Political debate in Canada over old age pensions was interrupted by the country's participation in the Great War (1914-1918). By the end of the war, Canada was a changed nation. Building on the impetus of war-time demand, industrial production grew and, with it, the urban labour force. At the same time, people were living longer and the proportion of seniors within the population was increasing. However, mechanization in industry was threatening many older workers with redundancy.
The new workplace favoured the young, and the tasks that workers had traditionally performed in their later years began to disappear. New jobs were difficult for them to find. Workers who had to support ageing parents had a hard time saving for their own old age. Private pensions from the workplace still covered only a minority, and they were not portable; if a worker was dismissed or left before retirement age, the benefits were lost.
In 1918, a Pension Act was passed to provide compensatory benefits to the survivors of the 60,661 soldiers killed in the war. It also provided for soldiers who returned with disabilities, just over 69,000 of whom were receiving pensions in 1920. Dependent parents who passed a means test could also receive survivor benefits.
The Government Annuities plan of 1908 had failed to achieve its intended purpose, and state assistance for the elderly poor was back on the political agenda in the 1920s. While nobody begrudged the pensions paid to soldiers for their sacrifices in World War One, many people believed that aged Canadian workers also had a right to assistance, in compensation for their years of service to the national economy.
The federal government introduced temporary income taxes in 1917 to help pay for the country's war effort. Those taxes were not removed when the war ended, giving the government a new source of revenue for the development of national social programs.
In 1924, a Special Committee appointed by Parliament to study the question of pensions for seniors estimated that 40 per cent of Canadians aged 70 and over would qualify for an old age pension based on a means test. In 1927, theOld Age Pensions Actwas passed, honouring a promise made at a time of political need for Prime Minister King. This act established a cost-shared program that would replace local emergency relief with a nationwide system of benefits for the poorest seniors.
Under the new Old Age Pensions Act, the maximum pension was set at $20 per month for British subjects 70 years of age and over who had been resident in Canada for 20 years.