To say that some people are unhappy that eligibility for Old Age security (OAS) will be going up from age 65 to 67 is an understatement. Preet Banerjee collected together some of the more reasoned arguments in this debate. I don’t want to pick on Preet because he’s definitely one of the good guys, but I don’t agree with everything he said.
My main concern is with the oft-quoted statistic that OAS and GIS (Guaranteed Income Supplement) payments are currently 2.36% of GDP and are expected to rise to 3.14% of GDP by 2030. Preet says that some see this as a “whopping” increase, it doesn’t really look very whopping at all.
I disagree. GDP (Gross Domestic Product) is the market value of everything produced in the entire country. Just about anything you measure as a percent of GDP (except government debt) is going to look small. Even Bernie Madoff’s fraud was only 0.45% of U.S. yearly GDP. If my cable company tried to convince me to take a full suite of all their top-of-the-line services because it only costs 3% of my pay, I wouldn’t be persuaded.
I definitely agree with Preet when he looks at the main reason in favour of increasing OAS eligibility: “If we did nothing, the average length of retirement would eventually approach the average length of one’s working career.” OAS needs to change over time to reflect changes in our longevity.
Preet asked a final question in reference to the fact that we can defer OAS payments past age 67 in return for higher payments: “As voluntary deferrals earn a premium in benefits, can those of us who got the shaft at least get a premium for our mandatory deferral?” My answer would be that younger people already get a premium in the form of a greater life expectancy which leads to more OAS payments.
I’d like to see automatic OAS reviews that would make eligibility adjustments based on life expectancy. The goal would be to make the lifetime costs per person for OAS stay constant (after adjusting for inflation). Without automating these changes, inaction causes OAS costs to keep rising as life expectancy increases.