It’s often said that Canadian seniors are doing fairly well, and that the rate of senior poverty experienced back in the pre-Canada Pension Plan days has dropped considerably.
However, says Ottawa-based union researcher John Anderson, the yardstick used to measure senior poverty levels needs to be updated to international standards. He took the time recently for a telephone interview with Save with SPP.
Currently, says Anderson, a “Market Basket Measure” (MBM) system is used to measure the cost of living, a “bizarre” system that factors in the cost of housing, clothing, food and other staples by province and region. By this old system, it is reckoned that 3.5 per cent of Canadian seniors live in poverty, although recent tweaks to the measurement process will see this number jump to 5.6 per cent.
The intricate MBM system – unique to Canada — goes into arcane details such as “what clothes you should have, how many pairs of long underwear, what kind of food you should buy, how many grams of butter. And there’s a sort of built-in stigmatization of rural living; it’s assumed that you don’t need as much money to live in a rural area as you do to live in Toronto,” Anderson says. The opposite is often true, he points out.
LIM system a better comparator
Anderson says the rest of the world uses a different measurement, one that’s much simpler, Anderson explains. The low income measure (LIM) scale defines poverty as being “an income level that is less than 50 per cent of the median income in the country,” he says. “This gives you a very clean comparison.”
By that measure, a startling 14 per cent of Canadian seniors are living in poverty, which is more than triple that figure that MBM currently quotes. “When you think about it, it means they are making less than half of what the average Canadian earns,” he explains. “They are not earning a lot.”
Why are today’s seniors not doing so well? Anderson says there has been a decline in workplace pensions over the years. “The numbers are way down,” he says. As recently as 2005, there were 4.6 million Canadians who belonged to defined benefit plans through work. By 2018, that number had dropped to 4.2 million, “at a time when we have seen a significant increase in the population, and more seniors than ever before.”
Defined benefit plans are the kind that guarantee what your monthly payment will be. About two million Canadians belong in defined contribution plans, which are more like an RRSP – money contributed over a working person’s career is invested and grown, and then drawn down as income in retirement.
“Only 25 per cent of workers have defined benefit plans now. And only 37 per cent have any kind of registered pension plan. Most have nothing,” says Anderson. This lack of pensions in the workplace, and the tendency towards part time and “gig” work that offers no benefits, is a primary reason why senior poverty is on the upswing, he contends.
“The kinds of jobs people are in today have changed,” Anderson explains. “People are working more non-standard jobs, gig jobs, contract work. Many are not even contributing to the CPP.” They tend not to be saving much on their own with these types of jobs, so it means that “when they retire, if they work that way, they don’t get much of a pension.”
That will leave many people with nothing in retirement except Old Age Security and the Guaranteed Income Supplement, Anderson says. Neither the OAS or the GIS has “really kept up” with increases in living costs. The most anyone can get from these two programs is about $1,500 a month, for a single person, he says. “These major government pension plans have not yet taken a leap forward,” he says. “The government has improved the Canada Pension Plan, and people will benefit from that (in the future),” he explains, but these other two pillars should get a look too.
Anderson says by moving to a LIM-based measurement of poverty, governments could have a more realistic basis on which to make program improvements.
“We already have a form of universal basic income for seniors through the OAS and the GIS,” he says. “The monthly amounts these pay out need to be raised.”
The goal should be to raise income for seniors to the LIM target of 50 per cent of Canada’s median income which is $30,700 per person based on median after tax income for 2018.
He also thinks that the OAS should be an individual benefit, rather than being designed for couples or singles. “You get less per person with the couples’ benefit; people should get the same amount,” he explains.
He says seniors today face an expensive retirement, with possible time spent in costly long-term care homes. “Can I survive when I retire – this isn’t a question that our seniors should have to worry about,” he explains.
Anderson remains optimistic that the problem will be addressed. The Depression prompted governments of the day to begin offering OAS; experience during and after the Second World War led to the introduction of EI and the baby bonus. CPP benefits started following a serious period of senior poverty in the 1950s. “We have to do better, but maybe there’s a silver lining with the COVID-19 situation, and maybe government will take a closer look at this issue again,” he says.
We thank John Anderson for speaking with Save with SPP. John Anderson is the former Policy Director of the federal NDP and now a union researcher.
If you don’t have access to a workplace pension, consider becoming a member of the Saskatchewan Pension Plan. It’s an open defined contribution plan – once you’re a member, the contributions you make are invested and grown over time, and when you retire, you have the option of turning your savings into a lifetime monthly pension. Check them out today.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|