Ontario’s Pay Equity Office unveils a hidden inequality in new report on the gender pension gap

By on 06/06/2024 | Updated on 06/06/2024
Kevin Schneider from Pixabay

A new groundbreaking research paper, Understanding the Gender Pension Gap in Canada, published by Ontario’s Pay Equity Office with Dr Elizabeth Shilton, long-time feminist litigator, labour lawyer, and pension expert, finds that although Canada’s retirement income system is recognised as one of the strongest in the world, not all Canadians are benefitting equally. While retirement incomes have increased substantially for all Canadians, men have consistently fared better than women and a persistent gender pension gap remains.

In 1976 – the first year for which meaningful statistics are available – the gender pension gap (GPG) in Canada stood at 15%, and it has stubbornly refused to close despite substantial increases in overall retirement income and massive advances in women’s labour market engagement and earnings since that date. In fact, the GPG has increased: it currently stands at about 17%, which means that for every dollar of retirement income men receive, women get only 83 cents.

In 2020, approximately 200,000 more women than men aged 65 and over were living below Canada’s low-income cut-off. Digging deeper, 21% of women aged 75 and over had incomes below this threshold – a concerning 51% higher than their male counterparts of similar age. This underscores a deeply entrenched inequality that demands urgent attention.

The gender pension gap is the difference between retirement income received by men and women. In Canada, this income is calculated from three sources or “pillars”: Old Age Security and Guaranteed Income Supplement, Canadian Pension Plan/Quebec Pension Plan, and private pensions. Based on our research, there are two main obstacles to closing the gap: Canada’s increasing reliance on private pensions, which is the most gender-unequal source of retirement income, and women’s unequal share of unpaid family care work, which prevents them from increasing their share of paid work over their lifetime.

Read more: Evidence-based action: the key tools governments can use to tackle the gender pay gap

Contributing factors

Some of the major factors that contribute to the gender pension gap include:

Childbearing and child-rearing: Women are more likely than men to leave the labour market (either temporarily or permanently) after having children. In 2015, the employment rate of women in Canada with children under the age of six was 69.5%, yet the employment rate of men with children under the age of six was 90.8%, signaling a 21.3% gap. Women’s employment rate increases with the age of their children but never catches up to that of men’s.

Caregiving: Women are more likely than men to work part-time due to caregiving responsibilities. In 2021, 24.4% of all Canadian female workers were part-time compared with 13% of all male workers. Women’s most-cited reason for working part-time was caring for children. Available data states that “one quarter of women reported caring for children as their reason for working part-time, compared to 3.3% of men”. Furthermore, women who work part-time may not be eligible to enroll in their workplace pension plan if they work fewer hours than their employer’s threshold.

Unpaid domestic labour is still mostly performed by women. In 2017, 89.9% of insured mothers in Canada took maternity/parental leave – at reduced income level – compared with 11.9% of insured fathers/partners.

The existing gender wage gap (GWG): Two of the three pillars of Canada’s pension system are designed to be tied to earning power. Canada’s gender income gap was 28% (2021) for average annual earnings, and 11% (2020) for average hourly earnings. To learn more about the ways the Pay Equity Office is working to reduce the gender wage gap in Ontario, click here.

Historical Bias: Canada’s public pension system was and still is designed for heterosexual couples with a male breadwinner.

All of these factors work together to perpetuate the lasting gender pension gap in Canada.

Read more: Canada’s public sector beating private sector on narrowing the gender wage gap, report finds

Pension system

Taking a deeper dive into the three pillars that make up the Canadian pension system, we can better understand the ways that the system itself is also set up to benefit men and disadvantage women. The three pillars of the pension system are:

Pillar 1: Old Age Security (OAS) and Guaranteed Income Supplement (GIS)

OAS/GIS is a social pension, administered by the Government of Canada. An individual must have an income less than $134,626 (as of 2023) to qualify and payment amounts are based on age, marital status and income. Employment history is not a factor in determining eligibility. OAS/GIS is designed to be gender-neutral, and actually favours women as they often have longer life expectancies when compared to men. It also indirectly addresses gender biases by providing essential financial support to workers who may have less access to other retirement income sources.

Pillar 2: Canada Pension Plan (CPP) / Québec Pension Plan (QPP)

CPP/QPP is a mandatory, public contributory pension plan administered by the Government of Canada and Government of Québec, respectively. With CPP, an individual’s pension is based on their earnings, their contributions, and the age they decide to start collecting their pension. This source of retirement income upholds traditional gender biases since it is based on earnings and contributions, which historically favour men who have had higher incomes and longer work histories. This perpetuates the gender pension gap as women often earn less over their lifetimes and may have gaps in their employment due to caregiving responsibilities.

Pillar 3: Private Retirement Income

Private Retirement Income comes from sources such as workplace pension plans and personal plans (such as registered retirement savings plans). Private plans are voluntary – not all individuals purchase a personal plan and not all employers provide workplace pension plans (in fact, three-quarters of Canadian adults are not covered by workplace pension plans). Unfortunately, women are disproportionately affected by the lack of workplace pension coverage due to factors such as the gender wage gap and part-time employment. Women are also less likely to have personal retirement savings due to lower incomes and fewer opportunities for financial investment.

Addressing the problem

So what can we do? Perhaps the most important first step is bringing awareness to this issue, and calling for more comprehensive gender-based analysis of retirement income systems in Canada and internationally. Ongoing monitoring and additional research into factors that may be perpetuating the gap in retirement income will help ensure that these systems provide equal protection and equal benefit of the law to both women and men. There have been recent enhancements to the CPP/QPP and reforms to the cost of child care to improve women’s pensions, but further reforms are needed, particularly if private pension plans are allowed to increase their market share of overall pension income. Women deserve equitable pay and financial stability in all stages of life – because a fair retirement is a right, not a privilege. To learn more about the gender pension gap, read here.

Read the report: Understanding the Gender Pension Gap in Canada

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About Kadie Philp

Kadie Philp is commissioner and chief administrative officer, Pay Equity Commission of Ontario

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