Intergenerational Equity and Social Policy

Jasmine Lam

At the Canada 150 Conference, Carolyn Tuohy (University of Toronto) moderated a panel  on Intergenerational Equity and Social Policy featuring John Myles (University of Toronto), Daniel Béland, (University of Saskatchewan) and Joseph Heath (University of Toronto). Fitting with the conference’s theme of examining transformative policies over the last and next 50 years in Canada, the discussion on intergenerational equity prompted the audience to think about social policies and impacts that transcend past, present, and future generations.

A Generation of “Postponed Adulthood”?

Starting the conversation off, Myles focused on how changes in economic realities have resulted in vastly different outcomes for the baby boomer generation and the present millennial and post-millennial generations. Myles is concerned that a weakened labour market may dampen the motivations of today’s generation to invest in the future.

Myles himself was born in 1943 and considered himself as part of the luckiest generation in the 20th century. When he graduated in the post-war period, he found himself in the largest economic boom in Canada’s history, where jobs with rising wages were plentiful. However, heading in the 1980s, Canada faced its worst recession since the 1930s and the economy has continually worsened since.

Myles paints a picture of “Tim,” a young adult who continues to live at home and has received his third post-graduate degree. Tim grew up after the recession and has faced falling real income and an economy that is characterized by weak integration of our education and labour markets.

Myles argues that the priority for social policy now is not only about pension for the elderly; rather, policies need to target job creation and wage growth for today’s generation so that they are able to support both their parents and children.

Evolution of Pension Plan Policies and Intergovernmental Relations

Following Myles, Daniel Béland chronicled the transformation of the Canadian Pension Plan (CPP) and Quebec Pension Plan (QPP), examined the role of intergovernmental relations in shaping the two programs, and emphasized the need to improve beyond pension plans and enhance the Guaranteed Income Supplement (GIS). In light of the recently announced reforms for both the CPP and QPP, an exploration into the evolution of both programs is particularly insightful and relevant.

While the two programs have developed in parallel since they were established in the mid-1960s, changes in Quebec’s demographics prompted a divergence in the two programs. As the Quebec population began to age much more rapidly compared to the rest of Canada in the past decade, the contribution rates of the QPP have increased higher than the CPP.

In the past decade, provinces have put pressures on the federal government to shape the trajectories of the CPP and QPP. Although the Harper administration had supported modest expansion of the CPP, this position was later backtracked. However, pressures from Ontario to create the Ontario Retirement Pension Plan (ORPP) ultimately influenced the federal government, now under Trudeau’s Liberal government, to move forward with expansion of the CPP to meet the needs of an aging Canadian population. While Ontario leveraged their position to pressure the federal government, changes at the federal level had in turn sparked calls for the Quebec government to similarly expand the QPP.

Béland argues that more attention needs to be focused on improving GIS to bolster income security for the elderly. As an income-tested program, GIS is a cost-effective social assistance program, without the social stigma associated with other welfare programs. For Béland, while intergenerational equity needs to support the current generation, we must keep a focus on reducing poverty amongst the elderly and maintain long-term fiscal sustainability.

Application & Implication of Social Discount Rates

Lastly, Joseph Heath discussed the application of social discount rates to calculate costs and benefits associated with various policies and emerging trends. A social discount rate is a percentage number, determined by the government, that reveals the present-day and future value of a policy. Social discount rates place higher values on benefits that can be accrued closer to the present, while discounting benefits that appear farther out in the future. Currently, all government initiatives are subject to cost-benefit analyses using the social discount rate.

Urgency about climate change has put the use of social discount rates into the spotlight. Heath noted that the social discount rate was determined quite casually over the last 50 years, but now, there is increasing scrutiny as to how the percentage number is determined. The number’s result is critical as climate change policies are unusually sensitive to whether a discount rate is higher or lower and the calculated value can skew policy recommendations. For instance, for Heath, a discount rate of 8% is still quite high for the climate change profile as it heavily discounts the future value of the policy. Canada is now rethinking which discount rate to use and Heath predicts that the rate will continue to decline over the next 50 years as our society places more value on future generations.

Together, the panelists highlighted key issues for social policies regarding intergenerational equity. Moving beyond comparison between generations, future discussions may also be deepened with an examination into inequities within generations and how those inequities could in turn disrupt intergenerational equity. Despite these differences, each generation is still highly intertwined and dependent on one another, and those connections must be leveraged to maintain a cohesive Canadian society fifty, one hundred, or more years from now.