National Approaches Income Support for Nonworkers

Canada refers to the three floors of its retirement income system. The first floor is the Old Age Security program, the second the Canada Pension Plan, and the third is private savings, which includes individual savings and employer-sponsored pension plan (Human Resources Development Canada, 2000a). In the U.S. retirement income system, reference is made to the three legs of the retirement income stool—Social Security, employer-provided pensions, and individual savings. The most significant difference between these two systems is that Canada offers a universal pension, and the United States does not. The key similarity between the two systems is the mandatory, earnings-related component that covers workers in the two countries and that requires contributions from both workers and their employees. Both systems provide relatively modest replacement rates that are adjusted to keep pace with inflation. There is a greater use of general revenues to support older persons in Canada than in the United States. Benefits are also available at a younger age in Canada and after shorter tenure.

Neither the Canadian publicly financed retirement income system nor the one in the United States provides all of the income middle-income retirees are likely to need in old age. Both countries attempt to have these benefits supplemented by employer-provided pensions and individuals savings. Both countries provide benefits to the needy elderly, although the programs that do this are very different from one another.

Despite differences in the public retirement income systems of Canada and the United States, both contribute roughly the same amount to total retirement income, though less of the total comes from the earnings related pension in Canada than in the United States (Gunderson, Hyatt, and Pesando). About 40 percent of the aggregate income of persons sixty-five and older in Canada in 1997 came from the OAS (29 percent) or the CPP/QPP (21 percent), while about 46 percent of the aggregate income of the sixty-five-plus population in the United States in 1998 came from publicly funded pensions, mainly Social Security (Human Resources Development Canada, 2000b; U.S. Social Security Administration, 2000b). Canada's Guaranteed Income Supplement goes to a much higher proportion of older persons than does the American SSI, although GIS is not, according to Turner, a poverty program like the U.S.'s Supplemental Security Income program.

Another significant difference between the Canada Pension Plan and the U.S. Social Security Program is the diversified investment of reserves currently permitted in the CPP but not in the U.S. Social Security program. Credit splitting and payment of certain benefits to same-sex common law partners also distinguish the publicly financed income retirement system in Canada from that in the United States.

Improvements in both systems over the years have resulted in sharp declines in the proportion of poor or low-income elderly. Though economic security continues to elude many retirees, the availability of indexed benefits guaranteed for life have gone a long way toward enhancing the economic security of older nonworkers in the United States and Canada. As a result, retirement in comfort and dignity is a reality for growing numbers of retirees in both countries.

Detailed information on income support for older nonworkers in Canada can be found at the web site of Human Resources Development Canada: www.hrdc-drhc.gc.ca. Comparable information for older nonworkers in the United States can be found at the web site of the Social Security Administration: www.ssa.gov.