Canada’s search for retirement sustainability

Active seniors are opting to continue to gainfully work in some capacity but the projected numbers still forecast an unsustainable scenario

Was Prime Minister Harper right when he suggested during his address at the World Economic Forum in Davos, Switzerland last Thursday that wealthy countries are complacent and take their wealth for granted? And what about that rumble about the Old Age Security system?

While our economy has outperformed many developed nations and is recognized as among the most sound by those at the WEF, Harper suggested that the wealth of western economies is no more inevitable than the poverty of emerging ones. And he made the point that many western nations are in financial straits because they focused heavily on providing services rather than a plan for how to pay for them.

The managing director of the International Monetary Fund, Christine Lagarde, was openly worried that severe widespread economic cuts, especially in ailing Europe, could bring the world’s markets down. That comment didn’t help the comfort zone of John Manley, who now heads the Canadian Council of Chief Executives. But he also happened to agree with her.

CBC quoted Manley as saying “We are not in one of those economies where things are faltering. Our unemployment rate is relatively low.”

Well, relative, that is, to many elsewhere. According to the International Labour Organization, a United Nations agency, the world’s unemployed now number over 200 million people of which 74.8 million are youth aged 15-24 who were unemployed last year. That’s an increase of more than 4 million since 2007. In the ILO’s annual report released earlier this month, the world faces the ‘urgent challenge’ of creating 600 million productive jobs over the next decade to generate sustainable growth and maintain social cohesion.

“Despite strenuous government efforts, the jobs crisis continues unabated, with one in three workers worldwide – or an estimated 1.1 billion people – either unemployed or living in poverty,” said ILO Director-General Juan Somavia. “What is needed is that job creation in the real economy must become our number one priority.”

Coupled with that job creation must be the education and training of skilled people who can meet today’s employment needs. Tuition fees are crippling which sends those wanting to improve/upgrade their skills on a vicious cycle of chasing the dream job.

Curiously, Davos was also the place where PM Harper addressed the other end of one’s working life when he referenced Canada’s Old Age Security System. It’s kind of an awkward, public place to make the statement to Canadians half a world away that he’s thinking of long term changes.

While he has no plans to change anything that seniors currently receive, he touched on the sacred ground of considering changes for those who have some time to go before approaching retirement with “substantial notice and adjustment period and in a way that does not affect current retirees or those close to retirement.”

You can see where he’s coming from when you crunch the numbers. And it ties in with his comment that some nations are in financial straits from providing services without a payment plan for them.

Over the next 20 years, the number of Canadians over age 65 will increase from 4.7 million to 9.3 million. Many seniors are living longer, healthier lives than when the Old Age Security Act came into force in 1952 meaning they will depend on it longer. So the cost of the program is expected to increase from $36 billion/year in 2010 to $108 billion/year in 2030.

Granted, a percentage of healthy, active seniors are opting to continue to gainfully work in some capacity but the projected numbers still forecast an unsustainable scenario.

Sustainability has to be Harper’s keyword going forward as he stimulates the economy for Canadians or sees them retire from it.