Canadians are staying in the workforce longer, but whether that’s a good or bad thing depends on whom you ask.

A recent report by the C.D. Howe Institute estimates that over the coming two decades, Canadians are likely to stay working for an additional five years, and says that this is good news for the economy. In Later Retirement: The Win-Win Solution, author Peter Hicks says that delaying retirement will have positive economic and fiscal effects, reducing pressures on government finances and pension funding.

“The trend toward later retirement will significantly reduce, although not entirely offset, the much-discussed negative macroeconomic and labour market effects of population aging,” said Hicks, a former federal assistant deputy minister. “This suggests that compensating policy reforms are still needed but can be less draconian than has often been thought to be necessary.”

Hicks says that baby boomers will continue working later into life as a result of both social and economic pressures, and this delaying of retirement will occur regardless of any action by the government to raise the retirement age—something that’s expected to be addressed in the federal budget announcement this Thursday and has been the subject of much recent controversy.

The debate surrounding Canada’s retirement age arose after Stephen Harper alluded to a possible Old Age Security (OAS) policy change at January’s World Economic Forum in Davos, Switzerland. He said that Canada’s current system is financially unsustainable—a comment that opened the floodgates for opinions from a variety of think tanks, organizations and other politicians, who have been weighing in over the weeks since then.

A February report by the Parliamentary Budget Office set off a heated debate in the House of Commons with its claim that Canada’s OAS benefits aren’t only sustainable, but that there’s fiscal room to increase them.

And some analysts have said that raising the retirement age could have negative consequences for the provinces, which will be forced to top up social program supplements for low-income seniors.

“I think this is another example of federal downloading onto the provinces,” said Allan Maslove, a professor at Carleton University’s School of Public Policy & Administration.

Recent changes to the CPP rules have included incentives for Canadians to work longer and delay receipt of government benefits. Effective Jan. 1, 2012, employees who receive CPP before age 65 will see a reduction in benefits, whereas those who postpone receipt until after age 65—but no later than age 70—will see an increase in the benefit.

“It’s clearly an attempt to encourage individuals to postpone receipt of CPP benefits as soon as possible,” Dave Ablett, director of tax and estate planning with Investors Group, told Benefits Canada. “Currently, about 65% of all participants in CPP took those benefits before age 65. And only about 4% of those individuals actually postpone receiving CPP. People are not prevented from taking their benefits before age 65, but there will now be a higher penalty to do so.”

Some critics have said that Canadians working longer isn’t just a negative for those approaching retirement but also for the younger generation coming up behind them.

According to a report by PwC, gen X employees are missing out on career opportunities due to boomers who are working longer and gen Ys who are quickly moving up the ranks.

“With older workers staying on longer and [with] younger employees hunger[ing] for advancement [and] coming up from below, the potential for disaffection in the generation X ranks is significant,” says PwC’s report, Value Through Your People.

In addition, boomers and gen Y employees have also continued to dominate headlines and the attention of employers over the same period, with boomers being characterized as having valuable knowledge and gen Y employees being identified as young, energetic and innovative individuals.

“Gen Xers are being ‘squeezed’ by older workers delaying retirement and younger workers,” said Philip Hunter, director in PwC’s people and change practice. “Contributing factors may also include changes to operating models favouring relationship skills [over] management expertise, and career paths characterized by more stringent promotion criteria at more senior levels, which would disproportionately impact gen Xers.”

A separate report by TD Economics last month found that since the economic recovery began in 2009, individuals aged 60 years and older have accounted for approximately one-third of all net new job gains—a striking figure given that these individuals also only make up about 8% of the total labour force.

As for whether this increase in the number of Canadians working beyond age 65 is a trend by choice or necessity, the debate carries on.

Copyright © 2020 Transcontinental Media G.P. Originally published on

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Ron Clerk:

One improvement to the pension system would be a guaranteed entitlement to CPP and OAS with no actuarial reduction after 43 years of contributions.The system design does not consider those who started their careers in their teenage years but it favours those who start careers at 30 years of those who control the funds

Wednesday, March 28 at 6:36 am | Reply

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