Federal budget rains money on seniors … and only drips it on the young: study

Click to play video: 'Federal Budget 2017: Does it deliver on promises to help middle class?'
Federal Budget 2017: Does it deliver on promises to help middle class?
The Liberal government has talked a lot about needing to help the middle class, to give them the security and the skills they need to cope with a growing economy. Shirlee Engle has a reality check on what this budget delivers – Mar 22, 2017

Young people across Canada are facing far more difficulty saving up to buy a home than their parents did.

But they merited no mention when Finance Minister Bill Morneau announced the creation of a National Housing Strategy (NHS) designed to give every Canadian a “safe and affordable place to call home” in the federal budget speech on Wednesday.

But who did make that part of the speech? Seniors — the very same people who have seen the value of their homes skyrocket in recent decades in some Canadian cities.

Story continues below advertisement

The omission was noted in a budget study by Generation Squeeze, a group that advocates on behalf of younger generations.

It found that the Liberal government’s second federal budget, which projects a $28.5 billion deficit in 2017/18, earmarks spending of about $23,000 per person aged 65 and over, compared to over $9,000 per person aged 45 to 64 and about $5,500 per Canadian under the age of 45.

The 2017 budget found an extra $720 in spending for people over 65, and only $88 per person under age 45, the study added.

“There is language about child care, there is language about a housing strategy, there’s language about more for post-secondary,” Generation Squeeze founder Paul Kershaw said of the budget in an interview with Global News.

“But when you look at the dollar values that are identified with the new language, the dollar values are modest, not much more than rounding errors.”

Story continues below advertisement

READ MORE: Federal Budget 2017: Liberals extend parental leave to 18 months, boost childcare funding

Generation Squeeze illustrated its argument by comparing spending on the NHS ($11.2 billion over 11 years) against dollars that have been earmarked for senior-focused programs like Old Age Security (OAS).

Spending on OAS, a program that hands monthly payments to Canadians over the age of 65 (with a clawback that kicks in at certain income levels), is set to grow by $3 billion this year, to $51.1 billion.

That spending is expected to ratchet up to $63.7 billion by 2021, an increase of $12.6 billion.

Financial news and insights delivered to your email every Saturday.

This is more than the entire value of the investments promised for the NHS over the 11 years of its life, Generation Squeeze noted. And it’s money that’s going to a richer class of Canadian.

Liberal Members of Parliament give Minister of Finance Bill Morneau a standing ovation as he delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Wednesday March 22, 2017.
Liberal Members of Parliament give Minister of Finance Bill Morneau a standing ovation as he delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Wednesday March 22, 2017. THE CANADIAN PRESS/Sean Kilpatrick

A BMO Economics study from 2014, the last year for which income data is available, showed that seniors are “four times richer than their parents were at the same age in the mid-1980s.”

Story continues below advertisement

“Many Canadians 65 years and older have benefited from strong equity, bond and real estate markets, rising participation in the workforce, and higher pension benefits,” the study said.

Kershaw also provided calculations showing that, when you adjust for full-time hours, the typical Canadian between the ages of 55 and 64 makes $54,080, more than the $47,600 made by people aged 25 to 34 years old.

READ MORE: The biggest losers: What’s missing from the 2017 federal budget?

Generation Squeeze also compared the budget’s spending on child care against moneys earmarked for the Canada Health Transfer (CHT), through which the federal government transfers health care money to the provinces.

The budget pledges $7 billion for child care over 10 years, money that will “support and create more high-quality, affordable child care spaces across the country.”

But the budget also earmarks $37.1 billion for the health transfer, and the government is expected to spend $43 billion on it in 2021 — representing an increase of $5.8 billion per year.

Almost 50 per cent of medical care spending goes to people who are aged 65 and older, Generation Squeeze said.

“The projected annual $5.8 billion increase to the CHT is almost as large as what the federal government will spend on child care over the next 10 years,” it noted.

Story continues below advertisement

Kershaw praised the creation of the NHS, and the spending on child care.

But he also wondered why the federal government is cutting measures like the public transit tax credit, which benefits young people who take the bus and the subway, but isn’t touching provisions like the age credit.

The transit credit, which will be eliminated as of June 30, allows Canadians to claim the cost of transit passes on their tax forms.

Meanwhile, the age credit hands out money to Canadians when they turn 65 years old and make less than $83,427 in net income.

READ MORE: Federal Budget 2017: How the budget will affect your pocketbook

“Why’d you cut that, but you left in place the age credit, which is way more money, and it comes on top of the OAS and the Canada Pension Plan and the medical care increases?” Kershaw asked.

“Can’t we find some way to reallocate some of these somewhat inefficient tax expenditures?”

Kershaw said that Canada needs strong retirement policy that lets people leave the workforce comfortably.

But Canadians also need to talk about how its policies affect future generations.

“If we can tolerate a $28 billion deficit but still only find investments for young people that are pretty much rounding errors, come on!” he said.

Story continues below advertisement

“That is pounding on a younger generation by not investing in them and then potentially leaving larger deficits.”

READ MORE: B.C. has Canada’s worst-performing economy for young people: Generation Squeeze

But seniors are nevertheless facing their own challenges, says CARP, an organization that advocates on behalf of aging Canadians.

“Canadian seniors face issues that are not faced, or not faced to the same extent, by other age cohorts,” Wanda Morris, CARP’s VP advocacy, said in an email provided to Global News.

“Over 600,000 seniors are living in poverty, including more than one in four single seniors, most of whom are women.”

Morris went on to say that seniors are having difficulty paying for their retirements when interests rates are low, and that older workers are facing “ageism in the workplace and difficulty obtaining meaningful employment.”

Age-based analysis

Academics differ on whether it makes sense to analyze federal budget spending based on age.

UBC economics Prof. Kevin Milligan thinks it’s useful because “there’s been an absolute sea change in the age structure of poverty in Canada over the past 40 years,” he told Global News.

“In the 1970s it was seniors who were most likely to be in poverty,” Milligan said.

Story continues below advertisement

“Today it’s most likely to be young people, specifically single parents. And I don’t think policy has adequately reflected those changes.”

Nevertheless, he thinks people should be careful about age-based analysis, in that certain needs, such as health and pensions, will be more concentrated among seniors than they will be among younger people.

READ MORE: Federal budget 2017: What does an 18-month parental leave mean for Canadian employers?

SFU Prof. J. Rhys Kesselman is less supportive of analyzing a federal budget based on age.

“I don’t think it makes a great deal of sense, rather than looking at the pressing needs of each group and they are different for people in their 20s and 30s than they are for people in their 50s and 70s,” he told Global News.

A Translink bus. Global News

Neither academic, however, feels it makes sense to compare the elimination of the transit tax credit against the retention of the age credit.

Story continues below advertisement

The transit tax credit was brought in with the intention of reducing congestion and greenhouse gases, and it was “clearly not meeting those targets,” Milligan said.

Kesselman was critical of the age credit — he wonders why “seniors warrant something that those who are not seniors don’t get” — but he said the two tax measures are “simply incomparable.”

“I would assess each on its own grounds,” he said.

Sponsored content