The Maturation of Canada's Retirement Income System: Income Levels, Income Inequality and Low Income Among the Elderly

Abstract

This paper revisits trends in the level and distribution of income among Canadian seniors in 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. The author relies on a detailed composition of income by source to show that not only did the maturation of these earnings-related programs produce a substantial increase in average real incomes but also to a substantial reduction in income inequality among the elderly, due mainly to C/QPP benefits. Rising real incomes went disproportionately to lower income seniors contributing to the well-known decline in low-income rates among the elderly.

Keywords: Canada Pension Plan, Disposable income, Economic families, Government transfer payments, Income, Income distribution, Income level, Investment income, Low income, Low income cutoffs, Low income measures, Models, Old age security pensions, Pension plans, Pensions, Quebec Pension Plan, Retirement, Savings, Seniors, Unattached individuals, Women

JEL Classification: H55, J14