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Understanding the Changing Ratio of Working-Age Canadians to Seniors
Fraser Institute
/ Categories: Ontario, Economy

Understanding the Changing Ratio of Working-Age Canadians to Seniors

and Its Consequences

DRYDEN, THUNDER BAY, SAULT STE MARIE, ONTARIO  ~~~~~  May 28. 2022 (LSNews)  As Canada’s population ages, the number of working-aged Canadians relative to the number of seniors has declined from 5.4 in 2000 to 3.4 in 2022, which means government spending related to demographics is increasing at the same time that the growth in tax revenues is declining, finds a new study by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

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“Workers pay the bulk of taxes, which governments need to fund important services, including health care and income transfers to seniors. As the relative number of seniors grows, and the relative number of workers declines, government finances across Canada will be put under increasing strain,” said Ben Eisen, senior fellow at the Fraser Institute and co-author of Understanding the Changing Ratio of Working-Age Canadians to Seniors and Its Consequences.

The study finds that the share of Canada’s population that is 65 or older increased from 14.1 per cent in 2010 to 19.0 per cent in 2022. Statistics Canada projects this number will increase to 25.0 per cent by 2059.

At the same time, the share of the population that is working-age (aged 15 to 64) is declining, such that the ratio of workers to seniors is also shrinking. For example, in 1970, the ratio of workers to seniors was 7.8, meaning there were almost 8 workers for every senior. This year, that ratio has dropped to just 3.4 workers to every one senior. By 2050, the ratio is expected to decline further to just 2.5 workers for every senior in Canada.

Crucially, as the number of seniors rise, there will be more people collecting income transfers such as the Old Age Security and the Guaranteed Income Supplement. Likewise, average annual per person health-care costs for people aged 65-74 is $7,751, compared to just $2,811 for people aged 35-44. This means that government expenses will increase substantially as the number of seniors rises.

And conversely, there will be fewer workers relative to the number of seniors, while workers pay the bulk of government taxes.

“This shrinking ratio of workers to seniors in Canada—which is already underway—is a significant headwind to policymakers in their efforts to improve the sustainability of government finances in Canada,” Eisen said.

Summary

  • This bulletin presents the most recent data and projections about population aging in Canada. It focuses particularly on the change in the ratio of working-age people to seniors over age 65.
  • The rate of population growth in Canada slowed considerably in the second half of the 20th century and has remained historically low since then.
  • The share of Canada’s population aged 65 or older increased from 14.1 percent in 2010 to 19.0 percent in 2022. Statistics Canada data projects this number will increase to 25 percent by the middle of the century.
  • The share of Canada’s population that is of working age is shrinking, while the share that is age 65 or over is growing. To help shed light on the economic and public finance challenges this trend is creating, we examine historical data and projections that look at how many people there are between the age of 15 and 64 for each person 65 or older.
  • In 1966 there were 7.7 working-age individuals for every senior. This ratio has dropped quickly since then and stands at 3.4 in 2022. Statistics Canada projects this trend will continue in the decades ahead. There will be just 3.0 working-age people for each senior by 2027, after which the ratio will slowly fall further to reach 2.3 by 2068.
  • The shrinking ratio of working-age Canadians to seniors will put pressure on public finances in the years ahead as there will be fewer working taxpayers to help fund cash transfers to seniors and the increasing health care costs that will result from an aging population.

Authors:


Ben Eisen

Senior Fellow, Fraser Institute


Joel Emes

Senior Economist, Fraser Institute

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    The Fraser Institute is an independent, non-partisan research and educational organization based in Canada. We have offices in Calgary, Montreal, Toronto, and Vancouver. Visit our Website 

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