Security Programs," NBER Chapters, in: Social Security Programs and Retirement around the World: Reforms and Retirement Incentives, pages 79-107, National Bureau of Economic Research, Inc.
    5. Guy Lacroix & Pierre-Carl Michaud, 2024. "Tax Incentives and Older Workers: Evidence from Canada," Cahiers de recherche / Working Papers 02, Chaire de recherche Jacques-Parizeau en politiques économiques / Jacques-Parizeau Research Chair in Economic Policy.
    6. Ross Finnie & David Gray & Yan Zhang, 2013. "Guaranteed Income Supplement (GIS) Status Amongst the Retired Population: An Analysis of the Incidence," Canadian Public Policy, University of Toronto Press, vol. 39(s1), pages 65-80, May.
    7. Robson, William, 2006. "Accounting for and Thinking about Social Security Liabilities in Canada," Discussion Paper 285, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    8. Bev Dahlby & Kevin Milligan, 2017. "From theory to practice: Canadian economists contributions to public finance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1324-1347, December.
    9. Alexandre Laurin & Finn Poschmann & William B.P. Robson, 2011. "When Striking an Awkward Balance Means Striking Out: Budget 2011," e-briefs 112, C.D. Howe Institute.
    10. Kevin Milligan & Tammy Schirle, 2017. "Health Capacity to Work at Older Ages: Evidence from Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: The Capacity to Work at Older Ages, pages 59-83, National Bureau of Economic Research, Inc.

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