03/29/2012 06:39 EDT | Updated 05/29/2012 05:12 EDT

Bravo Harper, Retirement Gets Much-Needed Facelift

An important long run element in today's budget is the change in "retirement age" -- actually a change in the age of eligibility for old age security. The current age is 65. This will go up by two years -- to age 67. The change will not affect anyone currently over 65, nor those close to this age. In fact, nothing changes for 10 years -- until 2023.

This is a much needed change -- something that is understood by at least some people in all the political parties. However, the temptations for political grandstanding would make it difficult for a minority government to make the change. Therefore, this change is a consequence of the Conservatives having a majority.

Here are some relevant facts. The age of 65 was first established as the age for universal access to old age security in 1966. In 1966 Canadian life expectancy was about 72. Today life expectancy is about 82. People are living longer, healthier lives. Old Age Security (OAS) was originally intended to provide for a few years close to the end of one's life.

Nowadays, age 65 is more like late middle age than old age and people who reach that age can look forward, on average, to a couple of decades of an enjoyable life. The problem is that the working age population cannot afford to pay for such a lengthy retirement for their seniors. As the ratio of retired workers to those actually working increases, sooner or later the system would collapse (as is now happening in Greece, where the generosity of pensions had become truly absurd and clearly unsustainable). Now is a good time to make the change, allowing plenty of time for people to adjust. Adding two years actually makes a big financial difference and should be enough for quite a while.

One other fact worth considering is that the nature of work has also changed a lot since 1966. In particular, the relative number of physically demanding jobs -- jobs that require high levels of physical strength and physical fitness-- has fallen dramatically. Most jobs can be done effectively by people in their 60s. And the evidence is that working longer (although not overworking) has significant health benefits as well.


Canada Budget 2012 Highlights