Deniers hinder aging-population debate
Like global warming, it’s a long-term problem that requires short-term response
The opposition parties had some sport earlier this week trying to pin down the natural resources minister, Joe Oliver, on whether he was a “believer” or a “denier” in the thesis that global warming is human-caused. This concern for rooting out unbelievers was intriguingly timed, coming just as the opposition was launching itself into hysterics over the government’s first tentative efforts to come to grips with the costs of an aging population.
For the two issues have much in common. Like global warming, population aging is a problem in the long-term that requires us to take action in the short-term. Gradual yet inexorable, the effects of each are serious but manageable — provided we get started now, rather than wait for the crisis to be upon us. And, like global warming, population aging has its share of deniers.
I do not mean those skeptics who properly demand sufficient evidence before taking some costly course of action. I mean those who are impervious to evidence, or indeed greet every piece of evidence to the contrary as if it proved their thesis — as has sometimes been the case in the global warming debate, and seems already to be happening in the debate on population aging.
The proximate issue is Old Age Security, and the government’s plans, as yet undisclosed, to slow the growth in costs that program is pro- jected to undergo over the next 20 to 25 years. But OAS is only one part of a much larger picture, and the resistance we are already seeing to even the mildest changes to OAS betrays a broader reluctance to deal seriously with the issue of population aging.
Suggest that OAS is overdue for reform, after several decades of failed attempts under both Liberal and Conservative governments, and you will be told it is not worth worrying about, compared to the growth in health-care costs. Suggest that that makes a good case for reform on that front, too, and the denier will respond that health care is not really a problem, either: if health care has been growing as a share of provincial spending, it is only because other types of spending have failed to keep pace. Or to the extent that health care is projected to be a problem in future, it is not because of the growth in the ranks of the elderly, from 12 per cent of the population today to 25 per cent in 2030, but simply reflects the costs of new technologies.
And so on. Every problem is minimized by comparing it to another, as if the two together did not amplify the fiscal challenge in front of us but somehow cancelled each other. But all the specious logic in the world cannot repeal the laws of mathematics. If you double the share of the population over 65, you will see a substantial increase in the share of spending going to the elderly: if not a doubling (there may be some element of fixed costs in these programs), something close to it. And if a larger share of spending is going to the elderly, then either there will be less to spend on other things, or taxes must be increased — unless you make up the difference by borrowing.
All of these are valid choices, but they are, in fact, choices. Whereas to simply holler “no” at every proposed reform is to deny that any choices need be made. No, OAS is not about to “collapse,” as several media reports have noted. But it should not require the prospect of imminent disaster to get us to take steps to improve our situation, even if incrementally. The projected increase in OAS spending of 0.73 per cent of GDP by 2030 works out to $12 billion in today’s dollars, nearly a third of the cost of the program. That is hardly peanuts. Now consider that there will be only 60 per cent of the population of working age then, versus 70 per cent today.
Likewise, it is true that new technologies will also add to health care costs, along with population aging. But how does that make the case that health-care reform is less necessary, rather than more? In his report for the C.D. Howe Institute last year, David Dodge, the former governor of the Bank of Canada, noted that consumption of health care rises rapidly past a certain age, from roughly $4,000 per capita at age 60 to more than $20,000 per capita after the age of 80. As it is, spending on health care has increased from seven per cent of GDP in 1975 to 12 per cent in 2009. Of the seven additional percentage points of GDP Dodge projects health care will absorb by 2031, half is due to population aging.
A final point. There seems to be a perception out there that this is a temporary phenomenon: that after peaking in 2031 with the retirement of the last baby boomers, the numbers of the elderly will then subside. Not so. Statistics Canada projections show the population will continue to age after then, albeit at a slower pace. As far out as 2061, the agency projects the over-65s will remain in excess of 25 per cent of the population. Of these, moreover, about 40 per cent will be over the age of 80, versus less than 30 per cent today.
This is not some minor bump we can ride over. It’s a permanent demographic shift, or permanent as far as anyone alive today is concerned. Anyone who disputes that is, well, in denial.