On March 29, the federal government tabled its 2012 budget. The changes are substantial, including a two-year increase in the retirement age, a five per cent cut to the federal public services and new limits to environmental assessments of major resource extraction projects. In this series, Mud and Water analyzes different aspects of the federal budget.
Part 1: Austerity for Low-income Seniors
“The eleven-year advance notification and the subsequent six-year phase-in period will allow those affected by these changes ample time to make adjustments to their retirement plans. ” Budget 2012
In this budget, the federal government confirmed that there will be changes to Old Age Security (OAS) that many Canadians feared. The eligibility age will be increased from 65 to 67 years and will affect all Canadians born after 1958. The Conservative government says that the changes are necessary because Canadians are living longer and healthier lives. But, as the Canadian Centre for Policy Alternatives points out, low income seniors have not shared the average increase in life expectancy of other Canadians. These are the seniors who will be most affected by the change. Statistics Canada reports that the ten per cent of Canadians with the lowest incomes can expect to live almost 10 years less than the the richest ten per cent of Canadians.
Many of the mainstream media reports on OAS ignore the Guaranteed Income Supplement and instead only focus on middle- and higher-income seniors who will lose $6,481 per year for two years. However, this ignores the additional $8,788 received through the Guaranteed Income Supplement. Thus, low-income seniors will have to save an additional $30,538 to compensate for the two-year loss in federal income support.
Many individuals have limited opportunities to save while working, because of the arithmetic reality of the difference between low wages and the cost of living in Canada. The notification period is irrelevant. For those most in need, a $30,538 adjustment is impossible.
Working an additional two years may also be impossible for many low-wage workers, especially those in occupations that are more physically demanding or more likely to result in occupational injury or illness. Lower-wage workers, including labourers, care givers and performers, may also be more likely to be employed as contractors, rather than employees, without access to the Canadian Pension Plan or any private pension benefits. These workers may compromise their health and safety by working two more years. Their only other option is provincial welfare benefits.
The Conservative government doesn’t understand the reality faced by many working Canadians. For many, there are no savings or private pensions and no feasible employment opportunities between age 65 and 67 years. Even those who are able to continue working may be forced into early retirement, through layoffs and redundancies, especially in the manufacturing sector. For many older workers, it’s not easy to find a new job as some employers may prefer to hire younger workers. The Canadian Centre for Policy Alternatives reports that the likely result of this change will be a doubling of seniors living in poverty in this group from 50,000 to 120,000. The Conservative solution, pooled private pension plans, are not accessible to most Canadians.
Reducing the leisure time of older adults creates a deteriorating quality of life in Canada. Despite its rhetoric about sustainable programs, the Conservative government knows it had a choice.
In his budget speech, Flaherty bragged “Our government reduced personal income taxes and cut the GST. We allowed seniors to split their pension. At the same time, we reduced taxes on the businesses that create jobs for Canadians. Canada now has the lowest overall tax rate on new business investment among major advanced economies.”
Even the federal government’s research shows that OAS expenditures are expected to rise from 2.4 per cent to only 3.1 per cent of GDP by 2030. If Canada can afford to cut income, consumption and business taxes, it can afford to provide income support for all low-income seniors.