Advertisement

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

Elderly couple on deckchairs with pet dog look out to sea from Shingle Stone Beach, Isle of Wight.
Elderly couple on deckchairs with pet dog look out to sea from Shingle Stone Beach, Isle of Wight. (Photo by In Pictures Ltd./Corbis via Getty Images)

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.

WATCH: Now more seniors than kids in Canada

Now more seniors than kids in Canada
Now more seniors than kids in Canada
“It’s something to be concerned about because if these programs continue to eat up a larger share of overall income in society, the prospects of having to significantly raise tax revenues in the future [are] altogether possible and feasible,” explained Colin Busby, director of research at the C.D. Howe institute.

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.

WATCH: Trump goes off in Phoenix and should OAS apply to all seniors?

Trump goes off in Phoenix and should OAS apply to all seniors?
Trump goes off in Phoenix and should OAS apply to all seniors?

“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.

Story continues below advertisement

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.

WATCH: Manitoba has more children than seniors: Stats Can

Manitoba has more children than seniors: Stats Can
Manitoba has more children than seniors: Stats Can

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.

READ MORE: Canada ‘woefully unprepared’ to deal with senior population surge, Senate committee hears

“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
Story continues below advertisement

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.”

READ MORE: Census 2016: For the 1st time, more seniors than children living in Canada

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.