World Events

Before the introduction of the Canada Pension Plan and Quebec Pension Plan in 1966, the proportionate amount of money Canada spent on public pension programs and the size of these programs were much smaller than was the case in most Western European countries. But when these contributory plans came into effect, the extent of the public pensions available to Canadians grew to a level that became comparable to many European pension systems.

In order for this public pension system to truly become the core of Canadians' income in retirement, the issue of portability - of being able to move from one job to another without losing one's benefits or ability to contribute to the plan - was very important. Numerous groups called on the government to work toward greater pension portability, particularly labour unions and a number of women's groups such as those that testified before the Royal Commission on the Status of Women in 1970.

In response to these issues and pressures, and because Canada's public pensions were now comparable to those of so many other countries, the federal government initiated the first of a series of international social security agreements on pensions in 1977. This was an agreement between Canada and Italy, which came into force in 1979. One of the objectives of these agreements was to make it easier to become eligible for benefits by allowing people to add together the years they lived or worked in Canada and other countries in order to meet the requirements for their Canadian or foreign pensions.

By the spring of 1978 Canada had begun to negotiate agreements with the United States, the United Kingdom, France, Portugal, and Belgium, and was approached by numerous other interested countries. All except the United Kingdom subsequently signed agreements that have enabled more seniors to become eligible for benefits. Although a limited coverage agreement exists with the United Kingdom, the two countries have not yet been able to conclude an agreement that would improve benefits to people who have worked in both. One of the results of such an agreement would be to pay out cost-of-living increases to pensioners in Canada, a condition that the United Kingdom has been unwilling to accept. Canada indexes all benefits paid abroad whether or not they are paid under an agreement.

The federal government's changing approach to social security, including public pensions, which began in the early 1980s, was similar to approaches being adopted in a number of other countries at the same time, including the United States and Britain.

The economic decline of the 1970s, which worsened as recession set in at the beginning of the 1980s, affected most Western countries. Many economists and politicians began to argue that Keynesian economics, with its emphasis on high governmental involvement in the economy, was no longer manageable or appropriate. It was at this point that monetarist economic thought, which advocated sharp decreases in government spending and regulation, grew internationally.

Monetarism originated in the United States and is attributed to American economist Milton Friedman. The United States was one of the first countries to officially adopt monetarist principles, beginning in 1980 with the election of the Republican government led by President Ronald Reagan. A similar change occurred in Britain after 1979 when a Conservative government under Margaret Thatcher replaced the Labour government.

It is interesting to note that an important exception to this international movement towards reducing government expenditures occurred in France. The economic policies of President François Mitterrand, following his election in 1981, involved significantly increasing the cost of the French public pension system by increasing benefits and lowering the official retirement age to 55 for many industries. France continues to have one of the most extensive social security networks in the world. However, the problem of sustaining such a large system has recently brought its future into question and the French government continues to seek ways of maintaining it.

By the 1980s, the early retirement of workers was straining many European public pension systems.
(G. Schellenberg, The Road to Retirement: Demographic and Economic Changes in the 90s. Centre for International Statistics (Ottawa, 1994), p. 17)