Freedom 85?
Why working longer may be good for everyone but you
BY Ellen Russell
Illustration by Evan Munday
“Hi—my name is Lucky!!” I kid you not: “Lucky” was the name on the tag of the guy bagging my groceries. Lucky certainly appeared to be far past “Freedom 55.” “Servitude 70” is more like it.
Sure, some seniors want to work longer. But late retirement is not a “lifestyle choice” for Lucky. It’s a class issue. Lucky and workers like him find themselves working longer because they can’t afford to retire.
If you are worried about folks in Lucky’s predicament, check out Monica Townson’s new book Growing Older, Working Longer (published by the Canadian Centre for Policy Alternatives, a.k.a. my employer). She knows this stuff: she served on the Pension Commission of Ontario and the Canada Pension Plan Advisory Board.
Canadians rely heavily on public pensions (55 percent of the income of senior women and 41 percent of the income of senior men comes from government transfers). But the problem is that these plans don’t provide enough to live on.
Public pensions were designed to be inadequate, since the private pension system was supposed to make up the difference. But today, fewer than 40 percent of Canadians belong to a pension plan through their employer.
On top of that, employer-provided pensions are becoming less secure. Defined-benefit pensions (where you are guaranteed a certain income in retirement) are being replaced with defined contribution pensions (where contributions are made to a fund for your retirement). The catch with the latter is that you don’t know how much money you’ll get when you retire. All of the risk associated with retirement saving is shifted from the employer to you.
That is why Canadians must rely on private retirement savings. Sure, Lucky could be retired if he had set aside money for his RRSP (and of course he’d get a tax break for doing so). But blaming Lucky for not saving enough just blames the victim. Given the disappointing performance of real wages in Canada over the last 15 years, it isn’t shocking that Lucky likely didn’t have much extra to set aside. It’s higher-income folks who are more likely to have the extra cash to put in RRSPs.
If we really wanted adequate retirement incomes for everyone, we’d rethink existing government support to seniors. But a lot of people make nice fees peddling RRSPs and the like. It would be bad for their business if seniors didn’t have to rely so heavily on private savings.
As the onus falls on RRSPs to fund retirement, vulnerable economics Freedom 85? Why working longer may be good for everyone but you by ellen russell workers are hurt the most. Leaving the workforce, even temporarily, eats into your ability to make RRSP contributions. So people with health or disability issues or care-giving responsibilities, or people who immigrated in the midst of their work life, will have the hardest time retiring on RRSPs.
The class issues that force low-income seniors to work longer are being obscured behind a lot of happy talk about “active aging” and the joys of working longer. Meanwhile, government hand-wringing over a possible shortage of skilled workers makes working longer sound like a virtue. Huh? If there are literally no workers who have certain skills, shouldn’t we be investing more in education rather than guilting seniors into working longer?
My hunch is that workers exist with the appropriate skills, but employers don’t want to raise wages to attract them. Employers would prefer another solution. If employees work longer, it will increase the supply of skilled workers. Holy supply and demand, Batman! Once the supply of skilled workers goes up, wages go down.
But there are other factors as well. Pensions usually don’t kick in until retirement. So both government- and employerprovided pensions save money if they can delay having to pay out. Seems like a good deal for employers and the government: Persuading seniors to work longer holds down pension and wage costs. And here is the macabre part that usually flies under the public radar: If the government can delay the time when it has to pay out public pensions, it saves money because there will be a shorter period before people die. And, as Townson points out, life expectancy is correlated with socio-economic status. So low-income seniors are likely to enjoy fewer years of payout from their public pensions than higher-income seniors. Let’s drop the pretense that persuading people to work longer is a grand empowering gesture. These are some nasty class politics dressed up as seniors’ rights.
