The Advisory Council on Economic Growth appointed by the Finance Minister Bill Moreau has been operational for almost a year, with a clear mandate to recommend bold ideas that will significantly improve Canada’s economic growth trajectory. One of the key areas -– workforce participation – was on full display in the second wave of recommendations released on Monday. And it paints a dismal picture of older Canadians in the labour force.
The advisory council points out that in “top-performing OECD countries” like Sweden, Norway, Japan, New Zealand and the United States, the participation rate for workers over the age of 55 is 62 per cent. But in Canada, it is only 54 per cent. “Closing the gap could add $56 billion to GDP,” the Council wrote in its report.
One way to address this gap, according to the Council, is to encourage Canadians to delay retirement by raising the eligibility age for Old Age Security and the Canada Pension Plan as a way to increase the labour participation.
Seniors are currently able to start collecting OAS benefits starting at the age of 65. For CPP, Canadians can start collecting at the age of 60. However, given our longer life expectancy and in many cases, lack of retirement savings, allowing OAS and CPP deferrals beyond age 70 could encourage willing older workers to remain in the labour force longer. Working longer coupled with the government looking to reward those workers for longer tenure helps Canada expand its workforce, level of expertise and competitiveness while also saving costs on a system put in place years ago when retirement represented a few years of our life. Government programs were never intended to fund 20 to 30 years of our life and the current system given the size of the aging population isn’t sustainable. Indeed, the Council wrote in its report that the age of eligibility for OAS and CPP “should be recalibrated and increased to meet the Canadian reality of an aging society and a considerably longer life expectancy than we had just a few decades ago.”
Yet altering the government programs isn’t simply about taking away benefits. Pushing out the benefits could really be a win/win situation given the economy needs the skills, knowledge and expertise of the more mature worker. The fact is many are living healthier, longer and more productive lives. In many cases seniors want to be engaged and working. But as it stands they will tell you there are barriers to getting back into the workforce and employers have an important role to play in identifying and addressing cases of age discrimination should it occur.
These potential changes aren’t just about the worker, companies benefit by hiring a senior by way of increased customer satisfaction. The population is aging and so are your customers. Mature workers often know the business, have excellent customer service skills and show up to work because they want to be there. Seniors are a very loyal workforce, work hard and often require less supervision.
Of course there is the other side of this – the worker who isn’t interested in expanding their career tenure. This brings us back to the need to save for retirement and possibly the recognition that government plans were never put into place to fund our retirements but to supplement the retirements for those who need it. This may be a wakeup call that the fundamentals around retirement planning are very real. You need to save more, start early and contribute often because the rules of the game can change when you least expect it.
Interesting to note if acted on, the Liberal government could be taking a page out of the Conservatives’ playbook. The Conservative government’s 2012 federal budget confirmed what many had expected: a plan to gradually raise the OAS eligibility age in Canada from 65 to 67 starting in 2023. The Liberals campaigned hard vowing to overturn this policy and they did. However, now faced with economic reality – the number of OAS recipients will double over the next 20 years – they too may be forced to act on a very unpopular agenda.
By the way, encouraging workers back to the workforce might be the easy part of the equation, the real challenge the government may be faced with will be helping the general public understand that retaining late-career workers doesn’t diminish the number of jobs available for younger Canadians. You can’t underestimate that challenge – it is a big one. However, a bigger challenge might be the feeling of entitlement around government programs.
Have questions about what your retirement will look like? Contact the Andrew Pereira Financial Planning team today!
Andrew Pereira, Consultant
519-358-1115 ext. 226
Cassie Fryscok, Associate Consultant
519-358-1115 ext. 222
