Parliamentary budget officer calls Canada’s population an age-old problem

Originally published in the Ottawa Citizen on May 18th, 2011. To go to the Ottawa Citizen website please click here

Now that the Conservatives have their majority, they need to figure out how Canada is going to cope with an aging population before it’s too late to avoid serious economic harm, says the country’s fiscal watchdog.

Parliamentary Budget Officer Kevin Page says the government has so far failed to confront the enormous health-care, pension and productivity implications that are no longer a long-term discussion but an immediate issue.

“You have to deal with these big, structural issues in a timely way, otherwise the bills will grow rapidly the longer you delay action,” he said in an interview. “This is not a long, long-term issue. We’re not talking about something that’s decades out.”

Briefing notes prepared for Human Resources and Skills Development Canada (HRSDC) and obtained by Postmedia News depict a perfect demographic storm on the horizon, with aging-related needs and spending swelling just as economic productivity and government revenues are sagging.

Canada’s “dependency ratio” — the proportion of retirees to taxpaying workers who can support them — is shifting drastically, one report says, from 4.7 people aged 20 to 64 for every senior in 2009 to a projected 2.5 workers per retiree in 2050.

The documents include information gleaned from National Seniors Council roundtables conducted across the country last year, showing that most employers say they’re worried about their aging workforces, but just 11 per cent actively focus on attracting and recruiting seniors. Canada averaged four per cent yearly productivity gains until 1973, another report says, but with an aging workforce, that sagged to 1.2 per cent a year between 1976 and 2000 and then “an anemic 0.7 per cent” between 2000 and 2008.

The reports include one PBO projection suggesting that Canada’s debt-to-GDP ratio could skyrocket to 100 per cent by 2050 without a fiscal overhaul to address the country’s greying demographics. The government’s 2010 budget, meanwhile, projected that Canada’s debt-to-GDP ratio would “peak” at 35.4 per cent in 2010-11 and fall to 31.9 per cent by 2014-15.

“We’ve been talking about it tangentially — this government has, anyway — but to actually put the analysis down on this is what the demographics look like over the longer term, here’s population growth and here’s what it means for the labour market, budgetary revenues, health expenditures, Old Age Security expenditures; they have not done that,” Page says. “We’ve not had that boldfaced conversation yet that we need to.”

The PBO produced a detailed report on the federal financial implications of population aging last year and they will release a new report on the provincial impacts later this spring or early in the fall, Page said.

In his new cabinet unveiled Wednesday, Prime Minister Stephen Harper appointed low-profile Vancouver-area MP Alice Wong minister of state for seniors. Wong, 62, replaces the more well-known Toronto-area MP Julian Fantino, who was promoted to associate minister of national defence.

CARP, Canada’s senior advocacy group, wasted no time in congratulating Wong and calling her to task in an open letter.