The Budget Must Take Old Age Catastrophe Seriously
Between population aging, the collapse of the stock market, near-zero interest rates, and higher life expectancies, will our children be able to afford our old age pensions?
Where are we, exactly?
Around 1970, when the retirement age was set at 65, life expectancy in Canada was 72 years. This meant that pension payments would theoretically last for seven years. Today, with our life expectancy at 81 years, retirement will span 16 years. This is good news, of course. But it does have consequences.
Indeed, as life expectancy has risen, the Baby Boomers have begun to retire. They started in 2010 and will leave the workforce in massive waves until 2025 or 2030. In 1975, there were seven workers for every retiree. Today, the ratio is four to one, and in 2030, it will be two to one. This is a result of low birth rates in recent decades, and the latest census data shows that no increase is expected over the medium term.
Consequently, the cost of the Old Age Security (OAS) program will explode, going from $36 billion in 2010 to $108 billion in 2030.
That means three times the cost but only half as many people to pay for it. We are running into a wall. We can close our eyes and plow right into it, or we can be responsible and disciplined and find a way of fixing the problem and making sure the plan remains viable. Are retirees in danger in the short run? Clearly not. Parliamentarians, regardless of their political stripes, are obviously not going to jeopardize the financial security and well-being of our seniors. However, refusing to deal with this problem for partisan reasons would be completely irresponsible to future generations, if not shameful.
Nearly all OECD member countries have taken steps to ensure their public pension systems are healthy, including Sweden and Denmark, two countries known for being social democracies.
For example, in 2010, France changed the legal retirement age from 60 to 62. Sweden also took the proactive measure of establishing training programs for workers aged 40 to 50 to enable them to stay in their jobs longer.
If we do not take our pension plan problems seriously, we will pass on this mess to our children and grandchildren. I reject this option.