«New factories favoured the young, and jobs that were traditionally done by older people began to disappear. Seniors could look forward to living ...»
OUR FIRST OLD AGE PENSION
Canada was a changed nation by the end of the First World War (1914-1918). War-time
demand led to more industrial production. The urban labour force grew, so that by the
1920s most people lived in the city rather than the country.
New factories favoured the young, and jobs that were traditionally done by older people
began to disappear. Seniors could look forward to living longer, but many lived in severe poverty. Workers who supported aging parents had a hard time saving for their own old age.
Survivor and disability pensions were created for war veterans and their families, but there was still a strong and growing need for a national old age pension system. The Government Annuities plan of 19081 was not the answer since few people could afford them. So in the 1920s, the issue of government assistance for the elderly was back on the political agenda. In 1924, Parliament appointed a special committee to study the question of pensions.
Political advocates like James S. Woodsworth and Abraham A. Heaps argued for a national pension scheme. When his government finally won a majority in 1926, Mackenzie King followed up on his promise to Woodsworth and Heaps by introducing legislation that became the Old Age Pensions Act in 1927.
In 1927, Canada’s first Old Age Pensions Act was passed:
• The maximum pension was $20 per month or $240 per year.
• It was available to British subjects aged 70 or over who had lived in Canada for 20 years.
The Canadian Government Annuities Act of 1908 was one of the earliest significant pieces of social legislation in Canada. Its purpose was to encourage Canadians to prepare financially for their retirement through the purchase of a government annuity.
The Act allowed for the purchase of various annuities for different amounts and lengths of time. At a specified age, the recipient would begin to receive fixed yearly benefits. The government guaranteed these benefits and assumed all the costs to administer them.
The first annuities issued were to a married couple from Quebec City.
OUR FIRST OLD AGE PENSION1915-1927
• It was restricted to seniors whose income, including the pension benefits, was less than $365 per year (this was determined by the “means test”2).
• Status Indians were excluded.
Although eligibility was limited, the Act was a modest beginning of nationwide benefits for the poorest elderly.
Researcher’s Summary Political debate in Canada over old age pensions was interrupted by the country’s participation in the Great War (1914–1918). By the end of the war, Canada was a changed nation. Building on the impetus of war-time demand, industrial production grew and, with it, the urban labour force. At the same time, people were living longer and the proportion of seniors within the population was increasing. However, mechanization in industry was threatening many older workers with redundancy.
The new workplace favoured the young, and the tasks that workers had traditionally performed in their later years began to disappear. New jobs were difficult for them to find.
Workers who had to support aging parents had a hard time saving for their own old age.
Private pensions from the workplace still covered only a minority, and they were not portable; if a worker was dismissed or left before retirement age the benefits were lost.
In 1918, a Pension Act was passed to provide compensatory benefits to the survivors of the 60,661 soldiers killed in the war.
It also provided for soldiers who returned with 2 The "Means Test":
The "means test" was used to determine a senior's income, or means.
The test involved provincial pension authorities calculating all aspects of a senior's income (e.g., pensions, income from boarding house operations, etc.) as well as the value of "perks" they received, such as free room and board. The means test, however, did not take into account how much money a person needed to pay for food, shelter, clothing, fuel, utilities or household supplies.
If a senior's annual income, including pensions, was greater than $365, he or she was not eligible for the Old Age Pension. The income each received determined the amount of assistance to which he or she was entitled.
The problem, however, was there was no specific way to calculate a senior's income. Provincial pension authorities had extensive discretion, so the calculations were inconsistent and varied greatly from province to province. For example, some calculations were based on the assumption of income from property when, in fact, such income did not exist. The value of free room and board varied depending on the province. Because a senior's income depended on where he or she lived, some seniors were denied assistance while others received widely varying amounts.
OUR FIRST OLD AGE PENSION1915-1927 disabilities, just over 69,000 of whom were receiving pensions in 1920. Dependent parents who passed a means test could also receive survivor benefits.
The Government Annuities plan of 1908 had failed to achieve its intended purpose, and state assistance for the elderly poor was back on the political agenda in the 1920s. While nobody begrudged the pensions paid to soldiers for their sacrifices in World War One, many people believed that aged Canadian workers also had a right to assistance, in compensation for their years of service to the national economy.
The federal government introduced temporary income taxes in 1917 to help pay for the country's war effort. Those taxes were not removed when the war ended, giving the government a new source of revenue for the development of national social programs.
In 1924, a Special Committee appointed by Parliament to study the question of pensions for seniors estimated that 40 per cent of Canadians aged 70 and over would qualify for an old age pension based on a means test. In 1927, the Old Age Pensions Act was passed, honouring a promise made at a time of political need for Prime Minister King. This act established a cost-shared program that would replace local emergency relief with a nationwide system of benefits for the poorest seniors.
Under the new Old Age Pensions Act, the maximum pension was set at $20 per month for British subjects 70 years of age and over who had been resident in Canada for 20 years.
Daily Life Because of continued industrialization and urbanization, the period between the outbreak of the First World War and the passage of the Old Age Pensions Act was characterized by a growth in the number of seniors in Canada, and a continuation of the decline in economic status for increasing numbers of older people.
3 OUR FIRST OLD AGE PENSION 1915-1927
The First World War itself brought about many important changes in Canadian society.
The war required unprecedented levels of production of munitions and other war supplies, and this need helped speed up the process of industrialization. When the war ended, many wartime factories were kept open and began to produce household appliances and new luxury items such as automobiles.
Industrialization revolutionized the way in which goods were produced. One effect of this was a decrease in opportunities for older people to take part in the new production process. As heavy machinery did more and more of the work that had previously been done by people, the less physically demanding tasks that were traditionally given to older workers began to disappear.
After the First World War, the problems faced by the elderly poor became more visible.
The sharp increase in urban factories contributed to the continual migration of people to cities. By the early 1920s, the number of people living in cities began to outnumber those living in the country for the first time. Because of both immigration and, especially, increased life expectancy, Canada’s population also grew quickly in this period. As more people lived longer lives, but resided in cities where jobs for seniors were disappearing, the likelihood of falling into severe poverty in old age increased considerably.
F. H. Lacey, ed., Historical Statistics of Canada 2nd Edition (Ottawa, 1983),Series As -14
30,000,000 25,000,000 22,992,604 20,000,000 15,000,000 14,009,429 10,000,000 8,787,949 5,000,000 4,833,239 2,436,297 0 1851 1891 1921 1951 1976 2000
This situation was further complicated by the fact that the Government Annuities program established in 1908 did not accomplish its intended purpose of providing a means by which large numbers of people would put enough money into savings to support themselves in their old age. Although the program offered the incentive of higher interest rates, by the 1920s it had become clear that those most in need of assistance in old age did not have any extra money with which to purchase these investments, regardless of the advantages they offered.
By the mid-1920s, Canada’s economy had recovered from a post-war recession caused by a sharp decrease in the production of war supplies combined with the large national debt accumulated in the war years. As prosperity spread to many parts of the country, the contrast between the aged poor and other members of society became more noticeable.
All of these factors contributed to a growing realization that seniors needed assistance on a much larger scale. This realization contributed to the creation of the Old Age Pensions Act in 1927.
Political Events When the First World War broke out in August 1914, the leader of the federal opposition in Parliament, Wilfrid Laurier, immediately pledged his co-operation and assistance to Prime Minister Robert Borden’s government. This parliamentary unity allowed the government to assume an unprecedented level of control over the country’s economy in order to supply the war effort.
By 1917, however, the issue of conscription divided Parliament and led to the creation of a Unionist government made up of both Conservatives and some Liberals under the leadership of Robert Borden. Such division affected the population more generally, as the social dislocations caused by the Great War fuelled public calls for large-scale social reforms across the country. The federal government carried into effect a number of reforms that further strengthened its power in many different areas, including pensions for war veterans and their families. Provincially, this period also saw the introduction of 5
OUR FIRST OLD AGE PENSION1915-1927 mothers’ allowances, beginning in Manitoba in 1919, and workers’ compensation, first initiated in Ontario in 1914.
As the federal government assumed more and more control over the economy during the war, a national Income Tax and a Business Profits Tax were introduced, increasing the government’s financial capacities. These taxes were at first meant to be only temporary measures, but the continuation of the Income Tax after the end of the war in 1918 provided the federal government with much of the funding required to implement the Old Age Pension program in 1927.
The issue of a national pension program for seniors gained prominence after the war, as social advocates and reform-minded politicians argued that the federal government should use its new power and financial capacities to extend the pension provisions offered to war veterans. In 1921, a minority government was elected federally for the first time in Canadian history, making it impossible to pass any controversial legislation. The 1925 election saw similar results, and Prime Minister William Lyon Mackenzie King sought the support of the Progressive party and the only two elected Labour Members of Parliament.
Labour Members James S. Woodsworth and Abraham A. Heaps, in co-operation with Progressive leader Robert Forke, presented Mackenzie King with a number of policy initiatives they considered essential, one of which was an old age pension program. The Prime Minister agreed to pursue the reforms in return for the support of the two parties, thus ensuring his government would not fall.
Before Mackenzie King was able to act on the issue of old age pensions, however, he chose to resign when the Governor General, Lord Byng, refused his request for an election as his government faced a vote of non-confidence. The Conservative leader, Arthur Meighen, was called on by Lord Byng to form a government but was unable to do so successfully and the “King-Byng affair”, as the incident came to be known, ended in 1926 with the election of a majority Liberal government under Mackenzie King. Only upon obtaining a majority was Mackenzie King able to undertake any large-scale reforms.
Accordingly, the Old Age Pensions Act came into effect in 1927.
6 OUR FIRST OLD AGE PENSION 1915-1927World Events
The First World War caused greater social and political upheaval in Europe than in North America. For the first time in the West, entire societies were mobilized for war. This required governments to become involved in economic and social issues on an unprecedented level, introducing such initiatives as conscription, rationing of food and supplies, and governmental control over many industries. This war-inspired expansion in the powers of governments led many people to believe that fundamental social change was possible, and such change came to be seen as a desired outcome of the war years in almost every European country.
As the war came to an end, Europe experienced huge demographic, economic and political problems. The tragic human losses and the physical destruction sustained in the Great War had immeasurable impacts on societies, and the fall of the Russian, AustroHungarian and Ottoman empires plunged a large part of the continent into revolution, civil war or political chaos.
In the late nineteenth and early twentieth centuries, many countries adopted public pension programs. The question of whether to make them contributory or noncontributory became an important issue. Contributory programs usually cost less because workers and employers pay into them, but they take longer to implement because people must pay into them for a number of years before they receive benefits.