I was recently trolling through Statistics Canada (LICO – After Tax) data on CANSIM and discovered to my slight surprise that the incidence of poverty (or low income as StatsCan politely prefers to describe it) has fallen very significantly among the elderly (age 65 and over.) I knew the rate was relatively low and had been falling, but it has declined very significantly, from 11.3% in 1989 (the last cyclical peak), to 9.8% in 1996 (when the poverty rate for all Canadians last peaked), to just 5.4% in 2006 (3.4% for elderly men, and 7.0% for elderly women.) Just 219,000 elderly Canadians lived in poverty in 2006.
Those figures are so low that Canada even looks great on the seniors poverty front in international comparisons (where poverty is defined differently as having income of less than one half the national median, again adjusted for family size.) The latest Luxemburg Income Study comparative data show, somewhat stunningly, that the poverty rate among the elderly in Canada is now even lower than in Sweden (5.4% vs. 6.6%) and hugely below the United States (21%) , the UK (16%) and most large European countries. We might even be able to stake a credible claim to having the lowest rate of poverty among seniors in the world (though these international compariosns are fraught with methodological cautions. http://www.lisproject.org/keyfigures.htm
Meanwhile, compared to 1989 – the most recent cyclical peak – poverty has actually increased for the working age Canadian population age 18 to 65 (from 9.4% to 11.3%) and has fallen only slightly among children (from 11.7% to 11.3%.) This is despite the fact that unemployment is significantly below the 1989 level, and reflects the growth of more insecure work and stagnant or falling wages at the bottom.
The main reason for the low poverty rate among seniors is Old Age Security plus the Guaranteed Income Supplement which currently provide a guranteed minimum income of $13,731 to singles, and $18,549 to elderly couples. These amounts are not too distant from the LICO After Tax cut off lines – $17,568 and $21,381 for singles and couples respectively in large urban areas, and lower in smaller cities and rural areas.
StatsCan doesn’t provide the data on CANSIM but the poverty gap among the elderly – the amount needed to push them all above the poverty line – would likely come in at significantly less than $1 Billion per year, a more than affordable proposition for the federal government.
That said, OAS/GIS has been in place a long time and – while matching inflation – improvements to it would not seem to explain the halving of poverty rates for Canadian seniors since 1989. A large part of the reason is likely the fact that today’s elderly couples at the lower end of the income spectrum -compared to those of 1989 – are more likely to be collecting two CPP cheques, the delayed result of women entering the workforce in big numbers back in the 1970s and 1980s. More may also be collecting two employer pensions. Many lower income seniors likely accumulated some significant wealth from house price increases.
Another factor may be that more of today’s elderly are working – 8.6% in 2007 compared to a low of 5.9% in 2001 – though employment rates for older workers are higher for the more highly educated rather than those at greatest risk of poverty.
Pension experts like John Myles and Bob Baldwin have underlined the important point that the incomes of today’s elderly reflect the economic circumstances and policies faced by that age cohort going back many years. They are still likely still benefitting from the maturation of the CPP/QPP and from high levels of private pesnion coverage of workers in the 1970s and 1980s. In other words, the fact they are doing well may be more a residue of the past than a reflection of anything we are doing particularly well today.
It would be useful to try and figure out more clearly what is going on. My suspicion is that falling private pension coverage, stagnant wages for the bottom 80% of Canadians, and high debt levels among the least affluent mean that non affluent baby boomers entering retirement may soon start to bump up poverty rates among seniors.
- Global carbon budget is a harsh reality check for Canadian investors (October 30th, 2013)
- Are Canadian investors headed for a carbon cliff? (April 12th, 2013)
- Carbon bubbles and fossil fuel divestment (March 26th, 2013)
- Later Retirement: A Win – Win Solution? (April 12th, 2012)
- How Much Will YOU Lose from OAS Deferral?? (March 30th, 2012)