Commonwealth_ Canada is undergoing a profound demographic shift, with major economic consequences. In this federal budget, much emphasis is placed on generational investments, yet little on one of the most pressing generational issues – a rapidly ageing population. This budget is a missed opportunity to deal with one of the country’s most critical challenges.
There is growing consciousness in the public sphere of several challenges that Canada faces. Among other things, these include geopolitical threats, economic inequality, and a growing inequality between wealth and younger and older generations of Canadians. While the federal government’s promise to run a significant deficit will improve its economic and military sovereignty, the burden of repayment lies most heavily with future generations.
Instead of taking any concrete action on intergenerational fairness, the federal budget avoids the issue altogether. This will only make a difficult problem worse. Seniors are more frequent users of healthcare services than younger adults – especially as they reach their 80s and 90s. Population ageing alone may boost Canada’s shared medical tab by more than $2 trillion by mid-century. At the same time, the number of workers available for each retiree continues to shrink, placing growing fiscal stress on a smaller workforce. Old Age Security payments are forecast to increase from $76 billion in 2023 to $104 billion by 2029—a nearly 37 percent increase that outpaces almost every other area of government spending. Healthcare spending is growing rapidly, too, and provincial systems are struggling to keep up with demand.
In provinces like Ontario and Quebec, costs related to ageing add more than $21 billion yearly, turning potential surpluses into deficits. Such burgeoning demand for healthcare services significantly raises the financial squeeze in systems across the country, irrespective of who the political lead is. It also provides cover for politicians who preach greater private-sector involvement in healthcare. These pressures are unlikely to diminish, given the irreversible nature of demographic change.
Canada does have choices. Lowering the threshold at which Old Age Security payments are clawed back would free up almost $8 billion a year for the federal treasury that could be better spent on seniors living in poverty or on programmes that benefit younger generations. Abolishing the Age and Pension Income Tax Credits, which together cost about $7 billion a year and do nothing to help low-income seniors, would be another step toward fiscal sustainability. These measures would go some way toward levelling the financial burden between generations.
Such solutions, however, are politically sensitive. Seniors are a powerful demographic when it comes to voting, and it seems the government is trying to avoid reforming anything that might alienate them. It echoes previous tactics of delaying pension reform by passing the cost burden down to younger Canadians. Millennials and Generation Z are being called upon to pay considerably more in taxes to cover health care compared to what was required of preceding generations, on top of struggling with economic insecurity, especially when it comes to housing. Where the federal government has spoken of bold action, reforming Old Age Security toward a more equitable fiscal framework for young Canadians does not appear to be part of that. Wealthier seniors could be asked to contribute more to alleviate the financial burden resulting from the policies and demographic trends their generation created. Without such measures, the current trajectory ensures intergenerational inequity will persist.
Young Canadians know that the result is an increasing imbalance, one for which they will ultimately bear the consequences. Ignoring this demographic and fiscal reality merely delays a problem; it sustains inequity. If nothing is done in the way of policy changes, there may well come a time when younger generations will demand more in the way of accountability and fairness from a system that has long postponed undesirable choices. Canada stands at a demographic and fiscal reckoning, and the need for meaningful reform has never been more urgent.
