Policy Issues
Canadians expect their governments to be forward looking. We expect them to anticipate and do things that will ease or avoid significant problems.
The demographic trends and outlook for interest rates examined on the "Home" and "A Demographic Wave" pages of this website are "flashing red lights" for policy-makers.
The case of Robert and Elaine uses a human example to illustrate these problems. That example shows how many modest income older Canadians will, if the federal government continues on its current policy path, face the unhappy choice of either:
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a big drop in their income and quality of life, post-retirement, or
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working long past normal retirement age.
We strongly encourage policy-makers to consider the socio-economic implications of these outcomes. And take those implications into account when setting policy today.
We look at some of these implications below.
Implications of a Sharp Drop in Income Post-Retirement
Economic Issues
If the income of a large segment of Canadians falls sharply, what happens to things like:
· local economies when purchasing power and consumption undergoes a signifcant drop ?
· tax revenue (income tax as well as consumption based taxes like PST and GST/HST) ?
· government expenditures on means tested social programs like the Guaranteed Income Supplement and Old Age Security when the "means" of a large number of Canadians dops ?
These economic costs could be very large. They should be considered when making decisions today.
Social Issues
If the income of a large segment of Canadians falls significantly, government should also consider the social costs associated with:
· the loss of quality of life,
· in many cases, the hardship and stress that comes with the loss of financial independence,
· the greater incidence of illness stemming from financial stresses and a lower quality of life, and
· the greater stress on familiies as they are also impacted by their parents' and grandparents' hardships.
Implications of Long Delayed Retirement
People in wealthy countries have come to expect that things will continue to improve, that they will be significantly better off than their parents were. That has been the case in Canada.
Recent surveys show that most Canadians "hope" to retire earlier than 65. The new reality that millions may be forced to work long past the normal retirement age of 65 will be a shock. It stands in contrast to the broadly held expectation that retirement will be a significant number of "golden" years, "earned" after decades in the workforce.
We should also be concerned about the "social rift" that will likely exist between the retirement "haves", those with employer pension plans, and the retirement "have-nots", those without those pension plans. Particularly, between private sector workers, 75% without an employer pension, and public sector workers, virtually all of whom have taxpyer funded defined benefit pension plans.
National Issues
With so many Canadians affected, including the big "baby-boomer" demographic, its very likely these issues will become "top of mind" national issues. They will capture national attention and call out for a serious national response.
Building Awareness and Solutions
We believe government is at an early stage of awareness and understanding of the financial and social impacts of these trends. We hope to work with government to create greater awareness and understanding.
If government starts to think now about what is unfolding and will accelerate in coming years, it can make decisions and adopt policies now that will ease rather than aggravate the coming hardships.
