Labour should march to the new tune

Posted on in Debates

NationalPost.com – Globe Debate
Sep. 07, 2015.   Konrad Yakabuski

With Labour Day falling in the middle of a federal election campaign, Monday’s parades will be even more political than usual. Organized labour’s list of grievances toward the Conservative government is a mile long and stretches from changes to sick pay for federal employees to a controversial new law that forces unions to disclose how much they spend on political activities.

The Harper government’s alleged “war on workers” also includes its plan to raise the eligibility age for Old Age Security (OAS) benefits to 67 from 65 by 2029. For labour, this is the kind of issue worth striking over. Any employer who suddenly told their employees they have to work two extra years before collecting their workplace pensions would face near certain uprising on the shop floor.

Reversing the Harper government’s decision to gradually increase the retirement age starting in 2023 has been at the top of organized labour’s wish list since the move was announced in the 2012 federal budget. Not surprisingly, NDP Leader Thomas Mulcair has been eager to oblige his party’s traditional union base by vowing to repeal the changes if he becomes prime minister.

More surprising is Liberal Leader Justin Trudeau’s promise to do the same, since raising the retirement age is perfectly justifiable given longer life expectancies and a decline in the proportion of Canadians younger than 65. The country faces a looming labour crunch and slower long-term economic growth prospects as baby boomers move from their peak consumption years into retirement.

OAS benefits are currently $565 per month for all seniors, while poorer Canadians can collect an additional monthly benefit up of to $766 under the Guaranteed Income Supplement (GIS). Most seniors typically supplement OAS benefits with income from the Canada Pension Plan (which will continue to pay full benefits starting at 65) or private pensions and savings. Ottawa starts to claw back OAS benefits if seniors’ combined income from other sources exceeds $72,809.

Many Canadians, especially those whose jobs involve manual labour, are not thrilled by the prospect of having to wait two more years to collect OAS. But no one born before 1958 will be affected, while those born after that date will likely face a very different labour market by the time they turn 65. They’ll likely have countless more employment options than today’s seniors.

Most developed countries have started to prepare for this change. The United States has been slowly increasing the eligibility age for Social Security since 2003. It’s now 66 and will rise to 67 by 2027. The retirement age will increase to 67 by 2022 in Denmark and the following year in Australia. Britain’s retirement age will hit 66 in 2020 and 67 in 2028. After that, Parliament will tie the retirement age to increases in life expectancy. Today’s twentysomethings likely won’t be able to collect state pensions in Britain until they’re 70 or so.

That’s not as horrible as it sounds. Canadians, too, are living longer, healthier and more active lives. And most future seniors will collect OAS benefits for a longer period than their predecessors.
Unlike most European governments, Ottawa’s finances are in good enough shape to handle the onslaught of baby boomers poised to collect OAS, even without increasing the retirement age. Still, unlike the CPP, elderly benefits including the GIS are paid out of general government revenues, and hence will suck up an increasing proportion of the federal budget until the grey tsunami recedes by mid-century. Indeed, elderly benefits are the largest single expense Ottawa faces, costing almost $46-billion this year and a projected $57-billion in 2019.

Increasing the eligibility age for basic OAS benefits will free up revenues that future federal governments could direct toward other priorities, such as enhancing the GIS. Canada has a comparatively low seniors’ poverty rate. It was about 7.2 per cent in 2010, compared with an average 12.8 per cent among developed countries, according to the Organization for Economic Co-operation and Development. But Canada’s rate has been rising in recent years.

The NDP promises a modest $400-million a year more for GIS benefits. But it could afford to do much more to help poorer seniors by ignoring its union friends and following the Harper government’s plan.

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