Social Policy in Ontario

Pensions: Harper gov’t pits generations against each other

Posted on February 27, 2012 in Child & Family Policy Context

Source: Toronto Star — Authors: Carol Goar

TheStar.com – opinion/editorialopinion
Published On Sun Feb 26 2012.   By Carol Goar, Editorial Board

The two generations that followed the baby boomers got a raw deal.

In grade school, they learned in portables, as governments adjusted to the ebbs and flows of enrolment. By the time they reached university, tuition fees had shot up so much that they had to take on heavy debts, unlike their parents. When they graduated, they couldn’t get the jobs for which they had trained, couldn’t launch their careers, couldn’t buy homes or start families.

It would be unfair, as Human Resources Minister Diane Finley told Canadians last week, to saddle them with the costs of government benefits they can’t afford.

It’s what she didn’t explain that left young people, their parents and their grandparents frustrated and worried.

The demographic trends Finley flagged in her speech to the Canadian Club in Toronto were not new. Her government knew the workforce was shrinking when it took office in 2006. It knew Canada’s dependency ratio (the number of retirees relative to the number of workers) would soon start rising. Number-crunchers had been urging governments to wake up for years.

Instead of doing that, the Conservatives increased federal spending, wiping out the $13 billion surplus they inherited from the previous Liberal government. Now they’re warning Canadians the country’s 60-year-old pension program is unsustainable.

How did it take the Tories six years to discover what any demographer could have told them on their first day in office? Why did Prime Minister Stephen Harper spring his pension trimming plan on the nation during a speech in Switzerland where he did not have to face questions? And why, a month later, has the government still not told Canadians how it plans to trim their Old Age Security (OAS) payments, what it will take to put the program on a “sustainable” footing, and how — if at all — poor seniors will be protected.

Finley had no details to offer. She told her audience they’d have to wait for next month’s budget, leaving Canadians in the dark on how they will need to revise their retirement plans. She assured current pensioners and workers approaching retirement that they would be unaffected — but Finance Minister Jim Flaherty had already promised that the reforms would not take effect until at least 2020, sparing anyone 57or older.

Nor did the human resources minister explain how reducing OAS benefits (or raising the age of eligibility) would help younger Canadians. That’s not what they’re asking for. They want jobs. Any scheme that induces older workers to postpone their retirement will keep new entrants on the sidelines, unable to earn a decent living or save for their future.

There was a second gap in her logic. Finley did not explain why the government had chosen to rein in OAS when other options were available. Jailing fewer Canadians — not more — would lighten the next generation’s tax load. Rethinking Ottawa’s commitment to spend $9 billion on top-of-the-line stealth fighter jets (with an additional $6 billion on maintenance) would lighten the burden of future taxpayers. Restricting corporate tax cuts to businesses that reinvest in innovative products and services (most don’t) would also produce significant savings. These are just a few of the possibilities.

To set the right tone, Finley could have announced a plan to reduce MPs’ pensions, which are much more generous and secure than anything most taxpayers will ever see.

If her objective was to downplay Harper’s earlier suggestion that OAS is financially unsustainable — an argument refuted by actuaries, economists and the parliamentary budget officer — Finley needed a credible rationale for reducing seniors’ benefits. She failed to provide one.

She did highlight a genuine problem though: Canada’s young people, cursed by demographics and a slowing economy, need a break. If her government really cares about their plight, it will use every lever at its disposal to help them become self-supporting.

Cutting the pensions they’ll one day need is not the path to generational fairness.

< http://www.thestar.com/opinion/editorialopinion/article/1136921–pensions-harper-government-pits-generations-against-each-other >

Tags: budget, economy, pensions, standard of living, youth

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