Hostname: page-component-848d4c4894-cjp7w Total loading time: 0 Render date: 2024-07-06T13:05:53.588Z Has data issue: false hasContentIssue false

The Maturation of Canada's Retirement Income System: Income Levels, Income Inequality and Low Income Among Older Persons*

Published online by Cambridge University Press:  29 November 2010

John Myles
Affiliation:
Florida State University and Statistics Canada

Abstract

I revisit trends in the level and distribution of income among Canadian seniors in the context of what is arguably the major source of change in these trends since the end of the seventies: the maturation of Canada's public and private earnings-related pension systems. The expanded role of earnings related pensions in the 1980s and 1990s is largely the result of changes that occurred in the 1950s and 1960s. The Canada and Quebec Pension Plans (C/QPP) were implemented in 1966 and the first cohort to receive full C/QPP benefits turned 65 in 1976. Cohorts retiring after this period were also the beneficiaries of the expansion of private occupational pensions that took place between the 1950s and the 1970s. I rely on a detailed decomposition of income by source to show that the maturation of these earnings-related programs produced not only a substantial increase in average real incomes but also a substantial reduction in income inequality among older persons, due mainly to higher C/QPP benefits. Rising real incomes went disproportionately to lower income seniors contributing to the well-known decline in low-income rates among older persons.

Résumé

Je réexamine les niveaux et la répartition des revenus chez les aîné(e)s canadiens à la lumière de ce qui pourrait être la plus importante cause de ces changements depuis la fin des années 70: la maturation des systèmes de pensions public et privés contributifs fondés sur les gains au Canada. La place de plus en plus grande occupée par les pensions contributifs fondés sur les gains au cours des années 80 et 90 dépend largement des changements survenus dans les annees 50 et 60. Le Régime de pensions du Canada (RPC) et le Régime de rentes du Québec (RRQ) ont été mis sur pied en 1966 et la première cohorte à en toucher les advantages complets a atteint l'âge de 65 ans en 1976. Les cohortes qui ont pris leur retraite par la suite ont également bénéficié de l'expansion des pensions privées résultant de leur emploi qui ont été établies entre les années 50 et 70. Je m'appuie sur une décomposition détaillée du revenu par sources pour démontrer que la maturation de ces programmes contributifs fondés sur les gains a entraîné une augmentation substantielle du revenu moyen réel mais aussi une réduction importante de l'inégalité des revenus chez les aîné(e)s, surtout à cause de la hausse des prestations du RPC et du RRQ. La hausse des revenus réels a atteint les aîné(e)s à faible revenu, contribuant ainsi au déclin manifeste du revenu faible chez les aîné(e)s.

Type
Articles
Copyright
Copyright © Canadian Association on Gerontology 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Atkinson, A. B., Rainwater, L., & Smeeding, T. (1995). Income distribution in OECD countries: Evidence from the Luxembourg Income Study. Paris: OECD.Google Scholar
Blinder, A. (1983). Private pensions and public pensions: Theory and fact. Ann Arbor: University of Michigan, Department of Economics.Google Scholar
Burkhauser, R., Smeeding, T., & Merz, J. (1996). Relative inequality and poverty in Germany and the United States using alternative equivalence scales. Review of Income and Wealth, 42(4), 381400.CrossRefGoogle Scholar
Cook, F., Marshall, V., Marshall, J.G., & Kaufman, J. (1994). The salience of intergenerational equity in Canada and the United States. In Marmor, T., Smeeding, , & Greene, V. (Eds.), Economic security and intergenerational justice (pp. 91129). Washington, DC: The Urban Institute.Google Scholar
Diamond, P., & Hausman, J. (1984). Individual retiurement and savings behavior. Journal of Public Economics, 23, 81114.CrossRefGoogle Scholar
Easterlin, R. (1980). Birth and fortune: The impact ofnumbers onpersonal welfare. New York: Basic Books.Google Scholar
Gower, D. (1998). Income transition upon retirement. Perspectives on Labour and Income, Winter, 1823.Google Scholar
Hauser, R. (1997). Adequacy and poverty among the retired. Paris: Organization for Economic Cooperation and Development.Google Scholar
Kangas, O. (1995). Attitudes on means-tested benefits in Finland. Ada Sociologica, 38, 299310.CrossRefGoogle Scholar
Korpi, W., & Palme, J. (1998). The paradox of redistribution and strategies of inequality: welfare state institutions, inequality, and poverty in the Western countires. American Sociological Review, 63(10.), 661687.CrossRefGoogle Scholar
Le Grand, J. (1982). The strategy ofequality. Redistribution and the social services. London: Geroge Allen and Unwin.Google Scholar
Lerman, R., & Yitzhaki, S. (1985). Income inequality effects by income source: a new approach and applications to the United States. The Review of Economics and Statistics, 67, 151156.CrossRefGoogle Scholar
Mitchell, D., Harding, A., & Gruen, F. (1994). Targeting welfare. The Economic Record, 70, 315340.CrossRefGoogle Scholar
Morrissette, R., & Drolet, M. (1998). The evolution ofpension coverage ofyoung and older workers. Ottawa: Business and Labour Market Analysis Division, Statistics Canada.Google Scholar
Myles, J. (1989). Old age in the welfare state: The political economy of public pensions. (Rev. ed. ed.). Lawrence, Kansas: University Press of Kansas.Google Scholar
Myles, J., & Pierson, P. (in press). The comparative political economy of pension reform. In Pierson, P. (Ed.), The new politics of the welfare state. New York: Oxford University Press.Google Scholar
Myles, J., & Quadagno, J. (1994). The politics of income security for the elderly in Canada and the United States: explaining the difference. In Marmor, T. & Smeeding, T. (Eds.), Economic security for the elderly: North American perspectives. Washington, DC: The Urban Institute.Google Scholar
Oja, G., & Love, R. (1988). Pensions and incomes of the elderly in Canada, 1971-1985. Ottawa: Statistics Canada.Google Scholar
Organization for Economic Cooperation and Development. (1997). Ageing in OECD countries. Paris: OECD.Google Scholar
Pedersen, A.W.. (1999). The taming of inequality in retirement: A comparative study of pension policy outcomes. Unpublished doctoral dissertation, European University Institute, Florence.Google Scholar
Preston, S.H. (1984). Children and the elderly: divergent paths for America's dependents. Demography, 21, 435457.CrossRefGoogle Scholar
Smeeding, T., & Sullivan, D. (1998). Generations and the distribution ofeconomic well-being: a cross-national view: Luxembourg Income Study, Working Paper Series, No. 173.Google Scholar
Smeeding, T., & Torrey, B. R., Rein, M. (1986). The economic status of the young and old in six countries. Luxembourg: LJS-CEPS Working Paper #8.Google Scholar
Titmuss, R. (1955). Pension systems and population change. Political Quarterly, 26, 152166.CrossRefGoogle Scholar
Wolfson, M., & Murphy, B. (1994). Kinder and gentler: a comparative analysis of incomes of the elderly in Canada and the United States. In Marmor, T. and Smeeding, T., & Greene, V. (Eds.), Economic security and intergenerational justice. Wahsington DC: Urban Institute.Google Scholar
Wolfson, M.C., & Evans, J.M. (1990). Statistics Canada's low-income cut-offs: methodological concerns and possibilities. Ottawa: Analytical Studies Branch, Statistics Canada.Google Scholar