Canada’s aging workforce is set to tighten public program budgets as more baby boomers approach retirement, and governments should be doing more to reduce the inevitable relentless fiscal pressure.
Canada’s younger workers will be faced with a malocchio of slower-growing government revenues combined with increased pressure on social programs, stemming from the aging population, C.D. Howe Institute associate director of research Colin Busby said.
“You’ve got increased pressures for a number of demographics and social programs, predominantly health care,” Busby, a co-author of the report, told sources.
Busby said Atlantic provinces, where governments are already feeling the pinch of an older population, have already started to make proactive changes.
“I think that same level of understanding and commitment doesn’t really exist elsewhere in Canada,” he said.
One example of possible healthcare policy change is testing an increase in at-home care, as opposed to institutional care, Busby said.
“That’s going to be a very important part of how we figure out who should pay for what, that we will need to have uncomfortable discussions that we haven’t had, particularly when it comes to those sort of old-age components of healthcare.”
Source report also points to the federal Old Age Security benefit as a tool the government can use to normalize an older retirement age. Although tax increases are inevitable for the future working population, if the retirement age went from 65 to 67, it would reduce that increase.
Busby said Canada’s federal government shouldn’t be encouraging workers to retire at a younger age.
“So there has to be a bit of working together between the federal government and the provinces to really look big picture at this intergenerational challenge and try to take it head on,” he said.
Report analysis last year that showed Prime Minister Justin Trudeau’s lowering of the Old Age Security eligibility age from 67 to 65 will end up costing millennials in additional taxes.
The Canada Pension Plan is an example of how programs can be fixed to make them sustainable. The government raised CPP contribution rates from 6 per cent of pensionable earnings in 1996 to 9.9 per cent in 2003, and created the Canada Pension Plan Investment Board to manage the money.
Sources report, in terms of financing public programs like health care, provincial and federal governments haven’t dealt with the effects of the aging workforce because it’s a “slow-moving problem.”