Reform in play?
Was Stephen Harper’s Conservative government correct after all when it raised the eligibility age for Old Age Security (OAS)? For Canadians approaching retirement, they certainly didn’t think so. The new Liberal government, which had campaigned against those changes, reversed the policy in its first budget last March.
The late Jim Flaherty’s 2012 federal budget planned to gradually raise the OAS eligibility age from 65 to 67 starting in 2023. The controversial measure was aimed at reducing the costs associated with this country’s aging population. Canadians are living longer and the number of seniors is growing – especially in Atlantic Canada.
That argument is convincing, especially for federal Finance Minister Bill Morneau, trying to deal with today’s harsh economic reality and expensive election promises.
Over the last two years, Canada was dealt significant economic blows from the steep decline in oil prices in the global downturn. Retirement reform would likely lead to improved economic growth, but it comes with considerable political baggage.
Morneau’s blue ribbon Advisory Council on Economic Growth is publicly supporting retirement reform. In a report Monday, the panel says Canadians should be encouraged to delay retirement by raising the eligibility age for OAS, CPP and other benefits as a way of boosting labour force participation.
That doesn’t sound like encouragement. It’s putting a gun to the heads of many Canadians who would depend on social security blankets to afford retirement.
Morneau gave the panel’s suggestion a positive response Monday. Keeping Canadians over 55 working to age 67 would pump an extra $56 billion into the country’s Gross Domestic Product. Extra taxes and added consumer spending are music to Morneau’s ears.
The thumbs-up lasted one day. Tuesday, cabinet swiftly rejected the proposal. Prime Minister Justin Trudeau and other cabinet ministers, bloodied over the pounding they took for backtracking on electoral reform, were in no mood to re-examine retirement age and break another Liberal promise. The government is now looking at other incentives to keep workers in the work force longer, if they’re able and willing. That makes sense.
Canada is bucking a worldwide trend among top industrialized countries. Currently, 21 of the top 34 countries are increasing their age of retirement eligibility. Only Canada is lowering that age. The U.S. will reach 67 by 2022, the U.K. by 2028, and Australia by 2030.
Morneau’s advisory council carries a lot of weight. It consults with cabinet ministers, senior public servants, industry leaders and academics on options for boosting economic growth. Government adopted many of its first round recommendations last fall. Five new reports were presented Monday and many of those will be accepted as well.
As long as Morneau remains finance minister, the Conservatives’ retirement proposal will always be in play. He hints that Harper and Flaherty were on the right track.
As for ordinary Canadians – with depleted bank accounts staring back at us – we may have to delay those plans to loll on a riverbank with fishing pole in hand.