23rd November 2017

A recent report by C.D. Howe Institute is making headlines across Canada. Its alarming analysis suggests young workers won’t be able to bear the financial burden of Canada’s growing elderly population. Because of this, the report notes taxes will be forced to increase in the coming decades, and the budgets of popular public services such as education, child benefits and health care will be squeezed.

What is the root cause of this issue? How much truth is there in the report? And is a tax hike really inevitable? These are questions surely on many Canadians minds. To discover the answers, Canada’s latest census reveals the facts about the country’s demographics.

How many young Canadians are there compared to the elderly?

Canada’s latest census, from May 2017, reveals that there are now more seniors in Canada than children under 14 years old. The reason for this is not surprising. The post-war baby boom juxtaposed with today’s trend of bearing fewer children is a major cause. Also, due to better health care, Canadians are living much longer lives than they did in decades past. All these factors contribute to the growing elderly population. 

Are social services to blame?

Government education, child benefits and health care are a major cause for the potential tax hikes. The report asserts that the costs of these programs will increase from 15.5 percent of Canada’s GDP to 24.2 percent between 2016 and 2066.

The director of research at C.D. Howe institute, Colin Busby, had this to say about the analysis, “It’s something to be concerned about because if these programs continue to eat up a larger share of overall income in society, the prospects of having to significantly raise tax revenues in the future [are] altogether possible and feasible.”

Busby is not the only one concerned. This past May, Senator Sharon Carstairs argued that Canada is “woefully unprepared” to handle the country’s aging population. To add fuel to the flames, a Canadian Medical Association report revealed that Canada’s 65 and older population consumes around 45 percent of all health care spending, even though this demographic makes up only 15 percent of Canada’s population.

When will the effects of this problem be seen?

Busby argued that the beginning stages of this issue are already happening now. And as time passes, the problems will escalate. Busby noted, “We’re just at sort of the early stages of it right now. The big upward pressure isn’t going to hit until most of the baby boomers are starting to leave the labour force, and when they start to hit ages that really put pressure on the health care system.”

Is there a way to mitigate the problems?

While it will be difficult to avoid the tax hikes of a growing elderly population, it is not inevitable. There are a few solutions that can help avoid or decrease the negative effects. The report suggests raising the retirement age to 67 and that the government partially terminate Universal Old Age Security. Instead of providing the benefits of OAS to everyone, the program should be targeted to people who struggle without its support.

Outside of these two changes, the government will likely need to make the social services system more efficient to account for the increase in the elderly population.