You've probably seen the television ad by now – the one that shows a man receiving a watch as a retirement gift, then pawning it at night, presumably because he's strapped for cash.
The ad, sponsored by the Canadian Labour Congress, is part of what is becoming an emotional debate over a possible expansion of the Canada Pension Plan. The Liberals have vowed to enhance the CPP and federal officials will meet with provincial premiers in Vancouver on June 20-21 to see if they can agree on what has to be done.
Here's one tip for all the deep thinkers who will convene in Vancouver: First, define the problem. Is the goal to help seniors living in poverty? Or is it to build a better retirement for the middle class?
Yes, our national retirement system could use some tinkering. However, it's fantasy to insinuate, as the television ad does, that large numbers of working Canadians are doomed to poverty once they leave a job.
Canada's retirement system consistently earns above-average grades from international comparisons such as the one compiled by benefits consultant Mercer. Thanks to building blocks put in place over the past half-century, poverty among seniors in Canada has faded to a small fraction of its level in the 1970s.
Contrary to popular belief, retirees are now less likely to be living in dire straits than working-age people. Only about one in 27 seniors has to subsist on a low income, compared with about one in nine non-seniors, according to a new report from the Fraser Institute.
To be sure, we should not be satisfied with any level of poverty. The elderly, in particular, often have little capacity to improve their economic situation and deserve special attention. However, the Fraser Institute study makes a strong case that simply expanding the CPP won't help the most vulnerable retirees.
The report, by Charles Lammam, Hugh McIntyre and Milagros Palacios, shows that senior poverty is heavily concentrated among those who live alone. These low-income seniors are disproportionately women.
The group of people who are the most vulnerable of all are those with absolutely no CPP income. In 2013, nearly half of seniors with no CPP income lived in poverty, according to the report.
Here's the rub: CPP benefits are typically based on how long a person has drawn a paycheque in Canada and how much money they have made. People with no CPP income in retirement are usually those with no history of paid employment, perhaps because they have been homemakers, perhaps because of health issues, perhaps for other reasons entirely.
Expanding CPP payouts won't do much to help this group because they don't qualify for benefits in the first place.
Even for seniors with a trickle of CPP income, an increase in benefits may not result in much increase in total income. That is because a more generous dollop of CPP money is likely to mean less money from other government sources.
Under current rules, an impoverished senior who collects a higher payout from the CPP would be penalized by receiving a lower stipend from the guaranteed income supplement for low-income seniors.
So what should CPP expansion aim for? The Fraser Institute report makes no suggestions. It gives the impression that any enhancement of the current system is probably unwise.
In contrast, many of us would like to see help for Canada's most vulnerable retirees. The problem is that it's difficult to see how this can be accomplished within the confines of the CPP system, which is tied to past employment income.
But perhaps that's not the real problem at all. Much of the agitation for an expanded CPP comes from those who believe many middle-class Canadians will face a sharp drop in living standards once they quit work.
That is a far more tractable challenge. One simple way to address the middle-class gap would be for the CPP system to bump up its earnings ceiling.
At the moment, CPP contributions stop once your income hits $54,900. If the limit were increased to $100,000 or more, CPP payments in future could ratchet up to much higher levels.
Just don't count on a big bump right away: The increased payouts would not be immediate. Extra contributions would take years to build up to a point where they delivered significantly higher payouts to future workers. And, yes, you would have to contribute more of your paycheque to make this happen.
The knotty realities of any reform suggest the upcoming CPP discussion in Vancouver will offer plenty of entertainment.
Those who attend will first have to address whether they want to help Canada's most impoverished retirees or address the plight of the middle class. Either way, the potential solutions are likely to prove more difficult than television ads imply.