One of the big successes of Canadian social policy over the last 50 years is the reduction in poverty among older people.
Statistics Canada says that in the mid-1970s, 36.9 per cent of Canadian seniors lived below the poverty line. By 2019, that figure was down to 5.7 per cent, lower than any other age group. And keep in mind that today’s poverty line is much higher than it was in the 1970s.
Partly this has been the result of what a great time it has been to be an investor over the last 30 years. If you put money into stocks or bought a house in the 1990s, you have done extremely well by historical standards.
But the bigger impact comes from government social policy. Seniors can now look to the Canada Pension Plan, Old Age Security, Guaranteed Income Supplement and other programs. Crucially for older people, we have free healthcare, Yukon Pharmacare and subsidized home care and assisted living. Seniors making less than $90,000 a year now get dental coverage.
While the Canada Pension Plan is backed by real investments, most of the other senior programs are paid by this year’s taxes. Baby boomers didn’t feel this too much during their working years. In 1975, there were 7.8 people of working age for every senior.
The burden will be higher for millennials when they reach middle age. By 2050, the Organization for Economic Cooperation and Development estimates there will be just 2.2 working age Canadians per senior.
The conflicts over the cost of senior benefits are already beginning, as evidenced by the riots against French President Emmanuel Macron’s decision to raise the official retirement age to from 62 to 64.
In Canada, then-Prime Minister Stephen Harper raised the retirement age in 2012 from 65 to 67, starting in 2023. The Trudeau government cancelled the move. This was very popular among Canadians of a certain age, and political scientists will remind you that older people are more likely to vote.
If governments don’t change the age you qualify as a senior, another way they can save money is by making benefits conditional on income or wealth.
Yukon Housing’s new asset cap policy for seniors is an example. As reported in the News last month, seniors used to be exempt from the requirement that community housing tenants have less than $100,000 in assets. The cap tries to avoid the situation of providing public housing to Yukoners who have low incomes, but lots of money in the bank.
This sounds like an easy principle to put into practice, but reading the policy reveals so many loopholes that we can expect the government to have to come back and revise it.
First, people who were lucky enough to already be in Yukon Housing on Dec. 6, 2022, are exempt for life.
Second, for everyone else the policy is highly game-able.
Some assets do not count towards the $100,000 cap, such as clothing, furniture, jewelry and one family vehicle. Assets that do count include cash, real estate (including Yukon cabins or foreign properties), business assets, second vehicles, recreational vehicles, money owed to you as well as investments. The latter category includes registered retirement plans and annuities.
To get around this, you can sign over legal ownership of the cabin, motorhome or small business to your kids.
It also promotes the wealth management strategy preferred by the wives of Viking warlords and gold-rush-era dance hall stars in Dawson City: gold jewelry.
Put 100 Maple Leaf gold coins on a chain, wear the necklace for five seconds before putting it in the safety deposit box, and you are good to go. In Vancouver, there are discrete shops where you can buy “investment grade gold jewelry.” Not only do $20,000 wearable bullion necklaces keep wealth off the books, you can also wear your retirement savings to parties.
You can also dabble in investments in fine wine and art (but not vintage cars, unless that 1965 Shelby Mustang GT350R is your primary vehicle).
Third, the policy discriminates between people with government pensions and those without. If you have a Yukon government pension that pays you $50,000 per year, plus other benefits, you are “in.”
People don’t often think of the total value of their pension. I asked an actuary what the cash value in today’s money of such a pension would be, and they estimated around $1 million.
Consider, however, if you worked in the private sector, where the majority of workers contribute to an RRSP instead of getting a pension. Suppose such a person has retirement investments that produce the same $50,000 per year as the pension beneficiary above. The private sector retiree would be excluded by Yukon Housing, since to generate that return they must have assets well over $100,000.
Thus two people with the same economic income — the government pension beneficiary and the private-sector RRSP holder — are treated differently.
The fact that government pension beneficiaries are richer than many realize is such a well-known fact among accountants that one wonders why the Yukon government decided to do this. Was favouring government pension holders over private sector workers part of some elaborate electoral strategy, or did the policy analysts make a very basic mistake that no one in the chain of command noticed?
Whether Yukon Housing changes this rule or not, this is just an early skirmish in the battle between the generations as our population ages and the fiscal little brown bats come home to roost in the Yukon government’s attic.
Oldtimers used to bore young people at their retirement parties by talking about the Great Depression, and how they used to make blankets out of holey socks to stay warm when it was 100 Below.
Nowadays, it’s more like this: “Back when I was your age, houses cost $100,000, the stock market was about to go up by a factor of 10 over 30 years, and the government didn’t pay for dental yet!”
Young Yukoners who are now expected to buy those over-priced houses and stocks may be forgiven for a generational eye roll.
Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He won the 2022 Canadian Community Newspaper Award for Outstanding Columnist.