Human Resources and Skills Development Human Resources and Skills Development

Although the population is living longer, the trend in Canada and most OECD countries is towards older workers to retire at an earlier age, which raises public policy challenges in the context of population aging. This paper evaluates the economic cost of earlier retirement, the benefits of working longer in Canada and the consequences for the financing of social security. The analysis is conducted using a computable overlapping generations model calibrated on the Canadian economy. The paper’s key finding indicates that a gradual increase in the average effective retirement age from 61 in the early 2000s to 65 by 2014 could raise real per-capita GDP by more than 8 % by 2030. This in turn would give room to reduce effective tax rates and could allow a 25 % reduction in the contribution rate to Canada’s Pension Plan