Categories
Employment Population Social security

Sub-1% employment growth the new norm, plus a look at demographic projections

Chart 1 Population and employment estimates and projections 1976-2050
Chart 1 Population and employment estimates and projections 1976-2050
Source(s): Statistics Canada and Finance Canada estimates and projections

As noted in a previous  post (see Family Tax Cut), the impact the demographic shift will have on labour supply is likely overstated. Its ill-advised use of Kijiji data aside, the Finance Canada Jobs Report published last February included labour market projections. 2014 was projected to be the last year with employment growth of 1.0 percent or higher, and the binding constraint on future growth was projected to be labour supply. The first projection missed out of the gate, and the limited data available suggests the second may not prove any more reliable.

Categories
Financial security Poverty Social security

Fraser Institute pension aversion: ORPP unnecessary, according to FI. Quite necessary, according to reality.

Chart 1: Sources of incomes among the over-65s

Income_sources-over_65
Source: Pensions at a Glance 2013 – OECD and G20 Indicators (PDF), The Organization for Economic Cooperation and Development (OECD)

It’s like the Fraser Institute can’t help itself

Proposed Ontario pension plan unnecessary
Charles Lammam and Sean Speer, The Fraser Institute May 2, 2014

Ontario’s recent budget included the Liberals’ proposal for a mandatory government pension plan modelled after the Canada Pension Plan. The proposal, however, is largely based on the faulty assumption that most Canadians are not adequately prepared for retirement.

Who says it’s faulty? Well, certainly not the 33% of Canadians over age 55 who are concerned they do not have enough money saved for retirement, according to a recent ING Canada survey. Nor the 49% of Canadians over age 65 who remain at work because they can’t afford to retire, according to a Canadian Association of Retired Persons (CARP) survey (PDF).

Regarding the ”generous’ pension benefits provided by the Canadian government: Spending on public pensions and government retirement benefits account for only 4.5% of Canadian GDP, whereas the OECD average is 7.8% of GDP. Public transfers account for 39% of Canadian seniors’ gross income, compared to the OECD average of 59%.

Who needs actual seniors or statistics to speak to the necessity of public pension enrichment when Canadians have the Fraser Institute…

Categories
Employment Social security Transparency

February 2014 LFS: An alternative view. Why job vacancy is now more relevant than unemployment

Labour Force Participation Rate-Finance

Source: Jobs Report – The State of the Canadian Labour Market (PDF), Budget 2014, Department of Finance.

The Budget 2014 companion Jobs Report: The gift that keeps on giving (thanks for forwarding, Tavia). To continue a long-standing (What, it’s been like eight months?) tradition of ignoring the monthly Labour Force Survey (LFS) release in favour of broader issues/trends, this month’s topic is why relative employment change is rendering the unemployment rate less meaningful than the job vacancy rate (possibly explaining the recent effort to ‘fudge it a little’).

Categories
Employment Social security Youth

December 2013 LFS: An alternative view. Just because it’s the first release of the new year

Chart 1 – Real vs nominal employment
Chart 1 Real vs nominal employment December 2013

Source: CANSIM Table 282-0087 Labour force survey estimates (LFS), by sex and age group, seasonally adjusted and unadjusted monthly (persons unless otherwise noted), Statistics Canada

Told ya so (see last month’s comment re self-employment boom/busts).

Seeing as it’s been some time since this ‘alternative’ Labour Force Survey (LFS) report was started, it’s probably worth going back to update a few of the charts and tables previously presented. Unlike StatsCan, we’ve tried not to bore readers with the same two charts each month.

Categories
Employment Financial security Social security Youth

September 2013 LFS: An alternative view. Employment demographics and a broken social contract cont’d

Break out the party hats and kazoos, Canada. The official unemployment rate has dropped below 7%. And just in time for Thanksgiving.

How did it get there you ask? Well…

The monthly changes in the official employment figures are notoriously unreliable. While we can’t vouch for the quality or accuracy of any of the data, the past couple of alternative LFS reports attempted to demonstrate the real, sustained loss in Canadian employment in general and youth employment in particular since the onset of The Great Recession.

According to the LFS data, adjusted for population growth, the Canadian labour market today is 400K jobs short of where it was five years ago.  The change in employment by age group over the last five years is revealing. Youth age 15-24, who accounted for a sixth of total employment in 2008, lost 240K of those jobs. On the other hand seniors age 65+, who accounted for a negligible share of total employment in 2008, saw a surge of 215K jobs. Even adjusted for popuflation, 115K more seniors are working today than were five years ago.

Q: Where are they working?

Figure 1 Employment by age group, Retail and wholesale trade
Chart 1 Employment by age group, Retail and wholesale trade

Source: CANSIM Table 282-0075 Labour force survey estimates (LFS), employees by establishment size, North American Industry Classification System (NAICS), sex and age group, unadjusted for seasonality, monthly (persons), Statistics Canada

A: As shown in Chart 1, increasingly, Wal-mart.

Categories
Employment Governance Justice Social security Youth

August 2013 LFS: An alternative view. Employment demographics and a broken social contract

To follow-up last month’s ‘alternative view’ of the LFS report, this month we’ll elaborate on the demographic issue that was touched on in the July 2013 LFS write-up. As noted elsewhere, reading anything into the monthly LFS movements is a fool’s errand. Readers are invited to view last month’s charts for the five-year trends for total employment and rate of unemployment. This month, we’ll take a closer look at employment and rate of unemployment for youth age 15-24 and seniors age 65+.

Chart 1 Real employment by age group
Chart 1 Real employment by age group

Source: CANSIM Table 282-0001 Labour force survey estimates (LFS), by sex and detailed age group, unadjusted for seasonality, monthly (Persons), Statistics Canada

Categories
Employment Financial security Social security Youth

July 2012 LFS: No silver lining in 30,400 job losses, report figures suggest real losses likely greater

The Daily Labour Force Survey (LFS) report today started off with a chart showing job gains between July 2007 and July 2012; it even gives a link to the data table (CSV).  Conspicuously absent is a chart showing population growth over the same period, to give the reader context.  What the chart says: 2007-2012 saw seasonally-adjusted job growth of 4%, from 16.8 to 17.5 million.  What the chart does not say: according to Statscan’s own estimates, Canadian population growth for those age 15+ was 6.8% over the same period, from 26.5 to 28.3 million.

Categories
Financial security Poverty Social security

C.D. Howe report on impact of CPP, OAS / GIS policy changes: Convenient over-simplification presented as ‘stylised fact’

Comparing Nest Eggs: How CPP Reform Affects Retirement Choices Reforms (PDF)
Alexandre Laurin, Kevin Milligan, Tammy Schirle, C.D. HOWE Institute commentary NO. 352

Accordingly, we simulate the flow of CPP benefits for a stylized individual retiring at different ages.

Problem right off the top: The primary determinant of total benefits received is life expectancy; a couple years difference in retirement age is secondary.

So how does the report account for differences in life expectancy?

Our simulations make use of a simplified model of an individual to provide a clear demonstration of how the new pension adjustments affect retirement incentives. Our individual is male, from Ontario, and began his career at age 24. This worker enjoyed relatively high earnings during his career, making contributions based on the Year’s Maximum Pensionable Earnings (YMPE) each year. The individual is now age 60 and needs to decide when to retire and take up CPP benefits.4 We consider potential retirement ages between 60 and 70. For ease of discourse, we call him Joe.

Another problem: Joe is assumed to have been continually employed with high earnings from age 24 to 60-70, entitling him to max out his retirement benefits contributions.  That’s more fantasy that stylised fact in the Canadian labour market today.

So how long will Joe live to collect?

We also consider how these benefits add up over Joe’s lifetime, using the pension wealth measure.  Future benefits are discounted and we account for male life expectancy based on 2007 mortality rates.5

Yet another problem:

Mortality rates were taken from the Canadian Human Mortality Database at http://www.prdh.umontreal.ca/BDLC. Note that the use of female life expectancy would change results slightly. In particular, pension wealth would be higher given longer life expectancy among women.

Unfortunately, gender is neither the only nor even most significant determinant of life expectancy.

Relative wealth and income play a far greater role in determining both quality and expected span of life.

Finding data on relative wealth is a challenge for a number of reasons, primary among them is the choice of metric.  Income on the other hand is more straight-forward, and there is some publicly available data to demonstrate strong correlation between wealth/income and life expectancy.

Healthy Canadians (HLT)
-Canadian Institute for Health Information (CIHI)

Clicking on Table 36b-HLT ‘Life expectancy by income’ should give the desired table.  Or not – more mysteriously missing data from Statistics Canada.  There is a CANSIM table that provides some information on life expectancy based on income quintiles (20% groupings).  It does not provide a breakdown by low-income measure, so analysis would be limited to comparing highest and lowest income quintiles in the absence of more detailed income distribution data.

 

 

2005/2007

Males

 

 

At birth

All income groups

68.9

 

Income group, quintile 1 (lowest)

64.7

 

Income group, quintile 5 (highest)

72.4

At age 65

All income groups

13.8

 

Income group, quintile 1 (lowest)

12.2

 

Income group, quintile 5 (highest)

15.5

 

 

 

Females

 

 

At birth

All income groups

71.2

 

Income group, quintile 1 (lowest)

67.0

 

Income group, quintile 5 (highest)

74.6

At age 65

All income groups

15.0

 

Income group, quintile 1 (lowest)

13.5

 

Income group, quintile 5 (highest)

16.8
Source: CANSIM Table 102-0122 Health-adjusted life expectancy, at birth and at age 65, by sex and income, Canada and provinces occasional (years), Statistics Canada

It’s apparent from the table that federal government policy pushing back the OAS/GIS full benefits qualifying age to 67 and changing the CPP payout schedule to favour those receiving benefits after age 70 entirely further disadvantage lower-income Canadians.

Men in the bottom 20% income group at birth on average would not live to qualify for full OAS/GIS benefits under the old scheme;  their life expectancy was just under 65 in the 2005/2007 survey.

Women in the bottom 20% income group at birth on average would not live to qualify for full OAS/GIS benefits under the new scheme, as they lived on average to age 67 according to the survey.

The difference in health-adjusted life expectancy for men and women between the top and bottom income quintiles at birth was ~8 years on average.  While neither men nor women in the bottom income quintile would live to collect any increased benefits past age 70, those in the top income quintile would collect ~2.5 and 5 years increased benefits, respectively.

The concept of health-adjusted life expectancy by income quintile for those 65+ is a bit confusing.  If those in the bottom quintile from birth on average did not live to age 65, this effectively provides a snapshot of life expectancy for Canadians 65+ after half those in the lowest income quintile are deceased (assuming normal distribution).  That said, even the life expectancy figures for those 65+ show a substantial gap  between the lowest and highest 20% of income earners, ~3.5 years for both men and women.

The federal OAS/GIS and CPP policy changes are effectively a transfer of wealth from low to high-income Canadians at a stage in life when those in low-income are most vulnerable.  The policy effectively subsidises affluent older Canadians.  Where are Mr. Smart and Mr. Mintz’s comments on how this policy is ill-advised because “more affluent Canadians are actually deriving a greater benefit than the poor”  (the lame argument they ran up the flag-pole to tax food staples).

Given the data on life expectancy and income, sound public policy would provide full OAS/GIS benefits to low-income Canadians starting at age 60 while clawing back OAS/GIS benefits for higher income seniors – instead of increasing the full benefit qualifying age for all to 67, as the new federal government policy proposes.  It would likewise provide CPP benefits to low-income Canadians starting at age 60 applying an actuarially fair discount instead of increasing benefits for those over age 70.  The latter would be funded through increased CPP contributions, as suggested by some economists.

Such a policy would be especially helpful in providing income security for single women age 60+ given the remarkably high incidence of low-income for the demographic,

Given the demographic shift under way which (in theory) will see baby boomers retiring en masse in the coming years, getting this policy right is paramount.  The anecdotal evidence available suggests problems with the current (and recently proposed) policy:

Are bankrupt seniors harbingers of things to come?
CBC News June 29, 2012