In 1924, the federal government determined that 98,841 elderly Canadians, one-third of all Canadians 70 or older, needed help to survive with any reasonable kind of decency. In a largely self-reliant society, the responsibility to provide "relief" fell to the country's municipal governments, and then mostly as providers of last resort.
People were expected to look after themselves, to save money during their working lives and to work as long as they were able. People who could no longer work were expected to seek relief from family first, from charities second. Provincial legislation obliged people to help their parents. Based on the federal government's national assessment of need in the Roaring Twenties, two-thirds of all elderly Canadians managed successfully to meet these laissez-faire expectations, thank you, on their own.
By the early 1950s, the federal government had subsumed all of these expectations, transforming personal responsibility and family obligations into anachronistic concepts - and vastly expanding the number of older people who needed help. At first, it used a stringent means test to determine eligibility; you had to be 70 or older and a Canadian resident for 20 years to collect a maximum pension of $240 a year. Eventually, Ottawa abandoned means-tested relief for universal coverage, no longer concerned whether these people needed relief. And, by far, most didn't.
Which was the better way to distribute relief? In a study published in 2008, University of Calgary economists Herbert Emery and Jesse Matheson evaluated three separate federal programs designed to expand the "health and well-being" of the country's oldest cohort. On the reasonable assumption that improved health would delay death, they analyzed the mortality rates associated with each of these programs:
First, with the original federal means-tested Old Age Pension (OAP), established in 1924;
Second, with a means-tested Old Age Assistance program (OAA), established in 1952, which enabled people aged 65-69 to obtain relief;
Third, with the universal Old Age Security program (OAS), also established in 1952, which provided relief to everyone age 70 or older.
The longevity assumption of the Emery-Matheson study proved correct. The universal OAS program reduced the mortality rate of Canadians (age 70 and older) more than the means-tested alternatives. But it did so at extraordinary expense.
The universal program (OAS-1952) reduced the mortality rate of the 70-plus cohort by 0.12 per cent: 66 fewer deaths, coast to coast, than would have occurred without it. The means-tested OAA program (1952) reduced the mortality rate of this younger cohort by only half as much: 0.07 per cent: nine fewer deaths. The means-tested OAP (1924) reduced the mortality rate by 0.02 per cent: eight fewer deaths.
Thus universal coverage extended more lives than the means-tested programs. The Emery-Matheson study, however, calculated that the government spent $2.6-million "per life extended" (over what it would have spent had it kept the original means-tested old age pension). Expressed in 2010 purchasing power, the cost was $21.5-million "per life extended" - or, for 66 such extensions, $1.4-billion.
A universal program is merely a means-tested program with easier eligibility: Without some eligibility restrictions, you would have relief "on demand." On one level, we're apparently there. The government now extends OAS payments to 4.5 million Canadians, 16 per cent of the population. On the other hand, we tax - "claw" - most of it back. This is the same model we use to distribute "baby bonuses." For all practical purposes, we subject everyone to tax-based means tests.
The Emery-Matheson study noted that governments abandoned means tests not because they were inefficient, but because they were deemed demeaning. They were "not nice." Perhaps modern innovations can make them nicer and less costly, too. Yet a number of economists have argued that universal social programs are unnecessarily expensive and do little for the people who need help the most. Herbert Emery and Jesse Matheson agreed; "Our results," they wrote, "suggest that continuing with means testing but with a higher income ceiling for eligibility may have been a superior plan to the universal OAS introduced in 1952."
Kinder, nicer means tests, in other words, may be more compassionate - and perhaps lengthen more lives and cost substantially less to operate - than universal programs that extend relief to everyone, whether they need help or not.