Nine-million baby boomers will retire from the workforce over the next two decades, and when they do, they will start to consume the most expensive forms of government programs. This is great news for seniors, but terrible news for our public finances and for young Canadians forced to foot the bill. Generation Y has been dubbed the "Millennial" generation because we came of age at the turn of the new millennium. A more fitting name for this cohort is Generation Screwed.
Reduce the length of time pensioners collect. The Auditor General noted that one of the biggest problems with the pension plans is that pensioners are living longer and collecting more and more benefits. It's not likely they will be willing to voluntarily give up their entitlements but steps can be taken to lower their life expectancy.
Now, in Australia, you get a lump sum pay-out (hardly any Aussies annuitize their lump sum). Once again, you have to manage your retirement on your own. Now, even if you knew exactly when you were going to die, this would be difficult, but when you have no idea of your personal life expectancy, this is a problem beyond the capabilities of the average Canadian.
Put simply, the aging of Canada's population has resulted in large and growing unfunded liabilities. The funding shortfall is estimated at $792.3 billion for the CPP, $494.4 billion for OAS, and $894.7 billion for medicare. Together the unfunded liabilities in Canada's public pensions and health care programs total $2.2 trillion or $134,841 for each income taxpayer. These unfunded program obligations make up more than half of total government liabilities. And their sheer size calls into question the structure of taxing current workers to provide benefits for retirees. Ultimately, to maintain current levels of spending in the future, taxes will have to increase or benefits for other programs will have to be cut -- or both.
The upcoming meeting of federal and provincial finance ministers will touch on what's become a politically charged debate about expanding the Canada Pension Plan. Proponents have tried to convince Canadians they are not saving sufficiently for retirement with some even suggesting we are on the brink of a retirement crisis. These views simply do not reconcile with the available empirical evidence.
Canadians are not using RRSPs enough, and those that do are in the higher income brackets. The people who need help saving for retirement are those earning under $100,000 -- i.e. most Canadians. So the goal is to ensure that any change has broad effect and target the reasons why people are not saving.
As our political leaders deliberate expanding the CPP, they would do well to consider the evidence which does not support the notion of a broad retirement income crisis. They also need to consider that a compulsory expansion to CPP could reduce private savings and the flexibility they afford Canadians.
Labour Day is about more than a well-deserved day off. It is a time to celebrate the important contributions working people make to our economy. It is also a good time to reflect on what is needed to improve the economic and social well-being for all workers. Economic recovery is being undermined by federal government actions over the last two years that erode workers wages, including: exploitation and fast-tracking approval for business to employ temporary foreign workers at wages below market rates; cuts to Employment Insurance and forcing workers to work at lower wages, continuous interference in the collective bargaining process on the side of employers, as well as attacks on unions and labour rights.
I read an article the other day that brought up a problem that sadly, happens more than we think; dying before you collect Canada Pension Plan (CPP) retirement benefits. The message was clear and correct -- a lot of people contribute a lot of money into CPP and never receive an income payment. Is this fair? I don't think so.