News and Blogs

With more seniors working already, do we need to raise the retirement age?


For the first time ever, the percentage of Canadian seniors aged 65 to 69 who are still working rose to more than one in four in the autumn of 2013.

As shown by Statistics Canada, while the life expectancy of Canadians has been steadily rising, the average number of years spent not working has actually been stable since the mid-1990s – due to the fact that more and more seniors continue to work past the traditional age of retirement.

The employment rate for persons aged 65 to 69 rose from less than one in five (19.6 per cent) in November, 2008, to 23.8 per cent in November, 2012, to 25.4 per cent in November, 2013. (The rate was 30.9 per cent for men and 20.2 per cent for women.) Since some seniors seeking work are unemployed, the labour force participation rate for this age group is even higher than that.

There are many reasons for the significant increase in the ranks of working seniors, both positive and negative. Many choose to continue to work even after becoming eligible for public and (for the fortunate) private pension benefits, while others feel that they have to continue to work for financial reasons.

Regardless, the rapid rise in the proportion of working seniors over age 65 suggests that eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits at that age is not a major disincentive to work, as some economists and policy makers have suggested.

A significant and fast-rising proportion of seniors choose to work and collect OAS benefits at the same time. More than four in 10 (41.1 per cent) of workers age 65 to 69 work on a part-time basis, suggesting that they want to combine income from pensions and income from employment.

The Harper Conservatives have, through the 2012 budget implementation bill, increased the age of eligibility for OAS and GIS benefits from age 65 to 67, phased in over six years starting from 2023. By that time, based on the trend since 2008, it seems likely that about one-third of the 65-to-69 age group will still be working.

Maintaining 65 as the minimum age of eligibility for OAS can be seen as creating a disincentive to work, which will contribute to future labour shortages. From this perspective, one could wield OAS eligibility as a “stick” – postponing benefits so as to force more seniors to work past age 65.

But eligibility for OAS does not require a person to withdraw from the labour force; it may act as a “carrot” to encourage many to work longer, but in a different job, or on a part-time or part-year basis.

A key problem with the stick approach is that many older workers are unable to continue working due to poor health. Statistics Canada data for 2009 show that 24 per cent of people who were fully retired did so due to health or disability. And another 7 per cent reported that they had retired to provide care to a partner.

Retirement due to ill health or disability is most prevalent among lower-income older workers, especially those who have spent a working lifetime in very physically demanding jobs. Access to OAS and GIS benefits from age 65 provides a bare-bones minimum income guarantee, which will be postponed to age 67 in the future.

In short, the stick approach of raising the age of eligibility for OAS is dealing with an exaggerated problem, and will hurt the least fortunate. People approaching retirement already make up a significant proportion of those living in poverty and collecting provincial social assistance benefits.

On a more positive note, Canadians now have the option to postpone receipt of OAS benefits past age 65 in return for a higher benefit. This carrot approach supports the choice of those who want to work longer, and could have been combined with no increase to the age of eligibility.

This article originally appeared in the Globe & Mail's Economy Lab.

Photo: designsquid. Used under a Creative Commons BY-SA 2.0 licence.