The Magic Is in the Mix

Abstract

Abstract With a policy mix that comprises of several major social programs, Canada’s pension system is among the best in the world in reducing poverty in old age and providing a high replacement rate for low-income retirees. In this chapter, we focus on the interaction between two closely related components of Canada’s pension system as a policy mix particularly successful at reducing old-age poverty: the Guaranteed Income Supplement (GIS) and the Old Age Security (OAS) program. More specifically, we analyse the primary root of this policy success: the ‘failure’ to dismantle a program that was meant to be temporary, the Guaranteed Income Supplement (GIS); and its complementarity to the Old Age Security (OAS) program. The GIS was introduced in 1967, as a transitory measure to tackle expediently the prevalent poverty amongst Canadian seniors while expected to disappear with the maturation of the Canada Pension Plan/Québec Pension Plan. Not only was this program never abolished, it failed to generate the kind of stigma associated with social assistance benefits by virtue of linking the program with the quasi-universal OAS program. As a result of this policy design, it is an income-test program—not to be confused with a means-tested program where assets are also taken into consideration—where older adults feel they’reentitled OAS beneficiaries. The combination of OAS and GIS provides a relatively generous floor for retirees with limited resources. This points to the close and complementary relationship of key elements of the public pension policy mix in Canada.