Prime Minister Justin Trudeau confirmed on Thursday morning his government will fulfill an election promise to reverse planned changes to the Old Age Security program in the upcoming federal budget.
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Instead of gradually upping the age of eligibility for the government-funded benefit to 67, Trudeau announced it will remain at 65. He called the previous Conservative government’s decision to tweak the age of eligibility a mistake, arguing that it was a “very simplistic solution” to a “complex problem.”
That problem remains a reality, however. Canadian baby boomers are exiting the workforce in droves, and an aging population — plus longer life spans — means that the OAS program will be drawn upon much more heavily in coming years.
So, is this a responsible decision? The experts Global News spoke with are divided.
According to Ian Lee of Carleton University’s Sprott School of Business, the answer is a resounding ‘no.’
“Is there any problem today? Not at all,” Lee said. “But fifteen twenty years from now, when Mr. Trudeau has left office presumably, there will be many people ruing the day and looking back on today’s decision and saying this was a terrible mistake.”
The OAS program on its own isn’t necessarily unsustainable, he added, but when you throw the Canada Pension Plan (paid into by employers and workers), plus the Guaranteed Income Supplement and “the grand-daddy of social programs” — healthcare — into the mix, the country’s finances will start to buckle in the face of a grey tsunami.
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The ratio of active workers to pensioners in the 1960s, when OAS was introduced, was seven-to-one, Lee said. Today, it’s two-and-a-half–to-one, and Canada may quickly find itself in a situation where there is just one worker for every pensioner.
“The prime minister claims he’s evidence based … but the (Organisation for Economic Co-operation and Development) has been crystal clear for the last several years, starting in 2012, arguing that all OECD countries must look at pushing back pensionable age.”
Trudeau’s decision will be politically popular among older Canadians in the short-term, Lee predicted, but eventually “what we’re going to be doing is taxing and exploiting our millennials to ensure that we very comfortable boomers remain even more comfortable.”
David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, disagreed with that assessment. He argued that Trudeau’s decision will help protect a particularly vulnerable segment of society, as OAS payments are gradually clawed back based on income.
“You definitely save money by cutting off transfers … if you did it today you’d save roughly $5 billion,” he said. “The problem is that about two-fifths of all that (OAS) money is going to low-income seniors, most of which are elderly single women, whose poverty rate is already about one in three.”
Macdonald said that people who would have lost OAS payments starting in 2023 under the Conservative plan would have ended up on other forms of financial support anyway.
“Someone would support them, it would likely be provincial government or family members.”