Are the parties protecting retiree's investments in a fair way?

Political parties are making significant spending promises this election, proposing to ramp up existing investments in medical care and public pensions, and to make new investments in things like long-term care, pharmacare, and child care.

While there are important differences in the approaches and investment levels proposed by the Conservatives, Liberals, NDP and Greens – which you can read about in the Gen Squeeze Voter’s Guide – all parties share two BIG things in common:

  1. They all accelerate spending for Canadians age 65+ far faster than spending for Canadians under age 45 (the generations in their prime child rearing years).

  2. They all expect younger Canadians to pick up much of the bill for new investments – because they are not politically brave enough to ask older Canadians (who have more wealth than any other age group) to pay a fair share for the improved services and benefits they want and deserve.

Accelerating spending for Canadian retirees

The parties accelerate spending on retirees faster than spending on younger Canadians. The NDP, Liberals, and Conservatives all propose to increase annual investments for every senior by at least $3,000 by the end of the next mandate – while planning to spend less than $1,000 for every person under age 45. The Greens fall in this pattern too, but as they don’t yet offer budgets for their promises, it’s more challenging to provide a specific number.

The NDP propose the largest age disparity: over $4,000 in new money per person age 65+ compared to $900 per person under age 45. The Conservative platform promises the lowest level of new spending for younger Canadians: just $250 per person under age 45 compared to $3,000 per person age 65+. Conservatives will invest less in younger Canadians primarily because they plan to cut the funding proposed by the other parties to implement $10 a day child care – an important move that would ease the squeeze on affordability for families with kids. Proposing Liberal spending falls in between the NDP and Conservatives: $3,300 per senior compared to $700 per person under age 45.

The largest chunk of spending for seniors is the result of all parties committing to hold the line on increases to Old Age Security (OAS) already included in the 2021 Federal Budget. These baked-in increases will grow annual spending on OAS by $18.5 billion – an amount more than double the annual investment promised for the creation of a universal, $10 a day child care system. When combined with a planned $4.2 billion increase in medical care for the aging population, Canada’s current trajectory is to grow annual spending for Canadians age 65+ by $22.9 billion.

By contrast, the 2021 Budget only plans to increase annual spending on priority areas for Canadians under age 45 by $12.8 billion. Key investments that comprise this amount are child care at $8.4 billion, medical care at $2.5 billion, and very minor increases in funding for postsecondary and family income supports.

The bottom line? The parties start from a budget that already accelerates funding for older Canadians far faster than for younger citizens – and none are promising to changing this overall pattern, although some would grow the disparity more than others.

It’s important to be clear up front that Gen Squeeze does not understand ‘fair’ investments for young and old to mean ‘the same’ investments for each age group. There’s no doubt that our medical care needs increase as we age, and that income supports become more important in retirement years. This is to be expected, and Gen Squeeze wants our aging parents and grandparents to continue to have access to the programs that support them.

While spending on young and old will never be the same, Canadians should be worried that platform promises don’t promote wellbeing with the same urgency for all generations, from the early years onwards.

Asking seniors to pay a fair share

As Canada’s population ages, there is growing demand to invest more in services like medical care, pharmacare, and long-term care, to better meet the needs of the aging family members we love. In the wake of key gaps highlighted by the COVID-19 pandemic, the NDP, Greens and Liberals all propose new investments in long-term care and/or pharmacare in Election 2021.

There is good reason to make these investments, given what the evidence tells us about potential positive impacts on health, access, and equality. But even good programs have to be paid for. We can’t simply demand more – and expect not to pay for it. Nor can we leave the bill for future generations, especially when the data make clear that younger Canadians are already shouldering a higher tax burden to cover medical care costs for those aged 65+, and when costs of living (especially housing) continue to escalate well beyond increases in earnings.

Some retirees are likely to point out that they paid taxes toward medical care and retirement security throughout their working lives. This is true. They worked hard and paid taxes.

But what political parties repeatedly fail to point out is that, when today’s aging population started out as young adults decades ago, there were 7 workers for every senior. Now there are fewer than 4 workers. So the taxes today’s retirees paid for medical care and OAS throughout their working lives were not at levels that cover their own usage of these programs in retirement. If we don’t re-design revenue strategies to address this concern, many of the bills for medical and retirement income spending will continue to be kicked down the road, for the kids and grandkids of today’s seniors.

We are already seeing this risk emerge in the current election. No party promises to balance government books – even 4 years from now, when we don’t expect to be in a recession! The parties don’t appear to be concerned about the prospect of heaping more debt on to younger Canadians, despite the fact that government debts were already 3 times larger for Canadians under age 45 before the pandemic started – compared to when today’s aging population started out as young adults.

Even though all parties anticipate deficits for many years to come, it’s not because we will be making transformational investments to fight climate change, or address housing unaffordability – issues that are squeezing younger generations. Instead, forecasted deficits are consistently similar in size to the increased investment parties propose for OAS and medical care for the aging population. 

Why do political parties think they can only win older votes if they don’t ask older Canadians (who have more wealth than any other age group) to pay a fair share for the improved services and benefits they want?

Clearly, today’s seniors won’t have had a chance to pre-pay for any increased pharmacare or long-term care benefits they now wish to use. So how do we invite older Canadians to pay a fair share of these new costs? One option is to shift our approach to taxation, to include more taxes on wealth, rather than just focusing on income. The skyrocketing home prices that are crushing affordability for new entrants to the housing market have disproportionately benefitted older Canadians, who have gained significant wealth windfalls. Statistics Canada confirms that Canadians over age 55 have gained two-thirds of the $3.1 trillion increase in the value of principal residences since 1976.

No party has proposed rethinking the way in which we tax housing wealth. The Conservatives pre-emptively reject the possibility of reviewing how tax policy privileges gains in housing wealth over employment earnings – even when Gen Squeeze proposes focusing only on the top 9% of most valuable homes in the country.  The NDP feature a commitment to make “the wealthiest pay their share” via new tax measures, but the amount of revenue they propose to raise falls well short of spending promises – and the party does not focus on housing wealth.

It’s time to discuss how the housing wealth held by many older Canadians could contribute to paying for the improvements to health care they understandably want and deserve. Our political leaders need to ask Canadians to wrestle with this issue. An important first step is making clear in election platforms how – and by whom – promises will be paid for, and whether there is a fair distribution across generations.

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