Forget all the gloomy talk about Canada’s aging population.
Future seniors here are actually getting younger, a trend that makes it desirable for them to keep working past the retirement age and embrace second careers. This is according to a new e-brief by the C.D. Howe Institute.
The population of Canada, home to the biggest group of baby boomers in the world, is certainly aging, but it’s not getting older in the traditional sense of the word, argues the report.
“This notion that the population is getting older is a problem of perspective,” says one of the authors of the report, Marcel Boyer, a research fellow at C.D. Howe Institute and professor emeritus of economics at the University of Montreal. “People are younger than they think. Older people are younger than the general population thinks.”
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One can arrive at this conclusion by measuring age based on the number of remaining years one has, rather than by the number of years since birth.
And, in Canada, one’s remaining years are increasing. In 1950, a 35-year-old Canadian had a remaining life expectancy of 38.6 years. But in 2010, this jumped to 46.8 years.
Given this trend, Canadians are not getting older in the traditional sense but younger, because when they reach retirement age, many of them are more active and more willing to work in the future than previous generations, the e-brief explains.
The employment rate for those over 60 stood at 23% in 2011, up from 13% in 2000. While it’s unlikely that the employment rate of this age group will surpass that of younger people, the C.D. Howe Institute expects that it will keep growing.
All of these factors create an opportunity for second careers among the future elderly, who will be more educated.
“Surveys show that a significant percentage of 50-plus workers would like to embrace an ‘encore career’ in advocacy (36%), work with children/youth (32%), conservation (31%), teaching (31%), spiritual/religious (23%) or healthcare (17%),” according to the brief.
In a double-career scenario, people would complete their first career, start using their retirement savings from that first career if they want and later study for their second career. Then they would remain in the labour market, stop using their pension savings and go back to making pension contributions.
So how can Canada implement this new vision?
Higher retirement age
One key step would be to increase the retirement age for public benefits such as old age pensions, according to the report. Canada is already set to raise the old age security age of qualification to 67, from 65, between 2023 and 2029.
Boyer admits that there is still strong resistance in Canadian society to the idea of upping the age for public benefits because the concept of young seniors still hasn’t gained much traction.
But “once people become convinced of that, then people would say, ‘Oh, I don’t need these public programs to apply so early in my life,’” he explains.
The brief also recommends reducing the clawbacks on earned income for Guaranteed Income Supplement recipients, because the authors of the report see them as a strong disincentive to work.
Introducing phased-in retirement with changes to tax and pension rules is yet another possibility, according to the study. This could allow employees to work and receive pension benefits while contributing to a pension plan.
Another solution proposed by the C.D. Howe Institute is to adopt policies that make it easy for older people to attend school so they can acquire the necessary credentials for their second careers.
“This could be accomplished, for example, with education entry requirements that take into consideration on-the-job experience rather than strictly academic credentials,” the report says.
The study also proposes making it easier to finance second-career education through flexible severance pay rules that would encourage people to leave their jobs toward the end of their careers.
“Older workers with lots of service time have little incentive to switch jobs since doing so would mean losing their common law right to a large severance payout should they instead get laid off,” the report explains.
Boyer says allowing older workers to remain in the job market would not aggravate Canada’s problem with youth unemployment, which is almost twice as high as the general unemployment rate of over 7%. In fact, it would benefit the entire economy.
“[Having] more people in the labour force is how you create more jobs for other people—because these people have needs,” Boyer explains, adding that Canada has a bright future because of its supply of senior workers. He says the notion that the number of vacancies would go up if fewer people enter the labour market is erroneous.
This coincides with the view of the Organisation for Economic Co-operation and Development, which argues that if Canadians continue to retire early, this will slow down workforce growth and ultimately stifle the economy.