Great pension crisis becomes forgotten issue

TheStar.com – opinion/editorialopinion
Published On Thu May 26 2011.   By Carol Goar, Editorial Board

Sometime between Christmas and the onset of spring election fever, the “pension crisis” fell off the national agenda.

It wasn’t because it had been resolved. It was because Ottawa and the provinces couldn’t muster the will to do anything about it. Finance Minister Jim Flaherty vacillated. His provincial counterparts were split. So they simply stopped talking about it.

The issue was barely mentioned in the recent federal election. Business leaders haven’t shown any initiative. Workers are hunkering down.

It’s time for baby boomers to wake up, says Michael Wolfson, research chair in population health modelling at the University of Ottawa and Canada’s former assistant chief statistician.

Approximately half of them — middle income earners in particular — will experience a substantial drop in their standard of living when they retire.

What’s more, Wolfson says, none of the proposals floated since the 2008 recession would provide much relief. “Governments will have to look at more ambitious and novel reforms than the ones currently under consideration,” he says in a paper published by the Institute for Research on Public Policy.

Wolfson begins his 28-page analysis with a reality-check. He criticizes the “no crisis” view advanced by the Prime Minister’s favourite pension expert, Jack Mintz of the University of Calgary, as a case of dubious assumptions leading to a flawed conclusion.

It may once have been true that Canadians over 65 were debt-free, stayed home, didn’t take courses, dine out, patronize the arts, support charity or have an active social life.

It certainly isn’t true now. Expecting healthy, active seniors to live comfortably on 60 per cent of their gross pre-retirement income is unreasonable — or just stingy.

But Wolfson is almost as dismissive of the “retirement security for everyone” proposal put forward by the Canadian Labour Congress. The union conglomerate says raising the Canadian Pension Plan contribution rate gradually (by 0.43 per cent of pensionable earnings over the next seven years) would lead to a doubling of benefits. Eventually it would, Wolfson concedes, but baby boomers would be in their 90s by the time it happened.

So what would he recommend?

Listen to older Canadians. What they’re saying is that their top post-retirement priority is to keep being contributing citizens. A 2005 Statistics Canada survey showed that individuals over 65 ranked paid work as their most satisfying activity.

This offers policy-makers an opening. If they can find ways to let workers age on the job — reducing their hours rather than retiring abruptly — it would alleviate pressure on the pension system, while improving seniors’ lives. The costs — in tax adjustments and employer incentives — would be outweighed by the financial and social benefits.

Shed outdated stereotypes. The notion that life is a succession of discrete phases — childhood, then education, then work, then retirement — is an anachronism. So is the idea that being old means being frail and housebound. These myths are constraining policy debate and stifling innovative thinking.

Shore up the weak spots in the pension system. Canadians with incomes over $80,000 don’t need assistance. Canadians with incomes under $35,000 are already better off when they turn 65. It is those in the middle who need help.

And re-examine the concept of intergenerational equity. The belief that changes in government programs such as the CPP must be pre-funded to avoid saddling children with their parents’ bills sounds fair. But future generations might prefer a healthy economy, strong public infrastructure or a clean environment to a bolstered pension system. Loosening this stricture would create room to explore options that are now off-limits.

Where would the impetus come from? Wolfson doesn’t address that question directly. But the answer is implicit in his study: Middle-class baby boomers have the most to lose.

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