by Terrance Hunsley
5th in a series; Futures Entwined: The Nation State and the Welfare State
… in the United States, for men born in 1930 those in the top 20 per cent of earners have a 5-year longer life expectancy than those in the bottom 50 per cent. For people born in 1960, the respective gap is some 13 years. (1) (ISSA)
An often underestimated dimension of economic inequality, and equally important factor in policies to offset it, is demographics – the social characteristics of the population and how they are changing.
The illustration above, by the International Social Security Association (ISSA) shows how income inequality translates into health inequality. The rich live longer and in better health. They are also less likely to encounter disabling conditions, even if they do more skydiving.
As the society became richer and better educated over the past half-century, it wasn’t that the poor fell backwards in absolute terms. Most countries, including the USA, have maintained a minimum (really minimum) floor of support. But the richer and better educated were able to live more healthy lifestyles, have better food, avoid life-shortening risks, avail themselves of better medicines and health care, and pass their advantage on to their children. The health and economic gap increased. The increasing social distance is leading us towards a class-stratified society, something which no one wants.
What happens when these two groups retire? A bit over-simplified but basically, the poor live a few years and die. Their draw on public pensions and health care resources is brief. The more affluent draw on those resources for a longer time. And although public support for retirement is one of the great advances of civilization, we can see that the overall effect of that redistribution of resources is not from the rich to the poor. It is more like from the middle class to the middle and upper. It can also be described as “redistribution over the life course”. You pay when you are working age and get paid back later. The same applies for transfers for children and child care. More resources are transferred between stages of the life course than from the rich to the poor.
In recent years there have been changes in retirement age policies in many countries. Governments have been gradually increasing the age at which public pension supports kick in. The USA is enacting a gradual increase put in place many years ago. In Canada, the Harper government decided to gradually increase the age for Old Age Security and the Guaranteed Income Supplement from 65 to 67 years (reversed by the Liberals). The rationale is that people are living longer in better health. Moreover, most are entering the labour market at older ages because they are receiving more education. Therefore it seems reasonable that the retirement age be pushed higher and possibly even linked to life expectancy, so that it automatically, but very gradually, increases. The rationale makes sense.
Remember though, that the poor and less educated enter the labour market earlier, and if they reach the age of retirement, they die earlier. So you might ask yourself, “Should low income older workers be able to retire earlier? They probably worked as many years.”
We actually have in Canadian history a little experiment which could teach us something about this if we did some digging. In the early eighties, with a big flow of baby boomers wanting jobs, and a high unemployment level, the federal and provincial governments agreed to relax the provisions for Canada Pension Plan Disability benefits for older workers. If their health status precluded them from continuing to work in their industry, they could apply for benefits. And they did! Within a couple of years the stream of disability pension applicants doubled. The provinces helped that along (and saved a few million bucks) by assisting older workers on social assistance to apply as well. By the end of the eighties federal politicians took note of the increasing costs. They reversed the decision, retightened the entry provisions, and turned off the tap. CPP administrators have been closely guarding the gates ever since.
But the rationale to provide low income older workers better support to retire early or opt for easier or part time work, makes a lot of sense. By age 55, for example, they are likely to have worked more years than higher paid, more educated workers. They are more likely to be struggling with their health. Their productivity may be decreasing. Their occupations are more likely facing obsolescence.
So how to do it? One way might be to give workers who are 55 or over and earning less than the median wage, the option to take their CPP and have it augmented by the GIS. That would provide them a basic minimum income of about $17,500 in 2018. Even if their CPP benefits are low, the GIS could increase to bridge the gap in the same way that it does for older immigrants who do not have enough years of residence to have full OAS benefits. The GIS is reduced by fifty percent of any income above the minimum, thus permitting some part-time earnings.
This would be consistent with federal leadership in the incremental development of a universal basic income guarantee, while still leaving provinces to deal with social assistance, social services and workers compensation insurance.
(1) International Social Security Association, 10 Global Challenges for Social Security (Americas) 2017