Session: 10, 66

Education

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Session: 57

Social Security

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Summary

In his lecture, Professor Brown will report on two recent pieces of research on which he has been working. Both have to do with the Macro-economic impacts of Population Aging on Financial Security systems.

In the first "paper", Professor Brown will argue that it is inevitable that the labour force retirement age will rise between sometime after 2006. Depending on the level of labour force productivity that we can achieve, this rise in the retirement age may not have a large political impact. However, once incentives for early retirement change into incentives for later retirement, we can expect some kind of behaviourial response from the work force. In particular, we should expect demands for more flexible retirement systems as workers attempt to smoothly "transit" into retirement. Many of the requests for pension flexibility are now obviated by pension legislation. Thus, this legislation will have to be questioned and (hopefully) redesigned.

In the second "paper", Professor Brown will argue that our present system of Registered Pension Plans (RPPs) and Registered Retirement Savings Plans (RRSPs) will provide the government(s) with exactly the correct amount of cash flow and at exactly the right time, to pay for the increased demand for health care created by the aging baby boomers. Thus, accidentally, we may have created the perfect macro-economic immune portfolio (i.e. RPP/RRSPs versus Health Care costs). However, this is dependent upon the government not looking at RPPs/RRSPs as a source of "Tax Expenditures" but rather as the perfect deferred tax asset. In particular, the government must embrace a philosophy whereby the RPP/RRSP system will be allowed to expand as rapidly as per unit health care costs are allowed to rise.

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Session: 34

Social Security

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Summary

With the election of George W. Bush, the debate around privatization of Social Security in the United States is sure to be rekindled. The Republicans seem to favor separating a part of OASDI and moving that portion of the scheme into Individual Retirement Accounts. President Clinton had proposed creating larger social security funds and investing a portion of them in the private sector, but leaving the scheme otherwise intact. Others have suggested more radical reforms such as moving OASDI entirely from a Defined Benefit scheme to a Defined Contribution plan based on the Chilean model. Canada has moved to a system of greater pre-funding for the C/QPP in order to cap contribution rates at 9.9 percent. These proposals are based on the goal of creating higher investment returns, in order to make social security benefits easier to finance in the long run. The important public policy issues inherent in such proposals are numerous: questions of whether pre-funded social security plans are demographically immune; whether pre-funding social security can increase gross national savings and worker productivity; whether there are better ways to create a healthy economy; whether social security is best offered as a defined-benefit plan or a defined-contribution plan. This paper reviews each of these important public policy issues in the context of recent social security policy initiatives in Canada and the U.S. After an extensive review of the literature the paper concludes that greater pre-funding of social security will not, of and by itself, create a more secure system.

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Session: 05

Social Security

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