December 20, 2014

Canada’s Demographic Challenge: A Population Growing “Younger”

July 24, 2013 – The real demographic challenge for Canadian policymakers is adapting to a population growing “younger,” after taking increased life expectancies into account, says a report released today by the C.D. Howe Institute.  In “The Main Challenge of Our Times: A Population Growing Younger,” authors Marcel Boyer and Sébastien Boyer propose an alternative approach to population aging, which measures years to live instead of years since birth.

Since 1950, Canadian life expectancy, on average, has increased. For example, a 65-year-old in 2010 had the same life expectancy as a 59.5 year-old in 1950. “Canadians are experiencing increases in longevity and are willing to work longer than previous cohorts,” said Marcel Boyer. “Public policy should aim to provide Canadians with the instruments to better manage retirement decisions.”

While the issue of an aging society is normally viewed from the perspective of the number of years since birth – a population’s age distribution – the authors turn this approach on its head. They focus on years to live, tracking the increases in longevity for different age cohorts since 1950. A 35-year-old had a remaining life expectancy of 38.6 years in 1950 but 46.8 years in 2010, showing a difference of 8.2 years. The real-1950 age of such a person in 2010 is therefore 35 minus 8.2, or 26.8 years. Similarly, members of 60-plus age groups may feel they still have much to contribute to the labour force, and governments should adapt policies to this reality.

The forthcoming generation of elderly will be more educated, which may allow more flexibility and therefore lay the ground for double-career paths, say the authors. A significant percentage of 50-plus workers, say surveys, would like to embrace an “encore career.” In a double-career path, people would have the opportunity to complete one career, start cashing their pension from it, if they so chose, as they study and train for their second career. Then they would continue working, stop pension withdrawals and restart pension contributions.

“New and more flexible labour market arrangements will be necessary,” said Sébastien Boyer, “if continued labour force participation after ages 60 to 65 is deemed desirable for the individual involved and society.”

The report provides recommendations for policy changes, including measures to allow the flexible use of pension and retirement funds and the facilitate second-career paths. Examples:

  •  Encourage phased-in retirement with changes to tax and pension rules. These steps could permit workers to work and receive pension benefits while contributing to a pension plan;
  • Reduce the clawbacks on earned income for Guaranteed Income Supplement recipients, which provide strong disincentives to work;
  • Adjust employment insurance programs to better cater to the needs of workers with a long history of service who are laid off late in their careers, in particular for those wishing or willing to switch careers;
  • Ensure flexible severance pay rules that reduce the financial disincentive to leave a job and find a new one.

For the report go to: http://www.cdhowe.org/the-main-challenge-of-our-times-a-population-growing-younger/22311

For more information contact:  Marcel Boyer, Professor Emeritus of Economics, Université de Montréal, Research Fellow, C.D. Howe Institute, Fellow of CIRANO; Sébastien Boyer, Collège Jean-de-Brébeuf and CIRANO; Finn Poschmann, Vice President, Research, C.D. Howe Institute; 416-865-1904, email: [email protected]

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