This morning I'd like to present key points on mandatory retirement from an economic rather than a human rights perspective. Fortunately, the economic perspective concludes in a way that is fully consistent with the human rights perspective. I'll approach this matter by describing major fallacies about mandatory retirement, which I'll abbreviate as MR, and I'll go over the relevant facts.
MR practices are often described as voluntary agreements between an employer and its employees. In fact, MR and the associated pension plans are not an agreement between an individual employee and the employer. These agreements are typically mediated by a union, and if they involve a vote, it is majority-rule imposed on all the employees. In a company applying MR, all employees are subject to it regardless of their individual wishes.
Some have argued that a worker should take a job elsewhere if he or she does not like MR at the current employer, but that option is costly to the individual, who loses wages and seniority. It also involves high mobility costs for the worker situated in a smaller city or working in a union-dominated industry. Moreover, some workers, such as women and recent immigrants, may have a stronger need to work until higher ages because of a shorter work history and inadequate retirement savings, either individually or through a company pension plan.
A common argument is that eliminating MR would act as a barrier to the promotion prospects of younger workers. This point may have been true in the 1960s or even as recently as the 1990s, but it is no longer valid, given the evolving demographics of Canada. We are witnessing an accelerating retirement of baby boomers from the workforce and an emerging smaller cohort of younger workers.
Canada is entering an era of worker scarcity and skill shortages in many occupations and industries that will be seeing faster promotions for younger workers. Some argue that Canada will need to sharply increase immigration of younger workers to satisfy the needs of the economy. But to forego the skills and experience of older workers who wish to continue working, which MR does, is a shortsighted and economically wasteful policy. It also assumes that the economy has a fixed number of jobs available, which is demonstrably false, as the supply of workers and skills is a key constraint on the size of the productive economy.
MR has also been described as necessary for employers to easily get rid of older workers who have lagged in their on-job performance. This argument assumes that employers do not have effective systems to evaluate the performance of workers of all ages and to dismiss poor-performing workers regardless of age. Only a badly managed firm would rely on MR at age 65 to get rid of a younger worker, such as a 40-year-old, who was not performing up to standard.
Similarly, MR has been supported as a means for firms to retire older workers who are overpaid relative to their productivity. Again, this assumes that employers do not have adequate systems for worker assessment and appropriate flexibility in compensating employees in line with their individual performance.
MR has been described as solely a private matter between workers and their employers and not an issue of concern for the general public or public policy. This position is incorrect, since the practice has implications for governments and the taxpaying public. Workers who are forced to retire by virtue of their age and before they wish to stop working impose various costs on the public treasury. They contribute less in taxes when their earnings cease or decline; they draw more in public pensions that are conditioned on incomes; and with the generally worsening health associated with retirement, especially forced retirement, they impose more burdens on our publicly financed health care system.
Prohibiting MR practices in industries subject to the Canadian Human Rights Act by amending the act would only bring the federal government into line with reforms already implemented in all the provincial human rights acts, and very belatedly at that.
Twenty-five years ago, in 1986, the Canadian government stopped the practice of MR with respect to the federal public service. Also in 1986, the U.S. prohibited MR practices nationally in that country. Many other advanced economies have done likewise in the years since then. Nowhere have any of the adverse consequences predicted by supporters of MR emerged as significant issues.
From an economic perspective, then, mandatory retirement has outlived any usefulness that it might have once offered. The interests of both the economy and older workers would be best served by prohibiting the practice under the Canadian Human Rights Act.
Thank you. I will welcome questions.