Retirement Incentives and Canada's Social Security Programs

Kevin Milligan, Tammy Schirle

Chapter in NBER book Social Security Programs and Retirement around the World: Reforms and Retirement Incentives (2021), Axel Börsch-Supan and Courtney Coile, editors
Conference held December 13-16, 2018
Published in February 2021 by University of Chicago Press
© 2021 by the National Bureau of Economic Research
in NBER Book Series - International Social Security

Since the mid-1990s in Canada, the employment and labor force participation rates of older men and women have increased steadily. In this study, we document Canadian trends alongside measures of the incentives to continue working at older ages embodied in Canada’s social security programs. The social security benefit an individual or couple receives largely depends on their career earnings. We demonstrate that Canada’s programs offering means-tested play an important role in the incentives one has to continue working at older ages. While the main pension program (the Canada Pension Plan) offers higher annual benefits when labor force departure and claiming are delayed, every dollar gained by a low-income senior in annual CPP benefits results in a loss of means-tested benefits. We represent this as an implicit tax on continued work. Since the late 1980s, it appears this implicit tax has been declining.

Acknowledgments and Disclosures

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