Submission to House of Commons Standing Committee on Finance Pre-Budget Consultation Giving Priority to Low-Income, Unattached, Women Seniors

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1 383 Parkdale Avenue Suite 402 Ottawa ( Ontario) K1Y 4R4 Tel. : (613) Fax. : (613) casw@casw-acts.ca Submission to House of Commons Standing Committee on Finance Pre-Budget Consultation 2008 on Giving Priority to Low-Income, Unattached, Women Seniors Dr. Glenn Drover Social Worker and Social Policy Consultant, Canadian Association of Social Workers August 13, 2008

2 Summary The Canadian Association of Social Workers is a federation of provincial and territorial professional associations that was founded in One of our goals, and ethical principles, is to advocate for social justice with respect to marginalized peoples in Canada. During this pre-budget consultation, we wish to advocate for an improvement in the financial status of low-income, women seniors in Canada, particularly unattached, women seniors. To bring about this improvement, we recommend an increase in the Guaranteed Income Supplement (GIS) for unattached seniors raising it to the level of the low-income cutoff. We note that the federal government has made ad hoc increases to the GIS from time to time in the past. 1 In 2008, the current government increased the exemption for the employment earnings for recipients of the GIS to (20% of) $3,500 the average amount of income earned by seniors receiving the GIS. 1 Finance Canada, Budget 2000,

3 Rate and Incidence of Low-Income, Women Seniors In general, Canada has made considerable progress in improving the low-income status of seniors. After taking government transfers and taxes into account, about 5% of those aged 65 or older lived in low income in 2006, compared with a low-income rate of 9% nine years earlier in However, low-income rates among women seniors remain more than double those of senior men 3% for men and 7% for women. Low-income rates for unattached, women seniors remain much higher. In 2006, 17% (134,000) of unattached women aged 65 or older had low incomes compared to 12% (45,000) of unattached men. 2 In 2006, the incomes of unattached, low-income, women seniors were, on average, about $2,200 below the after-tax LICO. The gap indicates what it takes to bring them up to the after-tax LICO. The number and the income gap of unattached, women seniors are relatively small compared to those of other groups, such as female, low-income parents. Therefore, raising their financial status to the low-income cutoff will be less of a burden on financial coffers. Old Age Security, the Guaranteed Income Supplement and the Allowance The first pillar of the public pension system (Old Age Security (OAS), GIS and the Allowance) is vitally important in providing economic security for today s seniors, particularly women. In general, women age 65 and older receive more of their income from government transfers than men. Retirement pensions, which include both workplace pensions and Registered Retirement Savings Plans (RRSPs), are a more important source of income for men. Several issues of concern for low-income women need to be addressed: The level of the basic guarantee is too low. For single individuals, the maximum available from OAS and GIS combined is below the after-tax LICO. As noted above, this has a disproportionate impact on unattached, women seniors. Benefits are indexed for inflation using the consumer price index. But over the longer-term, wages tend to increase faster than prices, so the standard of living for seniors in the future will likely fall further and further behind the rest of the population. Indexing is particularly important for women seniors because, on average, they will spend longer in retirement than men. 2 All references to low income are based on Statistics Canada After-tax Low Income Cutoff (LICO-AT). The statistics in this and the previous paragraph are taken from Income in Canada 2006, Catalogue No XWE, Table 11.1, published May 2008.

4 The Allowance is a benefit for low-income people aged 60 to 64, but it is also based on marital status. At present, unattached, low-income women aged 60 to 64 cannot claim benefits if they have never married, or if they are separated or divorced. Since the Canada Pension Plan (CPP) is available at age 60, it makes sense to eliminate the marital status limitation in the Allowance programs and make benefits available to all low-income persons aged 60 to 64, regardless of marital status. Canada Pension Plan The CPP (or the Quebec Pension Plan in Quebec) constitutes the second pillar of the public retirement income system. In contrast to OAS and the GIS, the CPP is an earnings replacement plan and those with lower earnings receive lower pensions from the program. Since women, on average earn less than men, their CPP retirement benefits are generally lower than those of men. Some features of the CPP are particularly helpful for women. The CPP covers all types of paid employment, including non-standard work arrangements, such as part-time jobs, casual and temporary work and self-employment in which many women find themselves. It also ensures that women who must take time out of the paid work force to have children or to remain at home while their children are young will not be penalized in terms of their retirement pensions. Benefits from the CPP may be shared between spouses when both reach retirement age, thus providing a pension in her own name for a woman who has not worked outside the home. And pensions built up during a marriage or common-law relationship may be shared between the partners on the breakdown of the relationship, so a spouse who has not worked outside the home will have part of the other spouse s CPP contributions credited to an account in her name. Benefits are also in place for the surviving spouse of a deceased contributor. Despite these helpful features, several issues of concern to low-income women still need to be addressed: Women receive low benefits because of their low earnings. Under the existing plan, contributors receive a pension equivalent to roughly 25% of their average annual earnings over their lifetime, up to a limit, adjusted to reflect current dollar values. This replacement rate could be increased for low-income earners perhaps making it 50% of earnings for those with earnings at or below half the average wage. 3 3 Federal, provincial and territorial finance ministers have stated any further improvements to the program must be self-financing. Increased replacement rates could be financed by increasing the upper level of contributory earnings from the current $43,700, which is roughly equivalent to the average wage, to a factor above the average wage.

5 High CPP contribution rates may be problematic for lower-income earners especially for women in precarious jobs. One possibility to address this problem could be to increase the existing tax credit for CPP contributions or to make it a graduated credit geared to income. Increasing numbers of older women have to withdraw from paid employment to care for older family members or relatives with disabilities. As a result, they lose CPP entitlements. The situation could be addressed by including a special caregiving drop-out in the CPP comparable to the child-rearing drop-out allowed for those who have little or no earnings while caring for young children. Financial Security for Women as They Grow Older While our priority recommendation and other suggestions focus on today s women seniors, we would also like to stress that the public pension system will remain very important for women in the future. Economic security for women seniors depends largely on events they experience earlier in their lifetimes. Unlike today s seniors, most women in younger age groups have paid employment. Even while there are more women in the paid labour force than ever before, their wages still lag far behind those of men. More and more women in paid employment no longer work full-time for a full year. They are part of a contingent work force working in part-time jobs, employed through temporary help agencies, on call or working in casual jobs, or are technically selfemployed working on their own. These precarious jobs generally offer poor pay; lack benefits, such as pensions; and offer little or no job security. Women in paid employment generally do not earn enough to be able to save for their retirement through RRSPs. Nor are most of them covered by workplace pension plans. Contrary to popular perception, many women with part-time jobs do not choose to work part-time in order to combine paid work with caring for their families. In fact, one-third of women in their main childbearing years work part-time because they are unable to find full-time work. 4 When women lose their jobs, they generally can no longer qualify for employment insurance. Back in the late 1980s, a majority of unemployed women received benefits. In 1996, the rules were changed resulting in a minority who receive employment insurance benefits. This denial of temporary income support has serious consequences for women and their families not just in terms of current income but in terms of their future financial 4 Townson, Monica and Kevin Hayes. Women and the Employment Insurance Program: The Gender Impact of Current Rules on Eligibility and Earnings Replacement. Ottawa: Status of Women Canada Policy Research Fund, 2007.

6 security. What is happening to these younger women will have an important bearing on their economic security when they grow old. It has been suggested that the abolition of mandatory retirement will be particularly helpful for women workers, because they will be able to continue working past the normal retirement age to make up for periods when they had to withdraw from paid employment because of caregiving or other family responsibilities. It seems particularly invidious to suggest that women who must combine paid and unpaid employment throughout their adult lives can only expect to receive a decent retirement income if they are prepared to continue working for pay beyond the age at which most other people would have retired. Improvement of public pension programs in the first pillar is a more appropriate way to provide for these women. A National Strategy In developing policies to improve the financial security of women seniors, it is important to recognize the different patterns of women s paid and unpaid work. Establishing and maintaining women s economic autonomy should also be given priority in policy development. Canada needs a national strategy to improve women s economic security. A national strategy must take into account the origins of women seniors poverty, including women s lower earnings; their family responsibilities; the way in which they combine paid and unpaid work during their lifetimes; the changing structure of the paid work force; the fact that women, because of their greater life expectancy, will spend longer in old age on average than men; and the likelihood that most women will eventually be left on their own. We also need to review our income support programs, such as Employment Insurance, public pensions, social assistance and legal aid, to ensure that such reviews include a thorough gender analysis if we want to make any progress in improving the economic security of women seniors (present and future). An increase in the GIS for unattached, women seniors, raising it to the low-income cutoff, is a modest step in that direction.