Canadians can expect a tax hike as senior population grows: report

Canadian workers won’t be able to carry the financial burden of the country’s aging population, even if they stay in the workforce longer, according to a new report by the C.D. Howe institute.

The report says the next few decades will see taxes increase and budgets squeezed for demographically driven services such as health care, education and child benefits.

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Between 2016 and 2066, the report states that the total cost of these programs will rise from 15.5 per cent of Canada’s national GDP to 24.2 per cent, while the dollar amount of the unfunded liability for age-related social spending comes to $4.5 trillion.

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“If they don’t increase taxes then they’re going to have to reform the system to get a lot more efficiencies out of it,” Busby added.

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While the report recommends that the retirement age in Canada be raised to 67, Busby explains that this still won’t entirely cover the costs of the upcoming demographic challenge.

In Canada’s latest census from May 2017, Canadian seniors now slightly outnumber children under 14 with a population of 5.9 million. Statistics Canada attributes this to the post-war baby boom, low fertility rates and the fact that Canadians are living longer than ever.

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In a Senate committee meeting heard this past May, Sen. Sharon Carstairs made the case that Canada is “woefully unprepared” to deal with its aging demographic. Furthermore, a Canadian Medical Association report added that Canadians over 65 make up 15 per cent of the population, but consume approximately 45 per cent of health-care spending.

While the issues have been acknowledged, Busby explained that Canada remains unprepared.

“From a political perspective, from a four-year term for a government, can you ride this out and hopefully avoid the worst of these pressures in that four-year period? Well with a little boost in economic growth I think a lot of provinces can get away with it, and those governments can get away with it,” he said.

Tweet This Click to share quote on Twitter: "From a political perspective, from a four-year term for a government, can you ride this out and hopefully avoid the worst of these pressures in that four-year period? Well with a little boost in economic growth I think a lot of provinces can get away with it, and those governments can get away with it," he said.

In addition to raising the retirement age, the report recommends that the federal government end universal Old Age Security and instead target it to those who would struggle without it, “rather than to spread out OAS benefits across all population groups aged 65 or older.”

He emphasizes that this isn’t a problem that’s a few decades away; the early stages of the impending fiscal pressure have already begun, and they will continue to escalate.

“We’re just at sort of the early stages of it right now. The big upward pressure isn’t going to hit until most of the baby boomers are starting to leave the labour force, and when they start to hit ages that really put pressure on the healthcare system,” Busby said.