It's older policies, not older workers, that are obsolete

In Canada, many of our policies and workplace practices create often unintended barriers to the continued labour market participation of older workers — even though the labour market activity of older workers is of increasing importance from both policy and practical perspectives. Individuals and employers should be allowed to make their own choices in this area without undue constraint from government-imposed barriers that can limit and distort those choices. It's older policies — not older workers — that are obsolete.

Canada's population is aging but older Canadians have greater life expectancy than they used to and are generally healthier and better able to continue working. And there are more and more of them: the ratio of seniors to the working age population is expected to almost double over the next two decades, rising from 20.3 per cent in 2010 to 38.4 per cent by 2040. In light of these trends, governments should do more to make it easier for older persons to remain employed if they wish to so they can meet their own personal goals and, not unimportantly, pay employment-related taxes rather than receive government benefits.

These trends also underscore the fragility of the implicit contract in pay-asyou-go social programs such as the Canada Pension Plan (CPP) and workers' compensation, where the current generation of taxpayers pays to support older retirees, with the expectation that later generations will in turn cover the cost of current taxpayers into their own old age.

The legislative banning of mandatory retirement means older workers are no longer compelled to retire. And many don't want to, given both increased insecurity about the adequacy of retirement income because of recent financial crises and the decline of employer-sponsored defined-benefit plans. The image of 55-andout has changed to 65-andout, and perhaps longer.

Moreover, there is evidence of negative health and cognitive consequences from abrupt retirement. And the nature of work has shifted from physically arduous blue-collar jobs towards white-collar and non-standard work — part-time, limited-term, self-employment, platform jobs in the gig economy, working from home — that is often well-suited to older workers, who can also provide important institutional knowledge and mentor younger workers.

But while the continued labour market participation of older people is clearly of increased importance, various barriers persist. For example, clawbacks in retirement income support programs such as Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and provincial supplements impose an effective tax on seniors who choose to earn additional income by working.

And, in contrast with most other developed countries and despite substantial growth in life expectancy, in Canada the age for normal receipt of the CPP, OAS and GIS benefits is still 65.

In addition, the personal income tax has a federal tax credit for people 65 and over, with a clawback rate of 15 per cent for income above approximately $39,000 (as of 2021). And, on average across the country, workers' compensation replaces 8090 per cent of lost wages, which clearly provides little monetary incentive to return to work.

Finally, when people turn 71, they have to convert their RRSPs to a Registered Retirement Income Fund (RRIF) or annuity and begin to draw down benefits. By moving some recipients into higher tax brackets, these annual withdrawals discourage employment.

On the private-sector side, as well, employer-sponsored pension plans can contain both subsidies to early retirement and penalties to delayed retirement, which can also discourage continued employment. The same can happen if older plan members are not allowed to accrue service credits or if there are caps on the earnings base on which pension benefits are calculated. Also, those who work past certain ages can lose benefits, such as long-term disability, life insurance and prescription coverage.

There may be reasonable rationales for many of these barriers. But, in view of the changing nature of work, the desire of many older Canadians to continue working, and employers' need to address current and looming labour shortages as our population ages, they need to be re-evaluated.

And, quite aside from that, employers can benefit from the skills and mentoring abilities of older workers.

Policies designed for the previous world of work, including pension and retirement policies, need to be re-evaluated for the new world we are now in.

GOVERNMENTS SHOULD DO MORE (SO) OLDER PERSONS CAN REMAIN EMPLOYED.