Intergenerational Injustice in Canadian Public Finance
Like many countries, Canada has an aging population. While we have a duty to ensure our aging parents and grandparents have a dignified, healthy, and financially secure retirement, there is a parallel duty to ensure their children and grandchildren can thrive. But how have governments adapted their budgets to fulfil both responsibilities?
The findings are troubling. They reveal Canadian governments have not committed to intergenerational justice in their budget decisions over the past four decades: older generations were prioritized, as younger Canadians fell further and further behind.
There are serious risks that upcoming federal and provincial budgets will worsen the problem. All levels of government are more likely to overlook intergenerational unfairness if we don’t provide data to inform our elected officials.
We need governments to budget for all ages, and report on revenue and spending trends. So we developed this peer-reviewed methdology for governments to adapt for their own budgeting and reporting purposes. We're sharing the methodology directly with federal and provincial governments, and offering our expertise to help their Ministries of Finance implement it.
- It is possible for provincial and federal governments to monitor and report routinely the age patterns in public finance. So governments should get on with this work.
- Governments collected an extra $11 billion in taxes as of 2016 compared to 1976, but spent an additional $38 billion on medical care for Canadians age 65+, leaving a $27 billion tax-collection gap. The shortfall was covered by spending ~$18 billion less on programs for younger Canadians, and by growing government debts.
- When analyzing spending per person, government investment has grown faster for those age 65+. Governments increased annual per person spending for seniors 4.2 times faster since 1976 than for those under the age of 45.
- Social spending on younger Canadians hasn’t kept pace with economic growth. Since 1976, spending per person age 65+ grew 6% faster than economic growth. By contrast, spending per person under age 45 grew 29% slower than economic growth, or $1,052 less per person under age 45. This equals $21.3 billion less in annual spending when multiplied by all the people under age 45 – a sum that represents enough to fund, for example, a high-quality, universal childcare programme twice over, or nearly a 50% increase to the post-secondary budget.
- Young adults are expected to pay 22-62 per cent more in taxes for medical care and old age security for today’s aging population, in comparison with taxes paid for medical care by today's aging population when they were young.
Young Canadians now inherit larger public debts. Government debt has grown from $15,000 per person under 45 in 1976 to over $44,000 today. Today’s seniors reduced their ecological footprint at just one-third of the rate that young adults must now do given the risks of climate change.
- Prioritizing larger spending increases for retirees and asking more in taxes for such programs from today’s younger Canadians may be appropriate if the latter have a greater ability to pay compared to when today’s aging population started out as young adults. However, data reveal that the contemporary aging population has a greater ability to pay than generations immediately before and after them. Seniors today have more prosperity on average than did elderly Canadians four decades earlier. They have lower levels of poverty, higher median earnings, and more wealth in their homes. Older Canadians today also generally encountered more favourable socioeconomic circumstances as younger adults in 1976 than do younger Canadians now. They started with higher median earnings, which could stretch further when paying for rent, saving for a down payment, and paying a mortgage.
How you can use this report:
- Share the report with your elected officials: if they understand the problem, they’ll be more willing to address it.
- Share the report with your friends: if they understand the problem, they’ll be more willing to vote in elections, engage in the issue, and open dialogue with peers.
- Share the report with your aging family members: because they believe in fairness, too, and always want what’s best for you.