Let me tell you about your Old Age Security.
Canadian Old Age Security system is not an expense to government because it creates economic activity.
by Tom Thorne
Prime Minister Stephen Harper’s recent comments about the fate of the Canadian Old Age Security (OAS) system has opened the debate about what his government has in mind for this universal social program.
The Prime Minister vaguely announced an OAS review and potential changes at the World Economic Forum meeting. He may have momentarily forgotten about the old age skew of Canadian demographics when he made this announcement wishing to please his European audience with his economic toughness in the midst of their Eurozone crises.
He stated that those already drawing the OAS at this time will see no changes to their payments. There were hints that the age to start OAS would go from age 65 to 67 but no one in the Harper government to this point will say whether this is the case or not. There was no indications about what will happen to those sitting on the cusp of OAS qualification at 64 who normally would apply after their 2012 birthday.
If the federal government goes ahead with this change it will be affecting people who actually vote in elections. Therefore it is likely that the federal government will achieve a later qualifying age for OAS over a phase in period of time.
This payment each month is certainly important for those on any type of disability but if you make over $67,000 per year you get the OAS clawed back in taxation. At this time those with good retirement incomes probably bank and invest the OAS each month or they see it as money for jam. Many without these higher retirement incomes see the OAS as an important part of their monthly income.
No matter where you sit on the OAS, every OAS payment to Canadians is used to generate economic activity. In short the OAS funds cycle and recycle in the economy creating economic activity that would otherwise not happen.
It is very short sighted thinking to alter the OAS age 65 qualifying age. The brutal fact is it is hard for anyone over 60 to work in this economy. After I left my last good paying job through no fault of my own, at almost 60, I received a truncated retirement income, then I took my Canada Pension Plan (CPP) early and finally at 65 took my OAS. I worked from 60 until I was almost 70 at a retail job to augment my income.
This is typical of many people whose good pay years are cut short about age 60 and despite excellent qualifications cannot replace their last big income job after that age. For those people these social programs are very important.
I really think of the OAS as a type of currency. Whether you receive a cheque in the mail or your bank receives a string of electronic impulses OAS is a generator of cash that in most cases will be spent. Those deposits enable chartered banks to lend at Bank Act ratios thus creating money.
Therefore to think of this cash as an expense line in the federal budget is wrong. In the times we have cutting back on this benefit would stop old folks from spending and there is a big population bulge of recipients of the OAS. Think of it in terms of an economic stimulus and you have the right idea about the OAS and for that matter the CPP.
It is good political optics for right wing politicians to be seen to be hard nosed and cutting back on profligate senior citizens. Get those seniors off the public tit. Make them use up their RRSP funds they have squirreled away for a rainy day. Tell them the rainy day is here.
The problem is not a lot of Canadians have pension plans with their employers. Very few have the cushy pension plans of federal government employees, teachers and the like. Most people rely on the CPP and OAS for their retirement. Many also need the supplement part of the OAS program.
And although Canadians are older and healthier these days the prejudice that after 65 they are employable if a myth. Many leave their career jobs and then supplement their incomes after retirement working at McJobs and greeting customers at Walmart. These people may want to be fully retired but they can’t afford it.
I know from direct experience of my own retail years of many workers who hold down two or even three jobs during their time before 65. None or few of these jobs have health plans or retirement plans. For many the CPP and OAS is all they have at 65. And those who do have pensions from employers find that without CPP and OAS they are inadequate.
Raising the age of OAS entitlement to 66 or 67 would mean many would have to stay working. And even with the CPP and OAS they would have to remain working part time to make ends meet.
And besides the retail world, better paying jobs with pension builders in them would also have to stay until 66 or 67. That would freeze out the places needed for the debt ridden graduates of our post secondary institutions?
And what about the double dippers? In professions like teaching people retire with great pensions, draw their CPP and OAS and then work up to 100 days a year supply and contract teaching. Often these people stop work at 60 leaving CPP and OAS until they are 65. Or they take CPP early and bank it in investments and tax free savings accounts. These people for certain get the OAS clawed back and they take hours away from newly minted teachers who cannot find jobs.
The entire notions we have about retirement are not just what happens to the OAS and whether you qualify for it at 65, 66, 67 or whenever. OAS payments clearly create economic activity at whatever age they are paid out. Second, many people rely on the OAS and CPP because they have little savings and little opportunity throughout their work life to create them.
Poverty for many seniors is a reality. CPP and OAS may give them less than a $1,000 per month. A couple may get $2,000 between them. Not all of them have their own home paid off and many rent so it is poverty for many. People in this situation can be guaranteed to spend all of their money each month making as they do so a contribution to the Canadian economy.
Finally, if the Harper government wants to mess with the OAS they may have set in motion their first really stupid decision. OAS receivers and people forced to wait for this benefit are people whose profiles show that they go to the polls and vote and not all seniors have memory problems.
© Copyright 2012, Tom Thorne, All Rights Reserved.