It’s no secret there’s a looming retirement savings gap among Indigenous and racialized Canadian seniors and their white counterparts.
Indeed, a June 2021 study by the Canadian Centre for Policy Alternatives found data from the 2016 census showed white seniors’ income from private pension sources — such as registered pension plans and registered retirement savings plans — was 33 per cent of their total income, compared to 25 per cent for Indigenous seniors and 21 per cent for racialized seniors. The report also found racialized seniors were most reliant on public pensions, accounting for 40 per cent of their income, compared to 34 per cent for white seniors and 25 per cent for Indigenous seniors.
While there are myriad reasons for such a wide divide when it comes to retirement security between the Black, Indigenous and people of colour community and their white counterparts, one of the most pressing reasons is that the country is still struggling to realize racial equity in the workplace. The BlackNorth Initiative has been working to unite companies across Canada to eradicate systemic racism since its formation in June 2020. But progress in this area has been slow, even as close to 500 companies have signed onto the BlackNorth pledge.
To fill this divide, employers must prioritize diversity, equity and inclusion initiatives, starting first with putting a process in place to root out systemic racism within their own organizations, ensure people from the BIPOC community are visible at every level of seniority in their companies and that they’re paid the same as their white counterparts.
As Sheila Block, the CCPA’s senior economist for Ontario and the report’s co-author said: “Employers should take a clear-eyed look at their workforce to ensure it represents the population around them. They also need to look closely at their hiring policies, as well as their approach to promotions and what their retention policies are. With pensions, part of what’s very important is where your earnings are at and how long you stay with an employer-sponsored plan.”
Reducing the retirement gap also means expanding access to employer-sponsored retirement savings plans to all segments of the population. Since the country became mired in the global coronavirus pandemic in March 2020, the importance of making long-term savings options accessible to all Canadian workers has never been clearer.
In many cases, workers who lost their jobs during the pandemic worked in low-income sectors in which employers don’t typically offer workplace retirement savings plans, such as retail and hospitality. According to a September 2020 Statistics Canada labour force survey, low-income employees accounted for an above-average share of all employees in most of the population groups designated as visible minorities in August 2020.
Canadian workers who don’t have access to retirement savings end up relying more heavily on the public pension system. If the federal government wants to reduce the burden on the public systems, it should start with incentivizing more employers to offer a workplace retirement savings plan. Many small- to mid-sized employers that don’t offer pension plans say it’s because they’re costly to set up and manage. Providing a tax credit to cover these costs would make these types of offerings more feasible.
And although there are low-income earners who are fortunate enough to work at a company that offers an employer-sponsored pension plan, many are still unable to risk taking money from their paycheques to put toward a locked-in retirement savings account, as they’re too busy focusing on surviving today.
Employers can lead in this area by providing a range of long-term savings options, including tax-free savings accounts, from which employees can choose. TFSAs help employees save for retirement through a vehicle they can also access without suffering tax-related penalties during times of emergencies. And because TFSA earnings aren’t subject to a guaranteed income supplement claw back in retirement, it’s an optimal savings vehicle for low-income earners.
Most people would jump at the opportunity to save for their retirement if given the chance. What’s more, a recent survey by Abacus Data for the Healthcare of Ontario Pension Plan found a majority (70 per cent) of Canadians are willing to forgo a higher salary in exchange for a workplace pension plan.
The economic upheaval caused by the pandemic has made saving for retirement a priority for many Canadians, and employers and the federal government should act now to ensure these workers have the opportunity to secure their future.