Albas: Aging population places pressure on services

Within the context of the debate about the future direction of Old Age Security, changes are occurring within Canada’s population.

Within the context of the debate about the future direction of Old Age Security, changes are occurring within Canada’s population—by 2030, our population of citizens who are over 65 will double.

The fact that the number of citizens over 65 will double, from 4.7 million today to 9.3 million, by 2030 is not in itself an alarming concern.

However, what must also be considered is the other important changes occurring to Canadian demographics.

In 1975, there was a ratio of seven working taxpayers for every citizen over 65. Today, that ratio has been reduced to four taxpayers per retired senior.

And by 2030, that ratio will be further reduced to two working taxpayers per retired senior.

So why does this matter?

Critics have suggested that these pending changes to our population should be ignored, as they are of no significance.

I respectfully disagree.

Having researched this subject over recent weeks, I have come to believe there is a legitimate cause for concern.

Critics have suggested that the future increase in OAS spending, in spite of consuming a larger share of our national GDP, is “manageable” and is really an issue of spending priorities.

While this may sound like a reasonable claim, it is also very important to understand where this money will ultimately come from.

Many citizens may be unaware of this fact—the single largest source of revenue for the federal government is from income tax.

Nearly 50 per cent of all federal revenue, a total of $113.5 billion, comes off the top of your paycheque.

By comparison, the GST as a revenue source provides just over 10 per cent of government funding at $28.4 billion.

From a revenue perspective, the fact that income tax contributes almost half of all federal government funding as the single largest revenue source is significant.

When one considers that the ratio of working taxpayers to citizens over 65 has gone from 7:1 in 1975 and will further decline to 2:1 by the year 2030, it is clear to me that not taking action today will create problems in the future.

While I’m not suggesting that there is a crisis, with income taxes comprising nearly half of all government revenues combined with fewer working taxpayers in the years ahead, that means there will be fewer people trying to pay an increasingly larger bill.

On the spending side, it must also be noted that OAS is only one of many benefits provided under Canada’s vast social safety net.

Total current spending on support for the elderly is roughly 13 per cent of the entire federal budget at $36.6 billion.

The child benefit program, by comparison, is less than half of this amount at $12.7 billion while health transfers to the provinces are currently $26 billion.

It should also be noted that currently Canada is paying $30.9 billion a year in debt serving costs.

I have in the past pointed to the challenges that other countries, most notably Greece, are facing from the inability to take proactive actions and maintain public spending within what taxpayers can afford. Even France, one of the most prominent countries in the European Union, faces challenges since its credit rating was recently downgraded, placing more debt pressure on its citizens.

Generally speaking, these problems are not created overnight. They tend to be decades in the making. Canada is a country that was build on hard work and if we are to keep our country strong as a nation, we must accept the importance of taking proactive actions to ensure that we have the resources needed to provide the services that Canadians can depend upon and that taxpayers can afford.