It’s a sad day in Canadian politics when the lobby for retirees shows more compassion for the finances of younger Canadians than federal opposition parties.
Most readers will know the Bloc Québécois is holding the Liberal minority government hostage to its demand that Ottawa add billions to Old Age Security for rich and poor seniors alike – an increase that would be funded disproportionately by younger Canadians. Sadly, all opposition parties piled on to support the Bloc motion last week, revealing that gerontocracy is alive and well in Canadian politics. Their short-term, cynical appeal to older voters will waste billions, as I demonstrated in my last column.
Happily, the lobby for retirees, the Canadian Association of Retired Persons (CARP), is displaying the intergenerational solidarity missing from Parliament. Last week, CARP president Rudy Buttignol invited Ottawa to consider reorganizing OAS so that it delivers more of its current spending to retirees in need, not those who are affluent.
Mr. Buttignol’s suggestion is a game changer. It would strengthen OAS, help younger Canadians, reduce the deficit and save Parliament. This would enable MPs to make the most significant improvement to generational fairness in the federal budget in my professional lifetime – rather than play political games by proroguing Parliament or launching an early election.
“What we’re talking about is social benefits, seniors benefits for those that need it most,” Mr. Buttignol said on CBC’s The Current. “There is an issue about income thresholds, and I think that’s where the debate should be on. You know, when is a senior’s income considered sufficient?”
I couldn’t agree more. Although Canadians 65 and older have the lowest poverty rates of any age group, 6 per cent still fall below the poverty line, according to the official measure. Others struggle with near-poverty incomes.
We should absolutely reduce economic insecurity for such seniors. Affluent boomers have a big role to play in this goal, principally by asking, “When is your income sufficient?”
Because the current answer enshrined in legislation doesn’t make sense. The full OAS – about $8,700 a year – is paid to retirees with individual incomes of as much as $90,000. The benefit is slowly clawed back above that, but individuals with incomes of more than $140,000 still get some support. This means some retired couples are receiving OAS when their combined incomes surpass a quarter-million dollars.
Since the clawback for the Canada Child Benefit (CCB) kicks in when family income is around $79,000, the time has come to refine our country’s answer to Mr. Buttignol’s question.
In my previous column, I costed out some options. The government could start to claw back OAS at an individual income threshold of $70,000 or a household income of $90,000. These alternatives would free up $12-billion and $48-billion, respectively, over the next five years.
But let’s not rely on my judgment. The federal government’s fall economic statement should task CARP and my think tank, Generation Squeeze, with collaborating to recommend a new OAS threshold that is politically feasible because it is supported by young and old alike.
At stake is the opportunity to deliver real help for retirees with low incomes and little housing wealth. Not the pittance proposed by the Bloc, and supported by all the opposition parties, who would increase incomes for retirees by no more than $870 for rich and poor alike – spending an outrageous $16-billion to deliver little impact for struggling seniors.
By slowing the pace at which tax dollars fund retirees who have six-figure incomes, the CARP president’s proposal would redirect those taxes so low-income seniors gain thousands of dollars. We could eradicate poverty for retirees.
Younger generations would also benefit, because they already pay 20 to 40 per cent more in income taxes toward boomers’ healthy retirement than boomers paid for seniors back in the day. Instead, the share of young people’s taxes that currently funds OAS for affluent boomers could be repurposed to expedite federal investments in housing, postsecondary education and $10-a-day child care.
If we land on a clawback threshold for OAS that better approximates that of the CCB, there would also be plenty of funds to reduce the deficit we are leaving for future generations.
That would be a win-win-win for intergenerational solidarity. Kudos to CARP for proposing it.
Dr. Paul Kershaw is a policy professor at the University of British Columbia and the founder of Generation Squeeze, Canada’s leading voice for generational fairness. He offers policy advice to governments of all party stripes, including the current federal cabinet.
