Growing Up: The Social and Economic Implicationsof an Aging Population
In Canada, it is projected that by 2021, there will be almost 7 million people over 65 years of age making up 19% of the total population and that by 2041, seniors will represent an estimated 25% of the population, up from 12.6% in 2001. By the year 2000, the then-current middle-aged cohorts representing the baby boom generation born between 1947 and 1966 made up nearly 33% of the Canadian population. As the baby boom generation begins to reach age 65 by 2012, we will experience a marked acceleration in the number and proportion of seniors. And although all countries are not aging at the same pace, 2000 demographic trends of other developed countries reveal changing age distribution resulting also from declines in fertility rates and increased average longevity.
As such, we would concede that the real challenge does not relate solely to the number of older persons, but also to the proportions of older persons to younger ones. In the context of this framework, a number of concerns have emerged. Ranging from doubts associated with increasing demand on a health care system that is already somewhat compromised, declining economic capacity and growth resulting from an older and shrinking workforce and increased social responsibility to the sustainability of our public pension system, it is undoubtedly time to revisit the conventional wisdoms upon which the attitudes and expectations of our nation are shaped.
Accepting that the elderly population will continue to grow and that the aging process itself plays a part in health deterioration, it is reasonable to expect accentuated demand for health care resources. Based on Canadian Institute for Health Information (CIHI) data, Canada’s 2003 total health care expenditure reached an estimated $121 billion, which amounts to almost $4,000 per person. The Conference Board of Canada estimates that total health spending will increase to $147 billion in 2020, within which public funding will increase to $102.5 billion. Having spent an estimated 10% of its 2001 gross domestic product (GDP) on health care, Canada’s total health expenditure as a function of GDP is ranked 4th in the world.
Given the expected upward pressure resulting from the effects of the cost drivers (population growth, aging, demand, increased prevalence of chronic diseases and inflation) and the cost escalators (pharmaceuticals, home care, new technologies and human resources in the health sector) health care costs will continue to attract significant attention. With advances in best practices and learning from the experiences of other countries more advanced than Canada in the aging continuum which have meaningfully managed costs, Canada would be well served to investigate potential restructuring of health care delivery financing, health system reforms meeting the needs of seniors, policies that focus on quality of life and more responsive cost/benefit models.
The shift in age structure of the population in Canada also influences our workforce and corresponding labour supply patterns. Compounding the effects of the baby boomer cohort nearing retirement age and a limited replacement capacity is the finding that retirement before attainment of 65 years of age has become more pervasive. In fact, current trends indicate that two-thirds of Canadians retire before the full Canada Pension Plan/Quebec Pension Plan benefit age of 65. The education and health care sectors are particularly at risk
of losing a large share of their workforce due to relatively young retirement ages which are rendered more alluring by generous retirement incentives. Other
sectors experiencing shortages of skilled workers include skilled construction trades-people, medical technologists and technicians, aircraft mechanics and
Although the inherent age configuration of respective vocations will play a part, we emphasize that skill shortages arise also from other key factors, or frictions, such as length of time or resources required to train, discerning standards, geographic mobility of workers and inherent working conditions that render it difficult to attract or retain workers. Depending on the relative success of corrective adjustments, a number of complementing measures can serve to calm some of the current and anticipated unrest. Emerging in the form of both generic and vocation-specific policies, strategies which encourage increased reproduction rates, immigration, labour force participation within select groupings, mentoring behaviour, graduated redeployment strategies and extended work life can be concurrently pursued.
Advances in technology and market globalization are transforming industrialized countries from resource-based economies to knowledge-driven economies. Underscoring how human capital is becoming an increasingly important engine of growth, it has the potential also to enlarge the effective labour force and to slow the pace of anticipated erosion or shrinking of the wage-income tax base.
Occasionally understated in the context of population aging is the potential divisiveness that may be produced between generations. Granted, the working-age population may be increasingly called upon to support, financially and otherwise, a growing proportion of the population having reduced individual output and requiring supplemental care and support. Importantly, though, the younger generations will benefit also from the significant wealth of those seniors in the form of commerce, taxation streams and inheritance. While no attempt has been made in this paper to conduct experimental research into the collective revenue repercussions, there is nevertheless cognitive recognition that aforementioned pressures will be mitigated, at least to some extent, by current social regimes and wealth exchanges that will naturally transpire over time.
Admittedly, there may be some timing discrepancies between the time at which the costs will be incurred and the times at which government/societal windfalls might accrue, but to ignore the causal relationship would be short-sighted. Our attitudes towards the reconciliation of these timing differences and towards our own personal or collective spending behaviours will in large part dictate the level of success with which we will navigate the upcoming decades. Optimistically, the current landscape affords us ample opportunity to pursue and confer onto future generations the legacy of our choosing.
In the pursuit of policy towards these affirmative ends, we are compelled to rally for balanced policy which provides a minimum standard of living to all while meaningfully allowing Canadians to assume fuller responsibility for, and greater independence in, their lives. Planning is a mutual undertaking wherein government, communities and the individual assume responsibility for different and complementing elements of the whole.
Adopting a holistic view, CGA-Canada would advocate for increased personal responsibility in accurately articulating the average Canadian’s financial plan. Seen as good deals for Canadians relative to individual contribution, government-administered benefits such as the Canada Pension Plan (CPP), Old Age Security (OAS), Guaranteed Income Supplement (GIS),War Veterans Allowance, Employment Insurance (EI) and provincial or municipal income assistance (welfare) can be accompanied by private plans such as registered pension plans (RPPs), registered retirement savings plans (RRSPs) and non-registered savings vehicles. On an absolute basis, the argument that social benefits alone cannot sustain the holistic needs of an individual is relatively accurate. Importantly, though, we must accept that these public programs are intended to provide for a minimum standard of living to all Canadians and do not profess to meet more generous levels of comfort. The answer therefore lies in effectively harmonizing personal or private plans with the provisions of public programs.
Within a framework of increased awareness and understanding, social accountability, goodwill and personal responsibility, stakeholders are better equipped to responsively shape policy aimed at preserving the interdependent interests of all Canadians.