Older Canadians not the problem
It’s unfair to allege that seniors are ‘screwing’ younger generations financially
According to newly released Statistics Canada census data, the number of Canadians aged 65 and over is now greater than the number younger than 15.
For many, this is cause for celebration. Canadians are not only living past 65 in greater numbers, they are living to greater ages; a record number of centenarians was also reported.
Others see this demographic shift as a cause for concern.
No matter what they do, it seems seniors are an open target. If they continue to work past 65, why don’t they retire and make way for younger workers? If they retire, why do they expect younger Canadians to support them? If they are hale and hearty, how long can younger Canadians be expected to support them? If they are infirm, why are they taking up so many health-care dollars?
Paul Kershaw of Generation Squeeze painted a woeful picture of seniors as the anchor holding back the inter-generational fairness ship. Let’s look at some facts. Kershaw noted that federal spending on seniors is projected to rise from $51.1 billion in 2017 to $63.7 billion by 2022; he calculated this as equivalent to an annual increase of 5.7 per cent per year. While my own calculations come out at a less alarmist 4.5 per cent, the point remains: it is unlikely that growth in the gross domestic product (GDP) will equal the growth in federal spending on seniors.
But it’s important to realize that Kershaw is comparing apples to gorillas. As an analogy, imagine we are talking not about the finances of Canada as a whole but rather your household budget. The growth in spending on seniors would be equivalent to the growth in one budget category, say transportation expense; while the growth in GDP is equivalent to the increase in your total household spending.
Granted, spending on seniors is not inconsequential. Using Kershaw’s numbers, it is $51.1 billion of $330 billion, or 15.5 per cent of the total, and by 2022 it will grow to $63.7 billion of $336.5 billion, or 18.9 per cent of the total. But spending on seniors is not an inescapable tidal wave destined to swamp our fiscal spending raft.
If we look not at total spending, but at how seniors’ income breaks down, Statistics Canada provides some telling information. According to the national agency, 19 per cent of seniors’ income comes from Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).
An additional 22 per cent of income comes from Canada Pension Plan payments.
While CPP was originally created as a benefit, it is now self-funding from contributions made by employees and employers, so this will not drain resources from elsewhere.
Other sources of seniors’ income include 30 per cent from private pension plans and 10 per cent from investment income.
In total, this accounts for 81 per cent of seniors’ income (the balance being income from employment, self-employment and unspecified sources).
CARP has long been an advocate for increasing CPP and other pensions to reduce reliance on taxpayer-funded programs like OAS and GIS. But even at current rates, 19 per cent hardly makes seniors completely dependent on the state.
However, spending is only half the story. Seniors continue to pay income tax on their earnings, including any government transfers they receive. They draw down and spend accumulated savings, stimulating the economy and paying goods and services taxes in the process. And older Canadians pay a disproportionate share of municipal taxes, with 40 per cent of homes in Canada owned by those who are age 50 to 70.
Concerns about inter-generational fairness point to a real problem.
But it’s not the amount governments spend on different cohorts; it’s the allegation that seniors are somehow “screwing” younger generations.
This rhetoric is not only wrong, it has the potential to do harm. Like conversations happening (primarily) south of our border about immigrants, disparaging comments about seniors will only increase the agism that many Canadians already experience.
There are many things we can, and should, do that will not only reduce federal spending on seniors, but increase the wellbeing of Canadians as we age.
For example we can provide appropriate types of care close to home to reduce health-care spending. We can provide incentives for seniors to continue working, to increase tax revenue. We can improve retirement security and investor protections so that fewer seniors need rely on government support.
For starters, we need to stop seeing seniors as a drain on the system and instead start seeing them as our future selves — people who have spent their lives facing challenges and doing their best to look after their families, their communities and their futures.