National Approaches Income Support for Nonworkers

The continued aging of the more developed countries is prompting many of them to reassess their social security systems in light of rising old-age dependency ratios and concern that the public sector might not be able to maintain current levels of support without substantially higher taxes. In many countries, efforts to reduce the rate of growth of social security expenditures have resulted or are likely to result in the reform of old-age social protection schemes. This has been the case in Canada and the United States, countries whose approaches to old-age support share a number of important features and differ in fundamental ways.

Both Canada and the United States have public, mandatory, contributory, earnings-related pension programs covering almost all workers that provide a portion of the income workers will need in retirement. Disability benefits are available in both countries. Both countries also offer tax incentives to encourage employers to provide private pensions and residents to save for their own retirement. Canada, however, provides a universal benefit, known as a demogrant, that can be supplemented by payments to persons with inadequate income. The United States lacks this universal benefit, but it, too, offers extra protection to very low-income elderly through a separate, means-tested program of income support.