In the 2011 federal election campaign, Stephen Harper didn’t talk about cuts to Old Age Security (OAS) and the Guaranteed Income Supplement, basic income supports for older Canadians. But on Thursday, at the World Economic Forum in Davos, Switzerland, Harper indicated that future cuts are possible.
In an address that extolled Canada’s economic performance, prosperity and low debt-to-GDP ratio, Harper said:
“We have already taken steps to limit the growth of our health care spending over that period. We must do the same for our retirement income system. Fortunately, the centerpiece of that system, the Canada Pension Plan, is fully funded, actuarially sound and does not need to be changed. For those elements of the system that are not funded, we will make the changes necessary to ensure sustainability for the next generation while not affecting current recipients.”
OAS is fully funded, by government tax revenue. It’s an income support program, so unlike the CPP and other pensions there are no contributions to consider. To say that it is not funded is misleading. The purpose of the program is to ensure that older Canadians have a guaranteed basic level of income, not to balance non-existent receipts with program expenditures.
Demographic statistics, in particular the number of aging baby boomers, are being used by fiscal conservatives to try to convince Canadians that cuts are necessary. But, according to the Canadian Labour Congress, 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. This is at the expected peak, when the greatest percentage of Canadians will be over age 65. A significant increase, for a period of time, but certainly not unaffordable. If the federal government can afford to lower consumption and business taxes, it can afford to support low-income seniors. As Harper says, Canada is a prosperous country.
It has been suggested that the proposed changes may include an increase in the eligibility age for OAS, from 65 to 67 years. According to the Statistics Canada report Labour market activity among seniors, Canadians with higher eduction are more likely to continue working past age 65, because they often have jobs that are less physically demanding. Seniors with less education are less able to find age-appropriate jobs. Many people with physically-demanding or injury-prone occupations, including performers, farmers, construction workers and servers, do not have private pensions or even, for those doing contract work, access to CPP benefits. If the eligibility age for OAS is increased, lower-income seniors may be forced to compromise their health and well-being for an additional two years.
In its report Fairness for Canadian Seniors, Food Banks Canada says that older Canadians on social assistance look forward to age 65 and OAS eligibility because they will have a more dependable and adequate source of income and because they will be treated with some dignity by the state. Food Banks Canada says that although there is much to be proud of Canada’ public pension system, more, not less, public support is needed to adequately address senior poverty.
Less than 24 hours after Harper’s remarks to the elite audience at Davos, the Conservative government has backtracked. The CBC reports that an internal memo from the Prime Minister’s Office says that there will be no changes that affect current retirees or those close to retirement and that any changes will have a substantial notice period. This retraction shows that although the federal government is anxious to appease concerned seniors today, changes to OAS are coming.
Last year, the federal government announced its support for pooled private pension plans to address current gaps in retirement income. For the majority of Canadians, those who don’t have a workplace pension plan, contributing to a private plan is not a viable option. Promoting private savings is yet another indication that our government isn’t interested in ensuring adequate public income support for Canadian seniors.