The goal of the change is two-fold: to encourage people to stay in the workforce longer, and to save the government billions of dollars.
When fully implemented, officials estimate, Ottawa may save almost $11 billion a year, although there was no documentation to break down the figure.
“In this budget our government is looking ahead not only over the next few years but also over the next generation,” Finance Minister Jim Flaherty said.
“This gradual approach will enable younger Canadians to plan ahead with confidence.”
The changes were signalled by Prime Minister Stephen Harper in January, when he said Canada’s social programs had to scale back if the country’s finances were to remain sustainable over the long term.
His targeting of old age security was greeted with angst within his own caucus, and push-back from experts who argued repeatedly that retirement benefits are sustainable in their current form.
But the government says many other industrialized countries are raising their age of entitlement, and Canada should too — especially since people are living longer and healthier lives.
“I don’t think it’s a really unreasonable request. I mean, governments around the world are doing this,” said Craig Alexander, chief economist at Toronto-Dominion Bank.
“As an economist, I have no problem with that. We actually want people to stay in the labour market longer.”
The provinces have expressed some concern that they would be stuck with a big welfare bill for the two years that low-income seniors are no longer able to collect old age security and the guaranteed income supplement.
The federal government’s commitment may alleviate their fears somewhat.
“The government will compensate provinces and territories for net additional costs they face resulting from the increase in the age of eligibility of OAS benefits,” the main budget document states.
Still, the commitment throws discussions about compensation into the political arena, where federal-provincial relations are tense and where the federal government has a spotty record of reimbursing provincial governments to the standard they demand, says Meredith.