Baby-boom bubble already deflating
Nothing to fear: Canada’s aging population isn’t the drain on the system we were told it would be
Canada’s baby boomers have been the target of great discussion and fear. Worries continue to proliferate that Canada is becoming “a nation of old people” as the babyboom bulge enters retirement.
Alarm bells were ringing this month as the media reported on a Statistics Canada study showing the country has more people over 64 than under 15. Some raised the spectre of a “seniors tsunami.”
To be sure, the birth explosion that took place in Canada from 1947 to 1965 following the Second World War was unprecedented in the West. Typical Canadian mothers were having four babies.
As a result, Canadians are repeatedly told, mantra-like, to grimly prepare for baby boomers to age: Expect government pension plans to collapse, health care to be decimated and workers to be in short supply. To prepare for the “greying crisis,” companies chopped their pension plans, governments privatized more health care and Ottawa pushed immigration rates higher.
Now it’s 2015 and a significant portion of the baby boom is in retirement.
The sky does not appear to have fallen. The economic troubles Canada is experiencing, manifested mostly in stagnant wages, have nothing to do with baby boomers.
Why the baby boom is going out with a whimper is partly explained by a Vancouver Sun interactive graphic created by Chad Skelton, which tracks the ages of Canada’s almost 35 million inhabitants.
Viewing the graphic, I noticed the baby-boom bulge (which I’m in the middle of) does not appear to add up to much.
The baby- boom section of the graphic, now between ages 50 and 72, is not a mountainous bulge. It is mostly a rapidly descending staircase.
I soon took in the grim news — the baby-boom generation is already dying off. Rather quickly.
Despite relentless talk about how Canadians are living longer, I failed to notice one in 10 Canadians die before age 60. One out of five Canadians leave this mortal coil by age 70.
“When you get around 60 all these diseases start hitting you,” Daniel Stoffman, Vancouverbased co-author of the classic bestseller, Boom, Bust and Echo, said in a recent conversation.
In my own circle of babyboomer friends, I’ve sadly dealt with losses to cancer and other maladies. But I hadn’t quite realized how much their deaths constituted a trend line.
The upshot of the graphic, however, is despite doomsday headlines, Canadians don’t have much to worry about: The baby boom is already losing its demographic power.
Indeed, the new StatsCan report shows Canada has a smaller portion of seniors than most advanced countries, including all those in Western Europe. While people 65 and over make up 15 per cent of Canadians, they comprise 21 per cent of Germans and 23 per cent of Japanese.
Pension plan is solid
Still, many things have occurred because of Canadian fears of a “seniors explosion,” however exaggerated.
To be sure, Canada’s vaunted universal health care system is being moderately challenged as baby boomers succumb to illness. But McMaster University economist Michel Grignon is among those stressing the key to managing health costs is to reduce unnecessary use of expensive technology and to stand up to overcharging pharmaceutical companies.
On the financial front, companies have also cut private pension plans, calling them unaffordable. But some good news is, according to Stoffman, Canada’s government pension system is solid.
Since my beat includes migration, I’ll turn most of the rest of my focus to oft-repeated claims that Canada needs high immigration to replace aging boomers.
It was the key reason the federal Conservative government in 2014 raised the annual immigrant intake to 275,000 from 250,000. Canada now has arguably the highest immigration rate per capita of any major country in the developed world.
On the surface, replacing aging boomers with new immigrants seems to make sense. But, oddly enough, it doesn’t stand up to basic arithmetic.
To stop Canada’s population demographic from gradually aging, Stoffman says, “would require impossibly large increases in immigration.” The United Nations has calculated the U.S. would have to hike its immigration rate by an astronomical 10 times to do so. That’s not going to happen.
Another theoretical method for replacing aging boomers would be to ensure no immigrant over age 45 is allowed into Canada.
But, as Stoffman says, that’s also unthinkable — especially given how Canadian politicians promise to strengthen family reunification programs, which welcome parents and grandparents.
Stoffman offers another caution that should be obvious: Immigrants themselves age. They, too, become dependent on Canada’s old age pensions and taxpayer-funded health care.
Stoffman is not alone in his analysis, which echoes leftwing Oxford University economist Paul Collier, the C.D. Howe Institute, Harvard University’s George Borjas and University of Toronto economist David Foot, the co-author of Boom, Bust and Echo.
Immigration lowers wages
Reflecting on baby boomers leaving the workforce, Stoffman and others say a second widespread “myth” to be confronted is that high immigration is necessary for economic growth.
He acknowledges it is partly true: Newcomers inflate a country’s GDP.
“Immigration slightly increases the size of the economic pie, but the price of that small increase is a drop in wages.”
When Stoffman has given talks on his book on immigration, Who Gets In, he finds it is predominantly immigrants who come up to him after to agree with him.
The settled immigrants realize new immigrants will reduce everyone’s wages. And that is what has happened: Statistics Canada reports immigrants are doing worse economically than they did prior to the 1990s.
The average Canadian worker is also struggling more. Even though Metro Vancouver’s housing market is astronomically expensive, University of B.C. economics Prof. Craig Riddell says B. C. and Canadian incomes are lower and more unequal, full-time employment is decreasing and jobs are more at risk.
“I think the main purpose of Canada’s high immigration policy is to lower wages — and inflate real estate values,” Stoffman said.
In support of his view, he noted outgoing Vancouver planning director Brian Jackson recently said the only way to lower the cost of housing in Metro is to reduce immigration levels.
The federal government used to routinely do that, Stoffman said. It changed immigration levels to correspond with economic realities.
In the early 1980s, Prime Minister Pierre Trudeau cut immigration levels by 25 per cent. It was not considered controversial. But that adjusting stopped with Brian Mulroney.
When Stoffman was asked how he would change immigration levels in light of Canada’s struggling economy, he suggested lowering it to 150,000 a year.
Alternatives exist to using high immigration rates to counter a modestly aging population. Some are already in place.
Foot has said a key purpose of Canadian RSPs is to require aging people to slowly re-inject their savings into the economy and into tax coffers.
Since so much wealth is in the hands of rich older people, Foot also joins with billionaire Bill Gates in recommending a fractional tax on financial transactions.
Meanwhile, many northern European countries offer free daycare to encourage citizens to have more babies. And, along with Japan, countries such as Sweden and Germany have adjusted for a slightly older population by having seniors work longer and by capitalizing on technology and innovation to increase productivity.
Overall, there is little to fear about the aging of the babyboom generation, Stoffman says.
“Canada is never going to become a nation of seniors.”
Let’s adjust accordingly.