We've known each other a long time.
There are basically two points I want to make. The first one is very short and in passing. It's about mandatory retirement. It's a classic case for economists. Mandatory retirement has certain properties, and when you mess with it, you wind up messing with other things.
University professors are excellent examples. When we used to have mandatory retirement—even we get old and doddery—you knew that at age 65 professors would be out of there and you could replace them. Their very high salaries would no longer be paid. You could then hire two good young ones to replace them. That is no longer the case. That is to say, there are efficiency wages. It's not just a question of justice—although I respect that—for people's ages and their capacities and our need for older workers; it's just that it's a very complex issue, and I urge you to take that into consideration.
The next point I want to make—and this will be the remainder of my comments—is about savings. My work with David has shown, for example, that for GIS recipients in particular, one of the critical factors—there are a number—is certainly that we are able to track people over their life cycles, their lives. Certainly the income level in their prime working years, obviously, is very important. If you have higher incomes when you're 50 or 52, you're less likely to be on GIS.
The other factor, independent of that, was whether or not you had various savings mechanisms. Those savings mechanisms could be personal ones in the form of RRSPs, but in particular employer-based pensions. Those are very critical to this poverty status, low-income status, in later years. Savings matter a lot.
I have another parallel set of papers with my colleague Byron Spencer at McMaster University, where we looked at all income sources, so beyond GIS. The importance, again, of savings from earlier ages on later incomes is critical.
This might be obvious, but I don't think it can be emphasized too much. Why is that? Because the policy issue is the decline in these savings mechanisms, in particular employer-based schemes. That's simply a function of the new labour market, the new workforce, the new dynamic economy. People are moving from one job to another. These mechanisms will not exist in the future the way they do today.
So what is going to replace them? At this point there's nothing. There's the RRSP system, but that has huge problems, as you're probably aware, starting with, I might say, the relatively high fees that are charged, which can represent 2% on a return of 3% or 4%—that's a 50% tax rate—and people don't know enough about them. We don't have an effective replacement for these employer-based pension schemes that will work moving into the future, that will reflect the new reality of the workplace for young people in particular.
What I think this country needs is some sort of set of collective savings schemes. It could be CPP, but it doesn't have to be. When I say collective, it doesn't have to be a government-run thing. It can come from the financial institutions themselves. It could be a private market-based savings scheme, but one that has the efficiencies of a broader savings scheme such as the CPP.
Instead of my putting my money in an RRSP, where they scrape off 2% every year, the maintenance, the administrative fees on these broader plans typically are much, much lower, and they can be very adaptive to any individual's given situation.
You have a relatively small amount to contribute. You can choose that and you put it in, but your money stays in that plan. It accumulates, and it's there later.