Our Goal: Wellbeing budgets that work for all generations
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Our wellbeing is not shaped by any single thing. It includes how healthy we are, whether (and how easily) we can access the goods and services we need, having enough time for work and family, our sense of belonging and support… and many other things. In public health, these many facets of wellbeing are referred to as ‘social determinants of health’.
Research about the social determinants of health encourages investment earlier in people’s lives, especially when generations are having their children, because human beings are especially sensitive to our environments when we are young. (For more info, see the Human Early Learning Partnership). Earlier investment is necessary to promote wellbeing and prevent illness, rather than spend more later on when people struggle in school, struggle to find work, or fall sick.
Canadians – and their governments – spend a lot of time and money trying to promote and sustain wellbeing for all. But for decades, governments have been slow to invest in areas that shape wellbeing for younger generations, like child care, postsecondary education, housing affordability, and climate action. As a result, the wellbeing of younger Canadians is being squeezed.
Gen Squeeze research shows:
- Since 1976, governments increased per person spending on retirees 4 times faster than for younger Canadians.
- Spending on younger Canadians hasn’t even kept pace with the economic growth Canada has enjoyed. If it had, we would be spending $19 billion more per year — enough to invest in key building blocks of wellbeing, like a $10 a day child care system; a 50% increase to postsecondary funding; and more in a single year than the National Housing Strategy currently invests over most of a decade.
- Ramping up medical care spending 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. Social spending is important for health, because health begins where we are born, grow, live, work and age – not in the doctor’s office or hospital.
- Government debts are now 3 times larger for Canadians under age 45, compared to four decades earlier. And this is before rapid debt increases that will be a legacy of the COVID-19 pandemic.
It doesn't have to be this way! It's time to recognize that promoting wellbeing requires promoting generational fairness now. That's why we put together this gameplan for fairer generational spending and revenue collection in Canada's budgets to promote wellbeing, from the early years onwards.
Check it out 👇👇👇
Table of contents
- Guiding principles
- Our basic plan
We're all in this together
The budgets that governments create affect all Canadians. Policy choices that emerge as the winners (and those that lose out) help to create the conditions that shape our wellbeing, for good or ill. For this reason, advancing "intergenerational solidarity" in public finance is critical – because we really are all in this together.
At its core, this principle means adapting to the needs of different age groups in our choices about where governments invest. We already do this in our own families: when our child or our grandparent needs our help, we act urgently. When decisions must be made about family finances, we try to make those choices in ways that fairly assess each member's ability to contribute, and that don't unfairly burden some family members over others. Our overarching goal is to set the entire family up for prosperity over the long-term – just as our overarching goal for Canada is to advance the wellbeing of all generations, now and in the future.
Our basic plan
Our plan has four key pillars. Two of them speak directly to how our governments invest taxpayer dollars. The other two speak directly to how governments raise money from taxpayers to pay for the services on which we all rely.
Pillar one — Invest fairly
Wellbeing budgets that work for all generations start with ensuring that we invest urgently for young and old alike, and that the resulting ratio in spending between age groups is fair. To assess this, Gen Squeeze urges governments to report the ratio of social spending on Canadians age 65+ relative to those under age 45. We recommend calculating this ratio by adding together all spending on old age security, the guaranteed income supplement for seniors, and medical care for seniors – and then comparing this amount to total spending on childcare, parental leave, grade school, postsecondary, family income supports, and medical care for younger Canadians. For more info about this methodology, see this study.
People may reasonably disagree about what constitutes a "fair balance" of spending between older and younger Canadians. As a starting point, let’s make clear that Gen Squeeze doesn’t believe that ‘fair’ means ‘same’. Our needs for health care and other supports grow as we age, so costs to public finances will also escalate, increasing the proportion of dollars spent on older Canadians. 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.
So while we don’t expect spending on young and old to be the same, we do worry that budgets will not be promoting wellbeing fairly for all generations, from the early years onwards, if spending on younger Canadians does not grow at least half as fast as spending on older Canadians.
It is clear that government budgets over the last four decades have fallen below this threshold, compromising the value of intergenerational solidarity. Why?
Research shows that governments have increased social spending for retirees 4 times faster than for Canadians under age 45. This disproportionate increase in spending on older Canadians then becomes the rationale for why there is little money left to invest in supports for younger people, like child care, affordable postsecondary education, fighting climate change, etc.
The lack of investment by governments in younger Canadians persists against the backdrop of deteriorating determinants of wellbeing for these age groups. Their earnings are stagnant or declining; costs for essentials like housing have dramatically increased; and they are faced with unmanageably high costs for services like child care, if they choose to have families.
At the same time, the pandemic has reignited a focus on gaps in our health system, particularly around Pharmacare and Eldercare. While evidence confirms that investments in these areas have potential to reduce costs and improve health outcomes, we need action to ensure that these major new public investments will be paid for in ways that are fair. (See below for further discussion under “Raise Revenue Fairly.”
Pillar two — Invest more in preventing illness
Evidence encourages governments to increase spending on illness prevention faster than spending on the medical care we need after we fall sick. Why? Because health doesn't start with medical care – it starts where we are born, grow, live, work and age. And these conditions are shaped by our earnings relative to major costs of living (like housing and child care), and by a sustainable climate. Research confirms that money spent on illness prevention yields far more return than money spent on medical care to treat people once they're already ill.
Canadian governments have failed to act on this evidence over the last four decades. Instead, medical care investments have been larger than spending increases on grade school, child care, parental leave, poverty reduction and post secondary, combined. For more info, see this study and this blog on why growing medical care spending may not always be a good thing.
Pillar three — Raise revenue fairly
As Canada’s population ages, there is growing demand to invest more in medical care, pharmacare and long-term care for the aging family members we love. As discussed above, a commitment to wellbeing budgets that work for all generations motivates making these improvements. But we must make these improvements in ways that ensure that these major new public investments will be paid for in ways that are fair between age groups and generations. We need to think seriously before we punt current bills down to future generations; and we must be careful not to use the proceeds of economic growth today disproportionately to meet the urgent needs of one age group without considering what is left over to address urgent needs for other age groups.
Canadians draw on Pharmacare and Eldercare primarily in our retirement years. However, today’s seniors will not have had any time to contribute to expansions of these new programs via taxes paid during their working years. Governments must be very careful to design the revenue plans so that they do not unfairly burden young Canadians – particularly at a time when they already are paying more of their tax dollars into medical care for an aging population. Political parties and governments need to be straight with Canadians about the cost of new programs, the tax revenue required to pay for them, and search for opportunities to ask members of the aging population who have the financial means to pay a fair share of the new costs. Campaigning for votes with the promise of lower taxes misleads Canadians about the balance between the services they want and need, and what is required to collectively pay for them. It also risks further eroding the government revenue that is left over to address key social priorities for younger Canadians.
As many in Canada aspire to improve medical care, elder care, pharmacare, child care, etc. in service of promoting well-being, we need action to rebalance taxes on income vs. wealth – with housing wealth being an especially important example. This shift is necessary to respond to the changing factors affecting financial wellbeing for Canadians.
Housing prices have skyrocketed across Canada. These price increases have created significant wealth windfalls for many people – particularly those who got into the housing market some decades ago, especially in bigger urban settings. This “lottery of timing” has seen older Canadians disproportionately benefit from much of the accumulation of extraordinary housing wealth.
Presently, Canada does very little to tax wealth – we rely heavily on taxing income. This approach advantages many older Canadians who have been lucky enough to benefit from the wealth generated by rising housing prices. And it penalizes younger Canadians, whose incomes are down thousands of dollars per year (after inflation) – and who are therefore struggling to get into the housing market at all.
It's time to rely less on taxing income, and rely more on taxing wealth, including housing wealth. This is even more pressing in the wake of the pandemic, as revenue needs grow in order to cover the cost of emergency benefits, and to #Build Back Better. Taxing high-value homes (say over $1 million dollars) creates new opportunities to raise billions of dollars in revenue for medical care, pharmacare, eldercare, etc. These investments will benefit the predominantly older homeowners who have accumulated so much housing wealth, while also adding a strong new policy signal to slow down the escalation of home prices and promote greater housing affordability for their kids and grandchildren. There is a real opportunity here for a win-win.
Pillar four — Leave fewer debts
If we raise revenue fairly relative to government spending, we will be able to leave fewer debts for younger Canadians and future generations.
We need action to stop growing per capita debt on young people (Canadians <45) outside of a recession. The amount of government debt left for each Canadian under 45 today is three times higher than it was when today's Baby Boomers started out as young adults. This growing debt has been driven in no small part by increased expenditures on retirement income and medical care for the aging population – especially as our political culture has simultaneously prioritized lower taxes. This approach to public finance leaves large government debts that are unfair to younger and future generations.
We also need action to ensure a high enough price on pollution. The escalating climate crisis is arguably the largest debt to be passed from one generation to the next in all of human history. The most recent science shows we have less than a decade to avoid irreversibly locking in this debt. We need governments to revoke the free pass we have given to polluters by allowing them not to pay for the environmental and health harms they are creating by ensuring we put a high enough price on carbon pollution. By "high enough" we mean a carbon price that increases at least $10/tonne per year and surpasses $50/tonne (noting some estimates suggest an eventual minimum of $100-$150/tonne).
Monitor and report on key patterns in public finance
Action on these four pillars will result in wellbeing budgets that work for all generations. To achieve this goal, governments also need to put in place three foundational building blocks.
Report annually on age trends: We need all governments to improve their approaches to monitoring the age distribution and intergenerational impacts of their spending decisions. Presently, no province undertakes this monitoring. The federal government has started, but needs to correct some serious flaws. For further information, see this blog.
Report annually on the social-to-medical spending ratio: A higher social-to-medical spending ratio (i.e. more spending on social issues relative to illness-treatment) associates with greater life expectancy and fewer potential years of lost life among OECD countries and across Canadian provinces. No provincial or federal government is monitoring whether their budget decisions align with this evidence. This needs to change.
Assign government point people: It is much more likely that the wellbeing needs of younger Canadians will be addressed as urgently as other groups come Budget time if each government has a Minister or Parliamentary Secretary specifically tasked with advancing intergenerational fairness in public finance.
Sources for the Wellbeing Budgets for All Generations Game Plan:
This game plan for intergenerational justice in public finance has been developed in the Generation Squeeze Lab at the University of British Columbia, with support from a Social Sciences and Humanities Research Council (SSHRC) grant titled “Budgeting for all generations.” The framework has been peer-reviewed, and published in the journals Intergenerational Justice Review, and the Canadian Journal of Public Health . Scholarship that contributed to the development of this framework was recognized by the BC Confederation of University Faculty Associations when it selected Dr. Kershaw for its distinguished academic honour of “Academic of the Year” in 2016.
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