Raising the retirement age alone won’t keep aging Canadians in the workplace — employers will need to do that themselves, says an economist with TD Bank.
For the most part, the onus falls on the private sector to devise ways of encouraging people to work later in life, said Derek Burleton. There is growing recognition that a surge of retiring baby boomers over the next few years will compound an already worrisome shortage of skilled labour.
In a report on the impending skills shortage in Canada, released last month, Burleton and co-author Don Drummond, suggested the government should consider raising the age of entitlement for public pension benefits to 67. Doing so would likely keep more Canadians in the workforce longer by forcing baby boomers to postpone retirement.
But contrary to some interpretations of the report, the economists never said it should be done, only that it should be considered, nor that it will solve the difficult challenge of replacing retiring baby boomers.
“We were a little disturbed about those statements that everyone should work until 67, we’re not talking about that, we’re talking about enticing employees,” said Burleton. “I don’t think individuals should be forced to work but there should be incentives. Rules forcing them to stay are not helpful.”
Mike Ternosky, a specialist in retirement programs with Towers Perrin in Toronto, said the predictions of a drop in retirements resulting from a hike in the retirement age are overstated, since Canadian Pension Plan benefits now represent such a small part of retirement income. Any attempt to raise the age will stem from a motivation to fund the CPP while still keeping payroll taxes at reasonable levels.
Alan Jarvis, vice-president of human resources with Allianz Canada, said the age should be raised over a period of time to help pay for the growing bill the CPP represents.
“I believe we should consider using the same phased-in approach as in the U.S.A.,” he said. The U.S. is gradually pushing back the age at which people qualify to receive their benefits.
Experts predict older workers will play a greater role in the workforce than in the past, though Burleton said he is skeptical that any large federal program will be able to solve the problem.
The federal government is expected to introduce a plan to address skills shortages in the country, this fall.
The government should play a supporting role and promote the idea of encouraging people to stay in the workforce, he said, adding that government programs designed to develop the labour pool won’t likely succeed.
He cites the millennium scholarship fund as example of a large scale, ineffective government program. The fund was intended to help more students obtain a post-secondary education, but instead, as Ottawa put more money into students’ hands, the provinces merely took more out, effectively cancelling the program. Similarly, he doubts the feasibility of plans for the government to introduce some form of tax-sheltered savings program to pay for continuing education. Most people don’t use all of their RRSP room, so it is unlikely they will be able to afford to put more into any new learning accounts, said Burleton.
Many experts predict an increase in the number of employers providing phased retirement programs. Despite the slowdown and the possibility of layoffs over the short term, many more HR departments are asking about phased retirement options, although a study released last month by the Employee Benefits Research Institute showed the practice is catching on very slowly.
Mandatory retirement provisions that exist in some provinces are being questioned. Jarvis said the idea that people should automatically retire at the age of 65 amounts to discrimination.
“At Allianz Canada we have several employees on our payroll who are well past age 65. They are loyal, hardworking and at the height of their game. They have extensive knowledge and experience and we would be fools to throw that away based on an out-of-date age barrier,” he said.
But he also said any push for phased retirement programs will likely come from employees, at least for the next few years. A lot of baby boomers haven’t invested enough and won’t be able to retire at 65 and maintain their lifestyles, he said. Employers may face the problem of trying to move somebody out of an organization when they are not ready and “right or wrong, 65-year old people” aren’t as appealing to employers as younger workers, he said.
One of the problems employers face in introducing a phased retirement program is legislation, especially in Ontario, that makes it difficult for people to work part time and collect part of their pensions, said Ternosky. Changes to those rules would make it easier for employers to introduce phased retirement programs.
