Don’t drive seniors out of workforce
Out with the old, in with the young? That’s certainly been the thinking for generations of workers who wanted to retire early and were happy to give way to younger, more energetic employees.
But things have changed. Canadians are living longer, healthier lives. Many want to remain actively engaged. At the same time, many are concerned they won’t be able to afford retirement because of inadequate pensions or savings. No wonder a growing number of seniors would like to continue on in the workforce, as many surveys have found.
Yet a perverse system of incentives discourages seniors from working. This is a problem not simply for older people who want to stay in the workforce but for the economy as a whole. Despite valid concerns about current youth unemployment, as the population continues to age, economists say there won’t be enough young people to fill jobs in the workforce in coming years.
That would entail a number of economic costs, including a loss of productivity and consumer spending power. It would also cause a worrying diminution of the tax base. This at a time when a growing portion of the population would be living off often-meagre pensions and requiring more help from social services, not to mention putting an ever-greater burden on the health-care system.
There is some urgency on this front. This week, Statistics Canada confirmed that the percentage of Canadians over 65 (16.9 per cent) is now greater than those aged 15 and under (16.6 per cent).
Fifty years ago, at the height of the baby boom, seniors comprised less than 8 per cent of the population and the youngest group was 34 per cent. By 2031, those over 65 are expected to make up about 23 per cent of the population, similar to today’s Japan, the world’s “oldest country.”
With all of this in mind, the Trudeau government’s economic advisory council recommended earlier this year that Ottawa raise the age of retirement eligibility to keep seniors in the workforce longer.
The Harper government tried to do just that, raising the age when old-age benefits kick in from 65 to 67, but the Trudeau Liberals rightly overturned that policy. They should stay the course.
Government policy should not penalize seniors who don’t want to work by making them wait longer for their pensions. Nor does providing seniors with pensions discourage them from working as much as one would think, says Andrew Jackson, a senior policy adviser with the Broadbent Institute, which has studied the issue.
Instead, the government should encourage Canadians to stay in the workplace with carrots, not sticks.
One inducement, sensibly recommended by the economic advisory council, would be to allow Old Age Security and Canada Pension Plan deferrals beyond age 70 and ensure that deferrals past 65 are more attractive than they are now. As it stands, deferrals barely increase the amount of guaranteed income pensioners will have over their lifetime.
A second suggestion is to make it easier for older workers to go back to school to upgrade their skills or learn new ones to adapt to a changing workplace. The council recommended spending $100 million a year over the next five years to establish a new, armslength national organization to develop new approaches to retraining workers.
Other solutions, proposed in countless studies, speak directly to making the workplace more attractive to older workers so they’re more likely to choose work over retirement.
To some extent, this means labour policies that promote decent work and would benefit all workers, including older ones. One example: policies that encourage a decent wage or allow part-time or flexible hours without a loss of protections.
But abundant research has also shown that encouraging older workers to stay in the labour market will require significant culture change. The Canadian Centre for Policy Alternatives found negative stereotypes about older workers were a significant barrier to their continuing to work. Tackling this problem involves changing the mindset of human resources policies so that employers focus on retaining seniors, and even hiring them, rather than pushing them out the door.
As The Economist has argued, performance, rather than age, should be the criterion for employing people. On this, governments can begin by setting a model in their own practices with the hundreds of thousands of public employees across the country.
Canada can also learn from countries in Europe and Asia that have aged more quickly than we have. Keys to weathering the demographic storm, according to one study that looked at 46 countries in Europe and Central Asia, are keeping adult populations active, providing high-quality education and ensuring seniors don’t live in poverty.
For too long there has been a culture of pushing seniors out the door or encouraging them to leave through buyouts to make room for the young. That may have seemed necessary in the past, but it doesn’t reflect our current challenges.
For seniors, for the economy, for all of us, the government must adapt its policies to the changing demographic reality. The steps government has already taken, both by rolling back the age of eligibility for Old Age Security and beginning to expand public pension coverage, are a good start — but only a start — toward ensuring that older workers who want to retire can.
Now, the government must act to ensure that the many seniors who want to stay in the labour market are also able to do so.
Abundant research has also shown that encouraging older workers to stay in the labour market will require significant culture change