Ontario’s pay equity office unveils a hidden inequality: “The Gender Pension Gap”

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Despite Canada's robust retirement income system, women are facing an uphill battle in securing financial stability during their golden years. And the situation hasn't improved much since 1976.

A new ground-breaking research paper, Understanding the Gender Pension Gap in Canada, published by Ontario's Pay Equity Office with Dr. Elizabeth Shilton, feminist economist and labour lawyer, finds that although Canada's retirement income system is recognized as one of the strongest in the world, not all Canadians are benefitting equally. While retirement incomes have increased substantially for all Canadians, a persistent gender pension gap remains.

“Women receive $0.83 to every $1.00 a man receives in retirement income. That is a 17% gendered pension gap,” notes Kadie Philp, Commissioner and CAO of the Ontario Pay Equity Commission. "This stark reality isn't just a number – it's a concerning trend contributing to a notable gender disparity among older Canadians, particularly women."

The Gender Pension Gap (GPG) is the difference between retirement income received by men and women. In Canada, this income is calculated from three sources: Old Age Security and Guaranteed Income Supplement, Canadian Pension Plan/Quebec Pension Plan, and private pensions. In 2020, approximately 200,000 more women than men aged 65+ were living below Canada's low-income cut-off. Digging deeper, 21% of women aged 75+ had incomes below this threshold — a concerning 51% higher than their male counterparts of similar age.

The report Understanding the Gender Pension Gap in Canada highlights that women are more likely than men to earn lower wages and spend fewer hours in the paid labour market, which contributes to the gender pension gap.

According to Philp “Gendered differences in income, whether while working or in retirement, have multiple and interrelated causes. This report highlights the need for additional research on the impacts of the gender wage gap on women in all stages of their lives”.

Quick Facts from the report:

• Persistent Gap: A gender pension gap (GPG) exists in Canada and has not narrowed since 1976 when it was 15%. As of 2021, the GPG was 17%, despite women's increased labour force participation.
• Size of the Pension Gap: Women receive 83 cents for every dollar men receive in retirement income, with the average retirement income for Canadian women in 2021 at $36,700 and the median at $29,700.
• Global Ranking: Canada ranks 12th out of 47 countries in the Mercer CFA Institute 2023 Global Pension Index. In 2021, the GPG in Canada was 17% according to Statistics Canada and 21.8% according to the OECD. In comparison, the average GPG across 34 OECD countries was 25.6%, with Estonia the lowest (3.3%) and Japan the highest (47.4%).
• Disproportionate Impact: In 2020, approximately 200,000 more women aged 65+ lived below Canada's low-income cut-off than men, with 21% of women aged 75+ having incomes below the cut-off, 51% higher than men of similar age.

Factors causing the gender pension gap:

• Childbearing and child-rearing. Women are more likely than men to exit the labour market (temporarily or permanently) after having children. In 2015, the employment rate of women with children under the age of 6 was 69.5%, yet the employment rate of men with children under the age of 6 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. 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.
• Historical bias: Canada's public pension system was and still is designed for heterosexual couples with a male breadwinner.

Canada's retirement income system

The GPG in Canada refers to the disparity in retirement income between men and women, measured across the three pillars of Canada's retirement income system:

• Pillar One: 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 (i.e., payments are not based on contributions). Pillar one is designed to be gender-neutral but favours women given their longer life expectancy compared with men. It indirectly addresses gender biases by providing essential financial support to women, who may have less access to other retirement income sources.
• Pillar Two: 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. Pillar two embodies traditional gender biases. It is based on earnings and contributions, which historically favour men who have had higher incomes and longer work histories.
• Pillar Three: Private Retirement Income. Private Retirement Income comes from sources such as workplace pension plans and personal plans (e.g., registered retirement savings plans). They are voluntary, private contributory pension plans. Not all individuals have workplace pension plans. In fact, three-quarters of Canadian adults are not covered by workplace pension plans. Pillar three represents gender biases in access to workplace pension plans and personal retirement savings.

Source: Pay Equity Office

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