Our aging population is a manageable challenge
We often hear doom and gloom scenarios in Canada when it comes to our nation’s aging population.
Whether we’re talking about longer health care waiting lists due to a wave of baby boomers requiring more services or significant tax increases to pay for the system, governments currently have us heading towards troubled waters.
However, the good news is that it actually isn’t that hard for governments to address the situation without negatively impacting the public. It just takes a bit of political courage.
First, note that a recent report by the federal government’s Office of the Parliamentary Budget Office (PBO) concluded for the sixth year in a row that provincial governments continue to be woefully unprepared for Canada’s aging population.
The PBO’s 2016 Fiscal Sustainability Report noted that due to our nation’s aging population provincial government expenditures are expected to exceed revenues by $30 billion annually in the years ahead.
To put $30 billion in perspective, the federal government’s Goods and Services Tax (GST) will bring in about $34 billion in revenue this year. Yes, we’re talking about a fair amount of money.
To be clear, older Canadians should not be ‘blamed’ for this financial challenge. They’ve paid their share of taxes over their lifetime. The problem is governments haven’t planned properly. In fact, Manning Centre research shows no provincial government in the country regularly forecasts the financial impact of an aging population.
Fortunately, there’s an alternative to simply raising taxes to address the funding gap.
First, note that total provincial government spending was approximately $380 billion in 2015-16. Thus, $30 billion represents less than 10%. Is it really a stretch to expect provincial governments to tighten their belts and improve their operations by 10% or so? Hardly. For decades, Canadian taxpayers have been inundated with news stories about governments misusing public funds on questionable activities, cost overruns and exorbitant salaries to name a few.
Consider one area of government spending alone – salaries and wages. In 2015, the Canadian Federation of Independent Business calculated provincial government employees receive approximately 22% more in compensation than private sector employees doing similar work (the calculation includes government employee pensions.) How is that fair?
While few Canadian politicians seem to have the courage to stand up to powerful government employee unions and impose pay cuts on current employees, what if our politicians targeted future employees?
As waves of government employees retire in the years ahead, they could be replaced with employees who make, say, 10% less; bringing compensation levels more inline with people in the private sector. Given that provincial salaries and wages alone made up approximately $192 billion in 2011, a 10% trim in pay could save, over time, upwards of $20 billion annually.
If we turn to the federal government’s finances, the PBO’s report notes that Ottawa can expect an annual surplus position of approximately $19 billion in the years ahead. It would be foolhardy to imagine Ottawa simply bailing out provincial governments for not planning, but one could make an argument for some of these dollars to flow to provincial governments.
Either way, hopefully you can see that an aging population is a manageable challenge. We just need politicians to focus more on the problem and on spending restraint – something they should have done ages ago.
- Colin Craig works for the Manning Centre and is the author of The Government Wears Prada
This column was published by Sun newspapers (Ottawa Sun, Toronto Sun, Winnipeg Sun, Edmonton Sun and Calgary Sun) on July 29, 2016