Editorial: Status quo unsustainable
For years, politicians, analysts and newspapers like this one have been full of disturbing statistics about an aging population and the impending unsustainability of social programs created at a time when there were far more working taxpayers per pensioner than there are today.
And for years — perhaps because those who will be most affected by this truth were too young to make retirement a priority worry, or because unsustainable health care was a more immediate concern — not much was ever done.
The Canada Pension Plan has been put on a sounder footing, it’s true, but CPP is based on an individual’s own contributions, rather than on the taxes others will pay. By fixing his eye on Old Age Security, Prime Minister Stephen Harper is sailing into new and more perilous waters.
Should he? The guessing here is a majority of Canadians remain to be convinced. Further, we’ll speculate that older Canadians will be more likely to be uncomfortable about a reminder that what Ottawa giveth to a person’s retirement comfort it can taketh away.
But an honest look at the numbers shows us a responsible prime minister has no alternative but to act.
And a close look at the politics and the requirements of basic fairness suggests it is Canadians still in their salad days as income earners who ought to be most worried, not those now approaching retirement after decades contributing to the benefits of their parents’ generation.
The numbers are these: by 2030, it’s estimated the annual cost of Old Age Security (which pays a maximum of $540.12 a month) will have risen from $36.5 billion in 2010 to $108 billion. At the same time, the ratio of working people to pensioners will have fallen drastically.
Right now, about 4.7 million people are paid the OAS benefit because they are over 65; in 2030 that num- ber is expected to climb to 9.3 million recipients as postwar baby boomers swell the ranks of retirees.
Expressing the seniors’ boom in terms of a percentage of the population, Statscan says the current proportion 65 or over is 13 per cent. It forecasts a rise to 21.2 per cent by 2026, and to 26.4 by 2051.
There are a variety of things the government can and should do about this. One is following the American model, which gradually raised the age of eligibility to 67. Another is lowering the income level (currently $69,562 a year) at which a clawback begins. And a third is to announce a long phase-in of a lower payment, to give younger Canadians a warning to save more while they still can.
Clearly, the government has a difficult tightrope to walk. Because Old Age Security is a program that transfers money from young to old, from rich to poor and from good planners to bad ones, Canadians will inevitably have a huge range of opinion about what is fair and affordable.
The challenge will be made even greater because policy-makers sometimes give the impression they think of citizens more as human resources serving the economy than as people served by the economy.
Voters who get the sense government sometimes views them as a burden it can’t afford may be inclined to relieve them of the burden of office at election time.
But Stephen Harper is right. The status quo is clearly unsustainable, and the strain on our social compact will only grow greater — as it has begun to do in a parallel fashion on health care — if we don’t act while the numbers are still manageable.
Perhaps many Canadians won’t like what he comes up with.
But we should thank him for having the courage to start the conversation. It would have been far easier to pass the buck to his successor a few more years down the road.