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Should Retirement Be Mandatory?

Introduction

Mandatory retirement is a practice once taken for granted but now increasingly restricted in Canada. Lobby groups for the 50-plus demographic label it discriminatory and, in the face of skilled labour shortages, the policy has also been called bad business. But some unions cringe at the prospect of a ban, saying it removes pressure to hire and train younger workers.

Last year, Ontario became the latest province to restrict mandatory retirement. Here in British Columbia, the Premier's Council on Aging and Seniors' Issues will review the practice this summer as part of a larger mandate. Age discrimination is also a potent international issue, as fall 2006 marks the deadline for European Union members to adopt protections for mature workers.

This background paper will briefly outline the history of mandatory retirement, its status in Canada and developments in British Columbia. It will also discuss arguments for and against mandatory retirement, and identify the potential implications for employers in jurisdictions where mandatory retirement is newly banned.

Background

The debate over ending mandatory retirement has been called one of the most “misunderstood discussions in the area of labour and social policy.” The confusion stems from the common misperception that mandatory retirement is based on a government law or regulation telling workers to step down at. Instead, it is the result of an individual employer's policy or collective agreement, often relating to a pension plan. The government either bans or allows the practice, but the decision about whether to implement mandatory retirement is left to collective agreements or individual employer policies.

Germany is often credited as the first country to equate age with retirement. The Germans set 70 in 1889 as the age when pension payments began, but later reduced the benchmark to 65.3 But U.S. Depression-era social policies giving older Americans a pension were arguably far more influential in establishing age 65.4 At the time, elderly people were often the first laid off in order to preserve jobs for workers with children. The U.S. Social Security Act encouraged retirement by providing a pension and establishing a 'usual' age. Congress operated under the assumption that 65 was the age that “workers tend to lose the ability to keep up with the technological advances of industrial society, are frequently subject to ill health and disability, and are less productive under difficult work conditions.”Private pension plans established after World War II set 65 as age benefits began and “naturally enough, the clear implication of this was that the individual would also retire at 65.” In Canada, the Old Age Pension Act of 1927 initially set 70 as the age to begin receiving benefits, but it was eventually lowered to 65 during the sixties.

Despite the Americans' influence in establishing 65 as a kind of 'universal' retirement age, the United States has since outlawed mandatory retirement. The practice is also banned in New Zealand and Australia.

Developments in British Columbia

British Columbia was the first province to include age as a type of discrimination in legislation with its ...