French citizens are fiercely contesting a recent change to their age of retirement. Many younger folks are striking against moving it to 64 from 62, wondering why they must accept retiring later when most boomers did not.
It is unfair but can’t be avoided – even in Canada. Our age of retirement, 65, is currently five years lower than where it stood when Ottawa launched Old Age Security (OAS) in 1952, even though average life expectancy has increased 14 years over the same period. It’s time to strengthen our pension system by considering a potential win-win tradeoff: slightly longer work lives for shorter workweeks.
Longer retirements are one reason why government budgets are under enormous demographic pressure. There are now 3.3 working-age adults to pay for the OAS of every retiree, compared with 6.9 when boomers started working.
In 2012, the Harper government planned to slowly increase the age of OAS eligibility to 67. The Trudeau government won the election in 2015 and struck down that plan.
That was good politics but bad policy, especially since Canadians don’t like paying more taxes to subsidize longer retirements. There will be no escaping the fact that dramatic increases in life expectancy will require adjusting the retirement age.
As we raise it, we should also adapt policy to other major demographic trends – such as the rise in dual-income households.
The definition of full-time work under employment standards still reflects the assumption that households will have one breadwinner and one person who specializes in caregiving and domestic work. Most households no longer operate this way. Feminism is one reason, but so too is the fact that wages haven’t kept pace with the cost of housing. For Canadians under 45, two earners are generally required to carve out a standard of living that is still falling behind what one earner often could achieve a generation ago.
Amid the rise of dual-income households, full-time work need no longer mean 40-plus hours a week, 49 to 50 weeks a year. That employment norm, established after the Second World War, contributes to a major time squeeze at home, especially when workers have young children.
Although we espouse family values in this country, Canadian workplace standards don’t deliver. The typical Canadian employee works 300 hours more each year than the typical German or Danish worker for about the same average income and roughly 200 hours more than the typical employee in the Netherlands, Norway, Sweden, France and even Britain.
Since it is inevitable that younger Canadians will begrudgingly need to accept a later retirement age, let’s expect them to do this only in return for employment norms that adapt to dual-income homes. This would require tinkering with the definition of full-time work, as signalled by experimentation with four-day workweeks.
It could be as simple as adjusting full-time norms to 35 hours a week rather than 40. An extra five hours each week, sometimes 10 for a two-income household, can make a huge difference in reducing parental time pressures or facilitating more leisure.
Governments could implement such a plan by adjusting overtime and EI premiums paid by employers to make it less costly to use employees for a maximum of 35 hours a week and more costly for any hours beyond that.
For employers, this switch will enhance productivity. France moved two decades ago to the 35-hour workweek with the intention of reducing unemployment. Since then, data show that shorter hours didn’t contribute much to this objective because employers didn’t fill a very large share of the reduced hours with new workers. They didn’t need to because their employees’ productivity increased on an hourly basis.
Some Canadian employees may trade a bit of after-tax income (or better yet, future wage increases) in order to gain four weeks of free time each year. In negotiations with their employers, this time could be taken in chunks of additional vacation days or as a reduction in weekly hours throughout the year.
Changes to the Canada child benefit could ensure that any reduction in employment hours does not reduce income for low-earning families, especially single parents. When combined with $10-a-day child care, families with young kids would generally find their after-tax income the same or better – plus they’ll have the extra time at home when they really need it.
All in return for delaying retirement from age 65 to 67.
Paul Kershaw is a policy professor at UBC and the founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on Twitter and Facebook and subscribe to Dr. Kershaw’s Hard Truths podcast.