Governments putting the squeeze on Generation Squeeze
VANCOUVER, BC/ Troy Media/ - February 11, 2015 ---- We’re approaching the season when governments release their budgets so it’s important to know how much government money goes to different age groups.
British Columbia will be the first to table its budget on February 17, soon followed by the other provinces and Ottawa. In the wake of the Premiers decision last summer to launch a new Task Force on Aging, the distribution of government spending by age will be a hot topic.
Problem is, Canadians have little information to inform this discussion. No government reports total social spending by age group, nor does Statistics Canada.
With colleagues at UBC and Generation Squeeze, I have been crunching the numbers to fill this void. Our new study published this week finds that governments combine to spend $33,000 to $40,000 per retiree, $14,000 to 15,000 per person age 45 to 54, and less than $12,000 per person under age 45. Since the coming budgets reflect who and what we value, one key question all Canadians should be asking is whether this age distribution is fair.
The answer depends on how different age groups are doing. In previous research, we’ve shown that Canadians age 55+ enjoy increases in household income that surpass those under 45, who are squeezed by lower earnings, less time, and higher housing costs compared to a generation ago. High housing prices generate big wealth gains for those age 55+, while weighing down those under 45 with large debts.
Retirees now report the lowest rates of low-income status of any age group, yet more than a quarter of Canadian children start kindergarten vulnerable in ways that make them more likely to fail in school, commit crimes and fall ill. Canadians in their 40s and younger also inherit larger government and environmental debts than did their parents a generation ago.
Such evidence suggests that younger generations need to become a greater priority for policy adaptation by Canadian governments. When new investments are being made this budget season, younger Canadians should receive at least as much as retirees.
Unfortunately, the new Task Force on Aging suggests that the Premiers are prioritizing population aging. This narrow focus risks overlooking generational equity.
Our new study shows that governments spend $150 billion annually on medical care – nearly half of which goes to the 15 per cent of Canadians age 65+. The same age group receives another $40 billion in Old Age Security (OAS). Canadians don’t pre-pay for medical care and OAS the way we do for our Canada and Quebec Public Pensions (which cost another $44 billion). Instead, medical care and OAS comes from general taxes each year, dwarfing spending on families with kids.
Over the past decades, we funded medical care and OAS with tax rates which reflected that a relatively small population of retirees was being supported by a larger working age population. This resulted in big tax savings for those who enjoyed their prime earning years over this period. Today, more retirees need to be supported by fewer working Canadians. Multiple studies doubt that we will be able to sustain the $33,000 to $40,000 we are spending per retiree at current tax rates as the population age 65+ grows.
Given this, younger Canadians must be forgiven for wondering whether today’s aging population will fully pay for the medical care and retirement income subsidies they intend to use. And if not, whether there will be anything left over to reduce the squeeze on younger generations which face lower earnings, higher housing costs, and a deteriorating environment.
Provincial and federal governments can and should budget equitably for aging parents and grandparents, as well as for their kids and grandchildren.
Fortunately, Canadians in their 40s and under are getting better organized to make this happen. Under the banner of Generation Squeeze, we’re squeezing back by building Canada’s most overdue lobby. It will match the good work of the Canadian Association of Retired Persons, which has lobbied on behalf of Canadians 50+ for decades.
So long as older Canadians have a strong lobby, younger Canadians deserve one too . . . so that provincial and federal budgets work for all generations.
Dr. Paul Kershaw is Founder of Generation Squeeze (gensqueeze.ca), and a UBC policy professor in the School of Population Health.
By Paul Kershaw