Canada: Study Finds that Economic Pressures Cause Many Older Workers To Retire Early

A study published by the Institute for Research on Public Policy (IRPP) finds that older workers who face sudden layoff rarely match their previous earnings upon reemployment, that their earnings tend to stagnate in subsequent years, and that the situation drives many to retire early. According to "Labour Force Participation of Older Displaced Workers in Canada: Should I Stay or Should I Go?", IRPP Study No. 15, written by Ross Finnie and David Gray, such hastened retirement will further slow labor force growth, which is already beginning to wane due to population aging, thus reducing economic growth and putting additional stress on public and private pension plans.

Finnie and Gray report that, among those aged 45 to 59 (who are not eligible for Canada Pension Plan benefits), about one-quarter have "retired" within five years after being layed off, in the sense that they rely on pensions as their primary source of income. This proportion rises to nearly 70% in the 60 to 64 age group.

The authors lay out four policy options to address the question of whether older displaced workers should retire early (by choice or by force) or continue to work:

1. Encouraging older displaced workers to retire early, aided by government subsidy, which amounts to very long-term income maintenance until they reach normal retirement age.
2. Providing passive employment insurance benefits.
3. Providing active employment insurance benefits.
4. Providing wage insurance.

IRPP also has available online an interview with the authors.

Source: Institute for Research on Public Policy Press Release (February 24, 2011)