How governments have underinvested in younger people for 40 years
Over four decades, governments have prioritized investing in older rather than younger generations, while their focus on medical care and retirement has largely ignored social programs for young people.
This is what the team at the Gen Squeeze lab (University of BC) found as we examined trends in government spending over the past 40 years. (The study was recently published in the Canadian Journal of Public Health).
Our research shows:
Since 1976, governments increased per person spending on retirees 4 times faster than for younger Canadians. This is because Old Age Security and medical care for retirees received the largest investments.
Spending on younger Canadians hasn’t kept pace with economic growth. If it had, governments would be spending an additional $19 billion per year on programs for younger Canadians. That’s enough to build a national, universal child care program twice over. Or increase by nearly 50% spending on postsecondary education. Or accelerate a national housing strategy that closes the gap between rents, home prices and young people’s earnings.
The focus on medical care has crowded out spending on social programs for younger Canadians — even though evidence shows that social spending leads to better health over the long term. This is like spending all our money on firefighters instead of improving buildings to prevent fires in the first place.
- Government debts are now 3 times larger for Canadians under age 45, compared to four decades earlier. In 1976, public debts totalled $15,000 per person under 45; by 2016, this number had grown to $44,000. This is because governments haven’t collected enough revenue to cover increases in spending on retirement income security or medical care.
How did this happen?
The study documents two trends that resulted in anemic investments in younger Canadians.
First, government spending on Old Age Security and medical care for retirees increased $39 billion per year.
Second, governments increased general revenue by just $11 billion — barely one quarter of the additional investments they’ve made in the aging population. This means that Canadians under 45 now inherit government debts that tripled from $15,000 in 1976 to $44,000 today.
So far, politicians have avoided this kind of fiscal real talk. The recent federal election is a prime example. The two parties that won the most seats promised a minimum $17 billion annual increase for Old Age Security, an $8 billion annual increase for medical care, and large tax cuts.
By comparison, very little was committed to tackling housing affordability, the cost of child care, student fees and debt, etc.
It’s not a zero-sum game
New investments for younger generations can be funded from existing spending or new revenue in ways that don’t change how governments invest in older Canadians.
In the lead up to the 2020 federal budget, Canadians called on the government to include five key actions to help balance the scales. They include action to curb housing speculation, protect affordable rentals, set legally binding climate targets and make child care available to everyone.
We also called for more transparency about age trends in public finance. The federal government took a step in the right direction last year when it published its first generational analysis of a budget, but further progress is required. Publishing the breakdown of budgets by age is important because it can help show whether or not money is being spent fairly across all the generations.
Our goal is to ensure that governments budget fairly for older and younger generations alike. Everyone deserves to be able to live in the place they call home, without the chronic stress of unpaid bills or fear of a worsening climate catastrophe.
Let’s not repeat the mistakes of the past.
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