In fact, annual spending on retirees will grow by approximately $12 billion annually since the Conservatives were first elected in 2011 – nearly six times more than spending increases for Canadians under age 45.
Canadians don’t hear about this generational inequity in the budget speech, or even from much of the media covering it. What we hear about is what’s ‘new’ – the latest mini tax credit, promises of income splitting in the future, and small spending commitments totaled up over several years to dazzle us with numbers that sound big. This means many will sweat the small stuff, and ignore what is happening with the fundamentals like Old Age Security, Health Care and EI that really drive how Ottawa uses our tax dollars.
We didn’t need Minister Flaherty’s Budget speech to know these fundamentals – they’re already in previous budgets. This may risk making them seem ‘less newsworthy’, but in fact such a view is akin to missing the forest for the trees. The spending trends reflected in the fundamentals of Budget 2014 shine a light on a troubling pattern. The Federal government is continuing to prioritize our aging population over adapting to new problems facing younger Canada.
Here’s what we know about how the federal government plans to spend $132 billion in 2016/17:
- Elderly Benefits like Old Age Security and the Guaranteed Income Supplement will rise to around $49 billion a year, up $8 billion from 2011/12 after adjusting for inflation.
- The Canada Health Transfer will rise to $36 billion a year, up $4 billion. Nearly half of medical care spending goes to the 15 per cent of Canadians over age 65.
- Employment Insurance for the working age population will stay relatively static at around $20 billion a year.
- Benefits for families with children will fall to around $13.7 billion a year, a drop of around 4% per person under age 45.
- The Canada Social Transfer, which represents federal contributions to education and social services, will stay relatively static around $13 billion a year.
These budget fundamentals illuminate major contributions by Ottawa to what the Generation Squeeze campaign calls Canada’s generational spending gap. All levels of Canadian government combine to spend around $45,000 per retiree each year, compared to approximately $12,000 per person under age 45.
The high level of spending per retiree is not the problem. The Canada Public Pension Plan, Old Age Security and Medical Care have successfully reduced the economic pressures facing millions of seniors today compared to the past. Now poverty is lower for seniors than any other age group, which is a policy success of which we should be proud.
The problem is that Ottawa adds nearly $12 billion in new annual spending to maintain the $45,000 allocated per person over 65 as more Canadians retire, while going on to say we can’t afford to address new challenges facing younger generations.
While today’s high housing prices mean more wealth for those who bought homes decades ago, they are bad for their kids and grandchildren. High home prices squeeze generations under age 45 with crushing debt, which they must pay with wages that have fallen thousands of dollars a year compared to a generation ago, and in jobs that rarely contribute pensions.
Canadians under 45 can’t work their way out of this time and money squeeze without giving up something fundamental. They are increasingly forced to choose between coping with the squeeze by studying and working more at the expense of having the family they want. Or they have the family they want, but at the expense of coping with the squeeze by patching together a financial foundation that depends on more time in the labour market.
Given that younger Canadians are squeezed by lower wages, higher costs, less time and a deteriorating environment, spending just $12,000 on benefits and services per person under age 45 is out of balance with allocating around $45,000 per person over 65. It’s time for Canada to restock the cupboard with investments that adapt to new challenges facing younger generations, or to explain why spending on younger citizens is so much less important than spending on retirees.
Paul Kershaw is a Policy Professor at the University of BC and Founder of Generation Squeeze, a campaign that is building a Canada that works for ALL generations.