Labour Market Matters - May 2013

As governments around the world struggle to reign in ballooning public deficits, one area that has been targeted for cost savings has been to increase the age of eligibility for retirement benefits. In Canada, the March 2012 federal budget announced plans to make a transition in the age of eligibility for Old Age Security from age 65 to 67, starting in 2023. Similar retirement age reforms in Europe have erupted in large-scale protests and civil disorder. Concern exists that those exiting the labour market before statutory retirement ages may suffer hardship before they can access public pensions. A CLSRN study entitled “Employer-provided pensions, incomes, and hardship in early transitions to retirement†(CLSRN Working Paper no. 117) by Kevin Milligan (University of British Columbia) addresses the wellbeing of those making early exits from the workforce by studying the extent, characteristics, and impact of such exits in Canada. Milligan finds that around 77 percent of females and 73 percent of males who are not working are able to avoid low-income status, and that the most important factor for this avoidance is the presence of income from other family members. There had been a dramatic decline in senior poverty rates since the early 1970s in Canada. The introduction and expansion of retirement income programs – including Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the Canada and Quebec Pension Plans – is often credited with this improvement in the lives of Canadian seniors. A CLSRN study entitled “Senior Poverty in Canada: A Decomposition Analysis†(CLSRN Working Paper no. 118) by Tammy Schirle (Wilfrid Laurier University), takes a closer looks at poverty trends in Canada and examines the extent to which other factors might have contributed to changes in senior poverty. While the evolution of characteristics such as education can account for some of the historical reduction in senior poverty, it does not explain very much. Rather, her results support the assertion that retirement income policy is central to understanding senior poverty in Canada.