The following is submitted by QUOI Media and written by Sasha van Katwyk and Michael Wolfson
Canada’s aging population has become a lightning rod for generational anxiety. Commentators increasingly warn that Baby Boomers are “hoarding” wealth, draining public coffers through pensions and health care while leaving younger generations to foot the bill. This framing is emotionally resonant, and deeply misleading.
The average boomer does indeed hold a sizeable share of household wealth while being a net recipient of public pensions and publicly funded health care. But this is not the result of an intergenerational raid on public resources. It is the outcome of decades of asset accumulation by households and sustained taxation to finance a robust welfare state.
Boomers are now beneficiaries of the social protection systems they built and paid for. That is not a failure of fairness; it is the system working as designed.
Over the life course, Canadians move predictably between being net recipients and net contributors to public programs. We receive publicly funded health care at birth, education in youth, and pensions and health care in old age.
During our working years, we fund these services – both for others and, implicitly, for our future selves. This is explicit in pension contributions, and implicit in income and consumption taxes.
From this lifetime perspective, most Canadians are net beneficiaries of the welfare state. Based on our analysis of current patterns, roughly the bottom 60 to 70 per cent of the population by income receive more in public pensions and health care over their lifetimes than they pay in taxes. It is primarily the top decile of earners who contribute substantially more than they receive.
Wealth is mostly accrued over a lifetime so generational narratives that paint boomers as identically extractive obscure far more consequential wealth inequalities within generations.
This matters because focusing narrowly on age distracts from the real problem Canada faces. While claims that boomers are “ripping off” younger generations are overstated, public concern about the long-run fiscal implications of population aging is, if anything, not serious enough.
Official projections, including those from the Parliamentary Budget Officer, suggest that Canada’s public finances are broadly sustainable. But these conclusions rely on the unrealistic assumption that current price indexing pensions will remain in place unchanged for decades to come, increasing poverty among the elderly.
Given the current trends of wealth distribution and growing affordability crises, we may need to brace for a very different picture. Costs associated with public pensions and health care are projected to outpace revenue growth by tens of billions of dollars over the next three decades.
This is not a crisis today, but it will become one if ignored. Without growing deficits, there are only two broad responses: raise taxes or cut spending.
There are many worthy options for gradual tax increases. Our analysis, published in the journal, Canadian Public Policy, explores cutting spending in the two largest age-related publicly funded programs: pensions and health care.
On pensions, one reform is gradually increasing the normal eligibility age for Old Age Security and the Canada and Quebec Pension Plans from 65 to 70, while maintaining – and strengthening – the Guaranteed Income Supplement for low-income seniors. Done properly, this could protect the most vulnerable while reflecting increased life expectancy. The Harper government attempted this before, unsuccessfully, in part by failing to increase GIS.
Importantly, though, we find that this pension reform addresses less than half the projected fiscal gap. Health care, by contrast, is where the real leverage lies.
Our projections show that gradually reducing real per capita health care spending – by roughly 0.9 per cent per year over three decades – would largely offset the fiscal pressures of population aging. That may sound implausible in a system already strained by family doctor shortages and emergency room backlogs. But these pressures are symptoms of long-standing and broader inefficiencies.
There’s a library’s worth of research pointing to concrete opportunities for improving cost-effectiveness and saving billions: expanding the role of nurse practitioners, implementing comprehensive pharmacare to reduce drug costs, deprescribing unnecessary medications, scaling telemedicine, fully adopting interoperable electronic health records, reducing inappropriate hospital procedures, and addressing stark regional variations in care. While saving billions, these deeper reforms would, if anything, improve access and quality.
One exception is long-term care, where spending should rise, not fall. Doubling funding in this area is long overdue and would ease pressure on hospitals by preventing the warehousing of seniors in acute care beds.
Taken together, these reforms show that Canada’s challenge is not that older generations unfairly benefited from the welfare state. It is that subsequent generations are inheriting a system weakened by shorter term patchwork changes that fail to address more fundamental problems.
The welfare state has not failed the young. Neglecting it will.
Sasha van Katwyk is a managing principal and senior health economist at the Institute of Health Economics.(Views expressed are his own).
Michael Wolfson is a former assistant chief statistician at Statistics Canada and current member of the University of Ottawa’s Centre for Health Law, Policy and Ethics.
————————————————————-