SEDAP (Social and Economic Dimensions of an Aging Population) is a multidisciplinary research program studying a wide range of aging-related issues and is funded by the Social Sciences and Humanities Research Council of Canada. SEDAP is centred at McMaster University and involves researchers from that institution as well as from the University of British Columbia, Université de Montréal, Queen's and the University of Toronto.

I. SEDAP Research Papers

SEDAP Research Papers are available on the SEDAP website (http://www.socsci.mcmaster.ca/sedap/) at no cost. Paper copies may be obtained for a nominal charge. Please contact Mrs. Gail Kalika, Department of Economics, KTH-426, McMaster University, Hamilton, Ont., Canada, L8S 4M4.

SEDAP Research Paper No. 9:

The Impact of Rising 401(k) Pension Coverage on Future Pension Income

William E. Even (Economics, Miami University, Oxford, Ohio) and David A. Macpherson (Economics, Florida State University, Tallahassee, Florida)

The share of pension coverage among U.S. workers accounted for by defined contribution pension plans has risen substantially over time and 401(k) plans are an important source of this growth. The 401(k) plan is similar to an RRSP in Canada in that contributions by employees are voluntary. But while individuals may set up their own RRSPs, a 401(k) plan must be set up by an employer in the workplace. This makes the 401(k) much like a group RRSP. 401(k) plans were introduced in the U.S. in 1978.

Even and Macpherson examine in this paper how the growth of 401(k) plans will affect the level and distribution of pension benefits among future retirees. They begin by using data from the 1992 Health and Retirement Survey and the 1992 Survey of Consumer Finances to assess the distribution of retirement benefits. They find that, among workers aged 51 to 62 in 1992 who were expecting to receive a pension benefit, workers covered by both defined benefit (DB) plans and defined contribution (DC) plans (including 401(k)s) had the highest median benefit expected from their current employer. Those with a DB plan only were second and those with a DC plan only were last.

However, given that 401(k) plans are relatively new, the experience of 51 to 62 year olds in such plans may not be a good indicator of what younger workers will do. The authors thus used pension information from the 1992 Survey of Consumer Finances for workers aged 25 to 65 to simulate future benefits for DB plans and for DC plans broken down into 401(k) and non-401(k) plans. The simulations were carried out for workers in the bottom, middle and top third of the income distribution.

The authors make a number of simplifying assumptions in their simulations, which are that:

• workers start with a firm at age 35 and stay with that firm until age 65
• wage growth is constant across workers
• the real interest rate earned on contributions to DC plans is 3.7%
• the life-cycle profile of DC plan contribution rates for a given person is always at the same percentile point in the distribution of contribution rates. Thus, for example, a person who contributes at the median rate at age 35 will continue to contribute at the median rate until retirement at 65. (The median contribution rate will, however, change as the person ages.)

Among the main findings of the simulations are:

• Mean and median benefits in 401(k) plans are projected to be less than in non-401(k) DC plans for workers in all income classes; 401(k) plans generate lower benefits than DB plans only for low-income workers.
• Among low-income workers, the variance in pension benefits is greatest for 401(k) plans.
• The relationship between income and pension benefits is strongest for 401(k) plans.

SEDAP Research Paper No. 10:

Income Inequality as a Canadian Cohort Ages: An Analysis of the Later Life Course

Steven G. Prus (SEDAP Postdoctoral Fellow, Centre for Gerontological Studies, McMaster University)

In this paper, Prus estimates patterns of income inequality in Canada, focusing on a particular cohort as it ages over the later stages of the life course. The cohort is constructed synthetically by selecting persons born between 1922 and 1926 from the 1973, 1981, 1986, 1991 and 1996 files of the Survey of Consumer Finances (SCF). The author notes, however, that as the SCF surveys only private households, the elderly are not as well represented as other age groups due to the fact that a greater percentage of them reside in institutions.

The measure of income used in the paper is family income. The author makes adjustments to family income for family size by dividing by the square root of the number of family members. (Thus, family income is divided by 1.0 for a one-person family, by 1.41 for a two-person family, by 1.73 for a three-person family, and so forth.) The author also makes adjustments to different types of income to reconcile underreporting in the SCF compared to National Accounts data. No adjustments are made to public or private pension income; investment income is increased by 33% to 50%, depending on the survey year, and social assistance income is adjusted by an average of about 35%. In the case of missing income data in the SCF, values imputed by Statistics Canada have been used.

Prus also makes use of data from the Luxembourg Income Study to make income distribution comparisons for Canada and other countries for persons aged 65 and older.

Among the major findings of the paper are:

• For family heads born between 1922 and 1926, income inequality within the cohort increased steadily from ages 47 to 64, and particularly dramatically from ages 55-59 to ages 60-64. For these same family heads, income inequality decreased from ages 65 to 74. These findings hold for unadjusted family income, family income adjusted for family size only and for family income adjusted for family size and underreporting of income components.
• Using family income adjusted for family size and underreporting, family heads born between 1917 and 1921 experienced rising income inequality within their cohort from ages 52 to 64 and decreasing income inequality from ages 65 to 79. Family heads born between 1927 and 1931 saw increasing inequality from ages 42 to 64 and decreasing inequality from ages 65 to 69.
• In the 1996 SCF survey, the 1917-1921 cohort (then aged 75-79) experienced more within-cohort adjusted-income inequality than did the 1922-1926 cohort (aged 70-74), who in turn experienced more income inequality than did the 1927-1931 cohort (aged 65-69).
• For the 1922-1926 cohort, the percentage of that cohort's adjusted family income received by the lowest income quintile declined from ages 47 to 64, then increased from ages 65 to 74. The percentage of income received by the highest quintile increased from ages 47 to 64 and declined from ages 65 to 74.
• The author's calculations using 1994/95 family income data (adjusted for family size only) from the Luxembourg Income Study show that Sweden has less inequality among those aged 65 and over than does Canada, while the U.K. and the U.S. have more income inequality among seniors than does Canada.

SEDAP Research Paper No. 11:

Are Theories of Aging Important? Models and Explanations in Gerontology at the Turn of the Century

Vern L. Bengston (Sociology/Gerontology, University of Southern California), Cara J. Rice (Psychology, Stanford) and Malcolm L. Johnson (International Institute on Health and Ageing, University of Bristol, U.K.)

In the broad and increasingly differentiated fields that constitute gerontology today, Bengston, Rice and Johnson feel that theory has come to play a diminishing part. They address the question of whether this should be a cause for concern by examining the role of theory in gerontology.

The authors define theory as the construction of explicit explanations in accounting for empirical findings. They emphasize that the term theory should not be confused with other terms that reflect the process of knowledge development such as empirical generalization, model or paradigm. They view the principal use of theory as building knowledge in a systematic way so that empirical work will lead to integration with what is already known and serve as a guide to what is yet to be learned.

It is suggested by the authors that the recent devaluation of theory development in gerontology stems from four other trends:

• the failed quest for "grand theory"
• the drive for applications and solutions
• post-modernist epistemological critiques (which claim there is no objective truth)
• the resistance to cross-disciplinary investigations

The paper concludes by stressing the importance of theory in gerontological work and notes that while a singe grand theory in the discipline may be impossible, many useful "minitheories" exist in the literature which may help researchers to frame research questions, decide on appropriate methods of investigation and interpret their findings.

SEDAP Research Paper No. 12:

Generational Equity and the Reformulation of Retirement

Malcolm L. Johnson (International Institute on Health and Ageing, University of Bristol, U.K.)

Johnson begins by outlining how trends toward a greater proportion of the elderly in the population have led to reductions in social support for the aged in many countries. He then proceeds to examine this reformulation of the bond between generations, particularly with regard to retirement programs.

Johnson notes that retirement benefits as originally formulated were intended to support those who were genuinely old and unable to work. However, there have been increases in life expectancies since retirement programs were first introduced, and Johnson feels that the life of extended leisure presently experienced by growing numbers of retirees is not what was ever meant in earlier conceptions of intergenerational support to the old.

With the reduction in retirement benefits that the above would imply, the capacity to continue to earn income will become an imperative for many young old. To that end, Johnson recommends:

• flexible retirement between ages 55 and 75
• new opportunities for job changes in mid and late career, possibly to lower paying but longer career path jobs such as in the service sector
• inclusion in the formal economy of much of the care of the old old currently undertaken by the young old
• self-provision for old age through a lifetime investment (with provision by society for those for whom this is not possible)

SEDAP Research Paper No. 13:

Long-Term Care in Turmoil

Malcolm L. Johnson, Lesley Cullen and Demi Patsios (all of the International Institute on Health and Ageing, University of Bristol, U.K.)

The Registered Homes Act and the accompanying Code of Practice of 1984 in the U.K. are seen to be in much need of revision. Johnson, Cullen and Patsios discuss such revision, particularly in light of the recent White Paper (Modernising Social Services, 1998) and Report of the Royal Commission (With Respect to Old Age, 1999).

Among the points raised by the authors are:

• The White Paper promises "services that are suited to the needs of people, not the convenience of providers" , yet there is no mention of the assessment process. Johnson, Cullen and Patsios feel that the current assessment process absorbs vast amounts of potential care delivery time and note that there are no shared assessment tools among professionals nor any central file on an individual to which all carers can refer.
• The lack of uniformly applied standards renders the measurement of care quality (and thus of cost effectiveness) impossible. For example, such assessment and review systems as are currently in practice are not readily transferable outside hospital or nursing home settings to the other vital services provided by external agencies. New regulations, if they are to be effective, must provide a common framework subscribed to by all professionals for assessment and recording.
• The authors feel that the greatest net gains to be achieved in the quality of long-term care over the next decade will be through improving the effectiveness and skill of long-term care staff. They suggest it would be more cost effective to devote training resources to managers rather than to all staff members.

SEDAP Research Paper No. 14:

The Effects of Population Ageing on the Canadian Health Care System

Mark W. Rosenberg (Geography, Queen's University)

Rosenberg begins his paper by examining various projections of population and health care expenditures in Canada by a number of researchers. He discusses the work of the "crisis theorists", who believe that the future growth of the elderly population will generate major increases in health expenditures which are not likely sustainable given the current organization and funding of health care in Canada, and contrasts these findings with the work of the "manageable theorists". The "manageable theorists" are of the view that while health care expenditures will increase as a result of growth in the elderly population, most of this will be manageable due to some combination of the reallocation of expenditures from the young to the old, accompanying productivity increases, and offsets from new technologies and efficiency improvements in the health care sector. Rosenberg notes the sensitivity of all projections to the population scenarios chosen and to the assumptions about productivity in the economy and in the health care sector.

Examining health care costs in Canada, Rosenberg finds that there is considerable evidence that the growth of the elderly population is likely not the major element driving growing health care expenditures. Regarding the role of new technologies, drug therapies, and home care, Rosenberg notes that these may be "add-ons" and not substitutes for current ways of delivering health care services and thus may increase costs rather than reduce them.

Among OECD countries, Canada currently sits at the high end in terms of health care spending and life expectancy but at the low end in terms of the size of its aging population. There are OECD countries whose elderly populations are significantly larger than Canada's in relative terms, that have similar or greater life expectancy and that spend significantly less on health care (for example, Japan and Sweden). There are also OECD countries that spend more than Canada and have lower life expectancy (such as Germany and the U.S.). Rosenberg's interpretation of the international literature is that in most countries the growth of the elderly population will have a "manageable" effect on health care expenditures.

Rosenberg concludes with recommendations to improve models that project the impact of the aging population on health care spending, including devoting more attention to high- growth population scenarios, consideration of the changing socio-economic and ethnic diversity of Canada, and developing forecasts at the sub-provincial level.

SEDAP Research Paper No. 15:

Projections of the Population and Labour Force to 2046: Canada

Frank T. Denton, Christine H. Feaver and Byron G. Spencer (Economics, McMaster University)

The authors present projections (based on their MEDS projection system) of the Canadian population, labour force, dependency ratios and life expectancy to the year 2046, under three different growth scenarios. Projections are presented in tabular form for five-year intervals. Population pyramids are presented for selected years.

(The MEDS projection system is publicly available. See http://www.socsci.mcmaster.ca/qsep/ for details.)

SEDAP Research Paper No. 16:

Projections of the Population and Labour Force to 2046: The Provinces and Territories

Frank T. Denton, Christine H. Feaver and Byron G. Spencer (Economics, McMaster University)

This paper is as paper No. 15 above, but with projections for the provinces and territories rather than for Canada as a whole. (The projections are again based on the MEDS system.)

II. SEDAP Post-doctoral Appointment

SEDAP is very pleased to welcome Karen Kobayashi as a post-doctoral fellow. Karen will hold her post-doctoral fellowship for a two-year period at the University of British Columbia.

Karen holds a B.Sc. and an M.Sc. in Kinesiology from the University of Waterloo and a Ph.D. in Sociology from Simon Fraser. Her doctoral thesis was entitled "Bunka No Tanjyou" [Emergent Culture]: Continuity and Change in Older Parent-Adult Child Relationships in Japanese Canadian Families. Karen's research paper "The Nature of Support from Adult Children to Older Parents in Japanese Canadian Families" was recently accepted for publication at the Journal of Cross-Cultural Gerontology.

During the tenure of her SEDAP fellowship, Karen will be working with SEDAP members Anne Martin-Matthews (Social Work and Family Studies, UBC) and Carolyn Rosenthal (Gerontology, McMaster) on projects relating to the changing patterns of family structure, family support, and combining family and work roles. She will also pursue independent research on ethno-cultural variations in family structure and the implications these variations have for social support, life satisfaction, and work-family conflict in later life, and will be teaching courses in Family Science.