Raising the OAS Eligibility Age Would Raise Poverty in Old Age

February 2, 2012

3-minute read

Canadian Press have put out a story based on a research paper by Richard Shillington which was commissioned by HRSDC from Informetrica, and obtained by the CLC through an Access to Information request.

Receiving OAS is required to makes seniors eligible for the GIS top up, which provides one in three seniors with a supplement which ensures they have a minimally adequate income in old age.

Raising the retirement age from age 65 to age 67 or higher would impact all future seniors, but would especially impact those who would qualify for the GIS supplement. Many older workers, especially the single, near elderly, already face very high rates of poverty.

As shown in Table 1, the OAS now contributes about one quarter of the incomes of Canadians aged 66 and 67, and the OAS and GIS in combination contribute about one third. The proportion of income replaced by the OAS/GIS is much higher for women and seniors with low incomes, about 70% for those with individual incomes of less than $15,000.

 

Table 1: OAS/GIS Contributions to the Income of Seniors (2006)
OAS OAS / GIS / Allowance
Age 66 26% 34%
Age 67 27% 36%
Women 65-69 29% 38%
Men 65-69 19% 26%
All Seniors 26% 36%
$5-$10,000 59% 71%
$10-15,000 37% 66%
$15-20,000 31% 49%
$20-25,000 25% 28%
$25-30,000 20% 21%
$50-55,000 10% 10%
$95-100,000 1% 1%
Source: Evaluation of the Old Age Security Program: Summary Report based on the LAD. Prepared for Human Resources and Skills Development Canada by Informetrica Limited, March 2009. Tables 24 and 25.
As shown in Table 2, the OAS/GIS makes a huge contribution to the reduction of poverty in old age. OAS/GIS reduces the low income rate (defined by the LIM Before Tax measure) from about 30% to about 12% (more for women than men).
Table 2: OAS/GIS Contribution to the Reduction of Poverty
Before After
Age 66 30% 12%
Age 67 32% 12%
Women Age 65-69 35% 14%
Men Age 65-69 27% 11%
Poverty Measure is Low Income Measure Before Tax (below one half of median adjusted for family size).
Source: Evaluation of the Old Age Security Program: Summary Report based on the LAD. Prepared for Human Resources and Skills Development Canada by Informetrica Limited, March 2009. Table 42.
 

Raising the age of eligibility for OAS/GIS would require future seniors with low incomes — those who would qualify for the GIS — to either save more, work much more hours, or to live in poverty. Saving more is not a realistic option for low income workers. And working longer is not a realistic option for many low income seniors who are in poor health, have a disability, or are providing care.  About one in four current retirees retired due to ill health.

Raising the age of eligibility for OAS/GIS would also mean that non-working, low income seniors on provincial social assistance and disability programs would have to wait to transition to OAS/GIS, raising social assistance costs for provincial governments. Costs of providing drugs and essential services to low income seniors unable to pay on their own would also increase

 

 

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