Political Events

Beginning in the late 1960s, a series of government reports were released, all of which stressed that poverty was still a serious problem in Canada. Among these reports was a federal White Paper called Income Security for Canadians (1970), which argued that Canada's public pension system did not go far enough to eliminate poverty. This was because the universal nature and modest amounts of Old Age Security, combined with the fact that the Guaranteed Income Supplement was only a temporary measure at the time, prevented a redistribution of wealth - or the provision of substantially larger benefits to people with lower incomes - through existing public pension programs.

In response, the federal government attempted to make Canada's public pensions more fair by retaining universal Old Age Security benefits for all Canadian seniors, introducing the Spouse's Allowance and then raising Guaranteed Income Supplement benefits in order to help those with the greatest need. In 1971 the Guaranteed Income Supplement was made permanent.

In the Throne Speech of January 1973, the Government of Canada responded to further demands that had come out of the 1971 Constitutional Conference. It stated that the federal and provincial governments should jointly review the nation's social security system - its policies and programs - and should develop reforms together. These reforms would provide individual Canadians with more effective programs, and find new ways to harmonize and integrate the federal and provincial elements of the system. All this was to be done within the existing constitutional framework.

The social security review was launched in April 1973 with the federal government's Working Paper on Social Security in Canada which contained propositions designed to outline the broad directions of policy that could lead to an improved, better-integrated system of social security. Some of the proposals were to increase the amount of Old Age Security and provide full indexation of both Old Age Security and the Guaranteed Income Supplement. These proposals were accepted.

By the later 1970s, the federal government's approach to public pensions began to change as the severe inflation and recession sparked by the Oil Crisis of 1973 put a strain on government revenues.

This economic decline was accompanied by the re-emergence of an economic philosophy called monetarism. Monetarists placed great emphasis on cutting government spending in order to reduce debt, and on reducing the amount of government involvement in the economy by cutting funding to public programs such as pensions.

The growth of monetarist thought contributed to a move away from increasing spending on public pension programs in the late 1980s. By that time, policy makers continued to focus on achieving the principle of redistribution but also sought to reduce the overall scope of Canada's public pension programs.

The reluctance of the federal government to increase spending on public pensions began in the early 1980s, at which time inflation and interest rates peaked.

It is important to note that, originally, the Canada Pension Plan surplus was meant to grow substantially in order to provide loans to provincial governments. This was accomplished very quickly after its introduction. In contrast, since 1972, when the special Old Age Security Tax stopped being collected, Old Age Security and the Guaranteed Income Supplement have been funded annually out of the general tax revenues raised each year.

Equally important is the fact that, unlike the Old Age Security program, any changes made to the Canada Pension Plan require the consent of two-thirds of the provinces representing at least two-thirds of Canada's population. This means that the provinces play an important role in overseeing the Canada Pension Plan. Consequently, it is more difficult to make significant changes to it since so many different governments must agree to them.

The potential legislative "vulnerability" of the Old Age Security program and the Guaranteed Income Supplement in comparison to the Canada Pension Plan became clear in 1983 and 1985. In 1983, Old Age Security was made subject to indexation limits of six and five per cent introduced by the government to control inflation. The Canada Pension Plan was not subjected to this provision. In May of 1985 the newly elected federal government announced that Old Age Security benefits would no longer be increased in accordance with inflation. In the end, however, this change was not put into effect because of strong resistance on the part of senior citizens' organizations and other groups supporting them.

Throughout the 1980s the federal government increasingly sought to reduce its expenditures. In 1989, Old Age Security benefits for senior citizens with annual incomes higher than $50,000 were reduced through taxation. Thus some seniors received little or no Old Age Security, and the universal nature of the program essentially disappeared.

It was in the late 1970s and early 1980s that concern began to be voiced publicly about the sustainability of the Canada Pension Plan. The economic decline of the 1980s, the growing realization that Canadian society was aging rapidly as the huge baby boom generation advanced in years, and the declining national birth rate led many people to question whether the Canada Pension Plan could survive into the 21^st century.

Research at this time showed that 7.8 per cent of Canada's population was aged 65 or over in 1951, a figure that rose to 8.1 per cent in 1971. It was expected to peak at 19.6 per cent in 2031. This demographic shift added to the concern about the financial security of the Canadian public pension system. (National Council of Welfare, Sixty-Five and Older (Ottawa, 1984) p.4.)

Plainly, the period between the late 1960s and the late 1980s included years of great change in Canadian public pension policy. The ability to expand and improve each program declined in the late 1980s when the federal government began to cut its expenditures because of the faltering economy and the need to reduce the debt. As the 1980s ended, the future of Canada's public pensions appeared uncertain to many.