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the Honourable Diane Finley
Minister of Human Resources and Skills Development
Canadian Club of Toronto
(Royal York Hotel)
Thank you for having me here today.
Although the work we do in the House is important for the country, I must say I love getting out and seeing this great country of ours.
Most importantly, I get to listen to Canadians. There’s never a lack of topics, I can tell you!
But hearing what’s on the minds of people living, working and raising families is some of the most important work I do. So it’s great to see you all this afternoon.
Now, I’ve learned that there are a couple of tables of students in the room.
You may want to glaze over when I start talking about retirement. Instead, perk up – because I hope that by the end of my remarks, you’ll realize thatCanadais changing dramatically.
I also really hope that you’ll realize our Government is working really hard to be sure that Canada is left stronger and better for you, by the time you’re running our companies and our country.
So let’s get to it.
Unless you’ve been under a rock (or perhaps in a warmer climate, as that would be preferable this time of year), you’ve undoubtedly been hearing a lot of discussion aboutCanada’s population.
Much of that has focused on the need to make Old Age Security sustainable and to ensure it is there when you need it.
But I’ll dig into that in a few moments.
After all, it doesn’t work to define a solution, if no one actually understands the problem.
Here it is, plain and simple.
Canadais aging. We’re getting older. Of course, I’d like to say we’re timeless and classic… but that really is more for my own benefit.
Seriously though, let’s look at the facts quickly.
1) Average life expectancy is increasing inCanada. In 1970, the average 65 year old could expect to live to 81. Today, that has increased by 4 years, to 85.
2) At the same time that people are living longer, our birth rate has been falling.
3) And now, the biggest generation in Canadian history, the baby boomers, have started retiring. Last year, the first baby boomers turned 65. As we boomers continue to retire over the next decade and a half, the number of seniors in this country will grow dramatically.
In fact, by 2030, for the first time ever… we will have more people over the age of 65 than under the age of 20.
Over the next two decades, the number of seniors will double.
As a result, the ratio of working-age Canadians to seniors is expected to fall from 4-to-1 in 2011 to 2-to-one in 2030.
These trends present very clear challenges to our economy, our labour market and our social programs.
An aging world
This reality of an aging population is not exclusive toCanada.
According to the United Nations, in 2005, 10 per cent of the world’s population was 60 years old or older.
In 2050, that proportion is expected to reach 22 per cent.
But the fact of the matter is that this trend has a bigger impact in developed countries like Canada.
Today, we rank 27th on the list of countries in terms of average age.
By 2030, Canada is projected to be the 11th oldest country in the world, and 8th oldest of the 34 OECD countries.
This is a significant change, in a short period of time.
If we want to succeed – and win– we have to adapt to population aging.
And that starts now.
In other words, we need to approach the future on our toes. Not on our heels.
There’s no question that the aging of our population is forcing us to re-evaluate our policies and programs.
We have to examine the programs we have in place – now – to see how they can better contribute to job creation for Canadians of all ages and to our economic growth.
Many of you may think that we’re doing relatively well as we ride out the economic downturn.
You’re right. Canada is one of only two G-7 countries to have recouped all of the jobs lost during the global recession.
There are now more Canadians working than before the downturn.
But this is no time to rest on our laurels.
We now have to adjust to a new reality as the boomers start to leave the labour force.
We will need to ensure that our government has the fiscal room to meet the various needs of an aging population… without putting an undue tax burden on younger generations.
We also need to face unprecedented labour and skill shortages.
It is becoming increasingly crucial to find innovative ways to bring in fresh talent to counter the rate at which our aging population will be leaving the workforce.
We are already seeing labour shortages in some regions and some industries.
As was stated in the National Post on January 31, “where once we worried about finding jobs for unemployed workers, in future our concern will be finding enough workers to fill the jobs.”
Responding effectively to our aging population means we have to be creative and we have to be willing to acknowledge – head on – when change is necessary to ensure that the social programs Canadians treasure will be there when they need it.
Of course, that includes OAS.
I’m going to pause there for now. Because it’s time for retirement income 101. The crash course, from Diane Finley.
You might think I’ve been taking this show on the road. You’re right. And it’s been a daily feature in the House of Commons during Question Period because the Opposition clearly needs remedial training…
There are three pillars to retirement income in Canada:
2) Canada Pension Plan and
3) Personal savings – including personal savings through Tax Free Savings Accounts and Registered Retirement Savings Plans, as well as employer pension plans. Soon this will include Pooled Registered Pension Plans.
Ideally, the combination of the three pillars is meant to ensure seniors have a standard of living similar to what they had when they were working.
Strengthening the third pillar
Let’s start with the third pillar, just to shake things up.
Many of you in this room know this – and students, it’s perk up time – but Canadians are not sufficiently planning and saving for retirement. In 2008, only 30 per cent of Canadians had a registered retirement pension plan. And, 60 per cent of Canadians did not have a work place pension plan.
Our Government is doing something about it. We’re bolstering efforts to educate Canadians about retirement savings.
In fact, Budget 2011 committed $3 million per year, in addition to the $2 million per year the Financial Consumer Agency of Canada already receives, to undertake financial literacy initiatives.
Yet just as important as the awareness… are the tools and support.
Our Government introduced the Tax Free Savings Account which allows people to accumulate tax-free earnings on savings for retirement.
We also introduced legislation to implement Pooled Registered Pension Plans, which will offer Canadians a new, low-cost and accessible pension option to help meet their retirement goals.
That’s not all. We have reduced taxes for seniors by introducing pension income splitting and increasing the Age Credit. As a result of these and other tax reductions, we have eliminated federal income tax for 380,000 lower income seniors.
The Guaranteed Income Supplement supports the most vulnerable seniors and, in 2011, we made the largest increase to it in 25 years.
These are just a few of the actions we have taken to help Canadians save for their retirement.
The CPP and OAS
And now, the favourite topics of late, CPP and OAS.
The Canada Pension Plan is based on contributions. You work – and you and your employer contribute.
The short story is that CPP is rock solid, based on the Chief Actuary, for at least 75 years. It’s an international model for sound structure, governance and long-term stability.
Major changes to the CPP were made in the late 1990s to align it with the new realities of an aging population. That’s why it’s in such healthy shape.
The Old Age Security program however, is a very different story.
OAS is available to all Canadians, funded 100 per cent by tax dollars. There is no reserve fund. There have been no such adjustments.
It’s ticking along as if things haven’t changed demographically in fifty years.
Things are different
People are living longer however and they are collecting OAS benefits over a longer period of time.
A person turning 65 today can expect to receive OAS for 20 years – 4 years longer than in 1970.
Add to that, the baby boomers are retiring in growing numbers. So we will have more people, collecting longer.
As a result, the total cost of benefits will be increasingly unsustainable for tomorrow’s workers and taxpayers.
And it’s the next generations of Canadians who will have to shoulder the burden. The next generations who will have their own families to raise, their own mortgages to pay, their own student and household debt to manage.
OAS expenditures – which are the largest single transfer we pay to individual Canadians – are projected to increase from $36.5 billion a year to $108 billion a year by 2030.
So the cost is going up dramatically – while the supply of workers who keep our economy growing and our tax revenues strong, is shrinking proportionately.
Something must be done
Ladies and gentlemen, inaction is simply not an option. Something must be done.
Nearly every OECD country has taken steps to ensure the sustainability of their public pension system, including theUnited States, Australia, United Kingdom, France, Germany, Sweden, and Japan.
Whatever the Opposition may believe, this is not a crisis that we invented .
Our population is aging, demographics are shifting. And it’s real.
It is clear that they are not interested in facing reality.
It is clear that they are not interested in proactively discussing Canada’s longer-term challenges and opportunities.
Their irresponsible approach to Canada’s finances would put many cherished programs at risk.
As one editorial recently stated, the Opposition parties’ efforts to panic Canadians are as disingenuous as they are dangerous.
So let’s be frank.
We cannot allow ourselves to be pegged into a situation where we are faced with a choice between the country’s financial security… and our commitment to aging Canadians who have worked long and hard to build this great nation.
This government will not allow that to happen.
There have also been many debates on the notion of sustainability.
Let me put that in a new context today.
Everything is sustainable… if we selfishly choose not to think beyond our generation.
Everything is sustainable… if we pretend other programs won't be affected by a greying Canada.
Everything is sustainable… if we decide to ignore a shrinking tax base to pay for our programs.
Everything is sustainable… if you believe the solution is to massively increase taxes and incur huge structural deficits.
By that definition, we could say that despite their current predicaments, the programs of many of our European friends are ‘sustainable’.
I don’t think I need to continue. The point is clear.
Government debt and inaction and complacency can choke an economy, as Canadians can see by looking abroad.
Thanks to the strong economic leadership of our Prime Minister and Minister of Finance, we have the financial independence to make choices on our own terms.
However, I cannot stress enough that if we want to continue to have choices, we need to start making responsible and prudent decisions today.
I’m sure many of you have heard this from me many times over the past few weeks, but I want to reinforce – again – that any changes being considered will not cost current seniors a penny.
I challenge you to walk away today… and tell your older friends and family that I personally assure there will be no changes for seniors currently collecting benefits. Nor will there be any impacts for anyone close to retirement.
Any necessary changes will be made with a substantial notice period, allowing plenty of time for Canadians – some of you here today – to adjust your retirement planning accordingly and prepare for the future.
Let me confirm right now that our Government will ensure the security of retirement benefits for Canadian seniors and for future generations.
We owe it to future generations to leave a solid OAS program that is affordable and that reflects the demographic changes happening in our country.
I think it’s also important to bluntly say that we would not be considering change for the sake of change.
We are considering change because it is in the best interest of Canadians, their families – and their futures.
This is a topic of great interest to Canadians. I’m hearing it loud and clear.
Yet I have to tell you, that Canadians get it.
Once they have a chance to absorb the information and realize just how different our country and our labour market will look in very few years… they understand.
Of course, I’m also being asked regularly for details, on what we’re planning.
Although there is no policy yet to announce, I expect that the upcoming Budget will ensure steps to protect retirement income.
It will also ensure that there are no cuts to the current benefits for seniors.
As our Prime Minister has said, our Government will make the changes necessary to sustain economic growth, job creation and prosperity.
Now is the time for leadership to ensureCanada is indeed a country for all ages – for youth, for seniors, for our newcomers… and all of us in between.
Yes, we have our challenges. But just remember that nearly 150 years ago, we still had challenges – just different ones.
Because of the commitment and vision of a small group of people, Canada became a country.
Fast forward to today, and this country is now a world leader. To me, it’s the very best place in the world.
Here you are given opportunity, freedom, the chance to work hard, raise a family and make a better life.
And now we must look to tomorrow and prepare for it.
Our Government will make sure Canada is left a better, stronger place. Both for Canadians today and for the generations coming behind us.