A codger’s comeback: Cutting OAS for boomers won’t fix the problems faced by younger generations

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Two important things happened to me this month. I received my first Old Age Security payment, and I discovered I was a public enemy.

I’m not exaggerating the second point. In recent weeks, the chattering classes appear to have decided to turn their fire on seniors. You can’t click on a Canadian news site without discovering another opinion merchant or think-tank entrepreneur explaining why oldsters are an unconscionable drain on the nation’s finances.

The common complaint is that much of the grey-haired set got rich on the fat economy of years past. Apparently, those of us who are relatively well off are now leeching off our younger, poorer compatriots by siphoning off vast amounts of undeserved OAS payments.

This comes as a shock. I had no idea I was such a blight on society. You may find this funny, but for most of my working life I was under the distinct impression that I was just getting by.

Here’s an even funnier thing, though: The more I examine the numbers, the less convinced I am of the merits of the critics’ case. So let me offer up a codger’s comeback.

Opinion: The high cost of pitting generations against each other

My irritation begins with the way the issue is presented. The ballooning bill for OAS is often depicted as an emergency, a surprise, a bit like a rogue comet that has suddenly appeared out of the reaches of deep space, rocketing toward Earth.

But it’s not like that at all. OAS expenses are mounting for the simple reason that there are a lot of boomers and we are all retiring at more or less the same time.

Actuaries have seen this shift coming for decades and they have fretted about it for just as long. (This won’t surprise you, if you know any actuaries.) They regularly review OAS and they have long factored in the impact of an aging population.

The most recent actuarial review, published in 2023, concluded that the greying of the boomers will boost the cost of OAS from 2.68 per cent of gross domestic product in 2023 to – are you ready? – 3.0 per cent of GDP by the early 2030s, before subsiding to around 2.64 per cent by 2060.

So much for any impending emergency. Set against the backdrop of the broad economy, the impact of aging boomers on OAS is, literally, a rounding error. Even the Trudeau-era enhancements to OAS at age 75 don’t change the fundamental reality that OAS is a thoroughly vetted program that has long been understood to be within Ottawa’s financial capacity.

Opinion: When it comes to OAS reform, are we asking the right questions?

Let’s be blunt here: What has changed isn’t the expected cost of OAS. What has changed is Ottawa’s overall fiscal situation. Its deteriorating bottom line is caused in large part by Canada’s need to carve out a new role in a world dominated by Donald Trump and his ideological kin. It has to find savings in existing programs to finance its new expenditures.

I’m sympathetic to Ottawa’s need for money. I’m not quite sure, though, why seniors should be the first place to turn for savings.

The rush to punish the oldsters seems to be based, at least in part, on the notion that boomers are somehow a uniquely entitled generation while under-35s are oppressed and impoverished.

Look at the numbers, though, and a more nuanced picture emerges.

A 2019 study by Andrew Heisz and Elizabeth Richards of Statistics Canada found that every postwar generation has done better than the one before it when each was compared at the same age. Gen-Xers (which the study defined as those born between 1965 and 1976) earned more, in real terms, than baby boomers (those born between 1950 and 1961) at the same age. Similarly, millennials (those born between 1982 and 1991) earned more and had higher net worths than Gen-Xers at the same point in life.

This trend appears to be continuing. Statistics Canada’s Survey of Financial Security shows that the median net worth of families in which the highest income earner was under 35 jumped to $159,100 in 2023 from $56,400 in 2019. Their 179-per-cent surge in wealth was the largest percentage increase of any age group.

This is not exactly the portrait of a young generation in ruin.

So why is there so much angst about the young? So much anger directed at the old?

Much of it stems, almost certainly, from Canada’s dysfunctional housing market.

Opinion: Young adults can’t afford homes to raise families, and city governments are at fault

This is one area where the stereotypes are true. Canada has done a horrible job of building homes and providing a supply of affordable housing. Young people who can borrow from the Bank of Mom and Dad can lever themselves into an absurdly expensive real estate market. Those who can’t fall behind and feel justifiably outraged.

We all know that strong action is needed – but this is where the slash-OAS crew fall short. Reducing OAS simply shifts dollars from one pocket of the government to another. It does nothing to make housing affordable.

A better approach would be to stop talking about the problem and actually overturn restrictive zoning laws and onerous development fees. Even better would be to cap the tax exemption on capital gains from principal residences.

These moves would help reduce home prices, a shift that would bring huge benefits to the young. A fall in home prices would also, not so incidentally, hit the old, with their paid-off houses and embedded gains.

And that is fine. The point here is not to coddle codgers. The point here is to build a better society. But you do that by tackling the real problem, not by punishing seniors simply because they’re an easy target.