Declining Pension Coverage and Rising Inequality

There’s quite an interesting piece on pension coverage in today’s Daily from StatCan. 

The study suggests that some of the statistical series showing sharply declining pension coverage are rather suspect, and they provide a series from tax data showing the proportion of taxfilers with a positive pension adjustment. This is a larger number than contributors to registered pension plans, since some plans are non contributory (including many large plans for industrial workers.)

Table 2 does bear out the main story that workplace pension coverage is declining significantly among men and is broadly constant or even rising for women. For men aged 35 to 54, the proportion with a positive pension adjustment fell from 54.7% to 46.3%, 1991 – 2004, while for women of the same age group coverage rose, from 43.% to 46.2%.  Again on familiar lines, most of the decline in coverage is accounted for by falling unionization and shift of jobs from sectors with traditionally high pension coverage.

The key argument advanced in the article is that families have been cushioned to some degree by increased pension coverage for women, which offsets some of the decline among men. Table 6 indeed shows that the proportion of couples with no pension plan at all in the family rose fairly modestly, from 33.5% in 1991 to 38.1% in 2004. (Data for couples with husband aged 35 to 54.)

However, the data should not lead to complacency. Only 21.3% of couples with husband age 35 to 54 have two pensions, and that falls to 15.3% for younger couples with a husband aged 25 to 34. Almost half (48.4%) of these younger couples have no pension plan coverage.

Further, pension contributions (and thus, of course, future pension incomes) have become more unequally distributed. In 2004, total pension contributions of the top 20% of couples were 9.2 times greater than those of the bottom 20%, up from 6.7 times as much in 1986.

As the study concludes, workplace pension trends are likely to contribute to a growth in income inequality among the future elderly, in contrast to the decrease in inequality which accompanied maturation of the Canada/Quebec pension Plan.

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