Canada faces big decisions to address aging, urban population

A blizzard of data from the 2021 census has spelled out some important facts that many of us may have never considered seriously — if at all.

One is that Canada’s population is becoming more densely concentrated in urban centres. That is not news. This trend has been going on since the late 19th century when agriculture was becoming more mechanized and, on the flip side, manufacturing and much of the service sector was growing in urban areas.

A second feature of our demographic profile is the impact of the march of time. The babyboom generation, those born between 1946 and 1960, are living longer than previous generations. This is thanks to improved health care, among other factors, Boomers represent a large bulge in the population profile, so the number of people 65 and older living in Canada has increased markedly in the last 10 years — both as a percentage of the population and in absolute numbers — as they have aged.

Moreover, since the fertility rate for Canadian women (now 1.4), has declined below a level of replacement (2.1), the number of people 25 years and younger is shrinking again both in percentage and absolute terms.

In other words, as the boomers retire, the number of new potential entrants into the labour supply to replace these retirees is shrinking.

This also means, given the existing tax structure, government revenues will fall in real terms (i.e., after correcting for inflation) at the very time when health-care costs rise because of the growth in the population 65 or older.

All of this, in turn, means we will be facing an imperative to make significant changes in what government does, how labour markets adjust in response and how the housing sector will evolve. All this will unfold during a period when climate change will require substantial alteration in how we deal with the continuing degradation of the environment.

Consider, for example, the demand for and supply of labour. Sectors that are labour-intensive, such as hospitality, some forms of agriculture such as viticulture, and health care will be hard pressed to attract adequate labour. This will undoubtedly result in higher wages and possibly also fewer restaurants, bars and small service sector establishments.

Or think about the problems facing education. With fewer children, the capital structure (bricks and mortar schools) needed will be less, but how to concentrate facilities? In higher education, will the nation be able to produce adequate numbers of skilled people so that our increasingly complex society will be able to continue to grow?

While immigration is one way to slow down the overall aging of the population, the size of the annual intake will have to at least double — if not triple. How will we accommodate this influx and integrate this many newcomers into our diverse population?

The greatest challenges will lie in health care, especially how it will be delivered and at what cost. Adjustment here will be difficult, if not impossible, unless governments and workers in health care can agree that change is both needed and inevitable and therefore work together to build in solutions that will be viable in the long run.

And with all of these problems looming larger, there will be a need to either radically reduce some expenditures or substantially raise taxes. For our political leaders, it will be an immense challenge requiring thoughtful policies and rigorous action in what could be a hostile political environment.

Given the existing demographic profile, these pressures from our aging population and growing cities will not just go away. Either we will deal with them or suffer a significant decline in our standard of living.