Gov’t spending should be fair to all age groups

Posted on February 13, 2015 in Equality Debates – life
February 12, 2015.   By Paul Kershaw, Troy Media

Kershaw is founder of Generation Squeeze (gensqueeze. ca), and a policy professor in the School of Population Health at UBC.

We’re approaching the season when governments release their budgets, so it’s important to know how much of their money goes to various age groups.

British Columbia will be the first to table its budget on Feb. 17, soon followed by the other provinces and Ottawa. In the wake of the premiers’ decision last summer to launch a task force on aging, the distribution of government spending by age will be a hot topic.

The problem is, Canadians have little information to inform this discussion. No government reports total social spending by age groups, nor does Statistics Canada.

With colleagues at UBC and Generation Squeeze, I have been crunching the numbers to fill the void. Our study, published this week, finds that governments combine to spend $33,000 to $40,000 per retiree, $14,000 to $15,000 per person age 45 to 54, and less than $12,000 per person under age 45.

Since budgets reflect who and what we value, a key question all Canadians should be asking is whether this distribution is fair. The answer depends on how different age groups are doing.

In previous research, we’ve shown that Canadians age 55-plus enjoy increases in household income that surpass those under 45, who are squeezed by lower earnings, less time and higher housing costs compared to a generation ago. High housing prices generate big wealth gains for those age 55-plus, while they weigh down those under 45 with large debts.

Retirees now report the lowest rates of low-income status of any age group, while more than a quarter of Canadian children start kindergarten vulnerable in ways that make them more likely to fail in school, commit crimes, and fall ill. Canadians in their 40s and younger also inherit larger government and environmental debts than their parents did a generation ago.

Such evidence suggests that younger generations need to become a greater priority for policy adaptation by our governments. When new investments are being made this budget season, younger Canadians should receive at least as much as retirees do.

Unfortunately, the new task force suggests that premiers are prioritizing population aging. This narrow focus risks overlooking generational equity.

Our study shows that governments spend $150 billion annually on medical care – nearly half of which goes to the 15 per cent of Canadians age 65-plus. The same age group receives another $40 billion in Old Age Security benefits. Canadians don’t pre-pay for medical care and OAS the way we do for our CPP benefits (which cost another $44 billion). Instead, medical care and OAS come from general taxes, dwarfing spending on families with kids.

Over the past decades, medical care and OAS were funded with tax rates that reflected that a relatively small population of retirees was being supported by a larger working age population. This resulted in big tax savings for those who enjoyed their prime earning years over this period.

Today, more retirees need to be supported by fewer working Canadians. Multiple studies doubt that we will be able to sustain the $33,000 to $40,000 we are spending per retiree at current tax rates as the population over age 65 grows.

Given this, younger Canadians must be forgiven for wondering whether today’s aging population will fully pay for the medical care and retirement income subsidies it intends to use. If not, will there be anything left to reduce the squeeze on younger generations, which face lower earnings, higher housing costs and a deteriorating environment?

Provincial and federal governments can and should budget equitably for aging parents and grandparents, as well as for their kids and grandchildren. Fortunately, Canadians in their 40s and under are getting better organized to make this happen.

Under the banner of Generation Squeeze, we’re squeezing back by building Canada’s most overdue lobby. It will match the good work of the Canadian Association of Retired Persons, which has lobbied on behalf of Canadians 50-plus for decades.

So long as older Canadians have a strong lobby, younger Canadians deserve one too, so that provincial and federal budgets work for all generations.

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