Old Age Security spending is set to rise by $28-billion by 2029.The Canadian Press
Something important shifted this federal budget season. For years, I felt like a lone voice warning that Old Age Security absorbs more tax dollars than any other line in Ottawa’s budget, crowding out other investments and driving the deficit. Now, a growing number of commentators are sounding the same alarm.
Inside government, the politics are shifting, too. In past consultations, I was told OAS was too risky to touch. But a recent interview with Finance Minister François-Philippe Champagne suggests the greater gamble now is avoiding reform. When pressed on OAS, his answers fell short in a way that could alienate younger voters, advocates for seniors in poverty and anyone worried about federal finances. They could also give the Conservative opposition an easy opening.
Politicians must take note that younger journalists such as Rob Csernyik, Robyn Urback and Max Fawcett are urging Gen Z and millennials to care about OAS. Even if retirement feels distant for young people, more now see that OAS is a major reason governments struggle to make their lives more affordable. When so much federal spending goes far beyond supporting vulnerable seniors to provide $18,000 a year to retired couples with six-figure incomes, little fiscal room remains to confront the pressures facing younger generations.
This paper’s editorial board has already endorsed a practical way forward: preserve OAS for most seniors but begin phasing it out at $100,000 of household income rather than the current $182,000 threshold for retired couples. Affecting about 20 per cent of seniors, the change would save Ottawa $7-billion a year. Use $2.5-billion to give every poor senior an extra $5,000 – eliminating poverty among that group of Canadians – and direct the rest to priorities such as improving affordability for younger people.
With OAS reform now firmly in the spotlight, it wasn’t surprising that Mr. Champagne was asked whether his budget deliberations considered being a little less generous with financially secure older people in order to be a little more generous with younger ones. The surprise was his answer.
First, he said his budget will balance the operating budget within three years so that future borrowing is limited to long-lasting infrastructure benefiting younger people.
But the Parliamentary Budget Officer reports that the government’s definition of capital investment is overly expansive. By the PBO’s measure, planned capital spending is about 30 per cent lower than the minister suggests, which means operating spending will remain in deficit. A major driver is the continued generosity of OAS to retired couples with six-figure incomes.
Second, Mr. Champagne described his infrastructure spending as transformational. But scale matters. Infrastructure spending is set to rise by about $5-billion in 2029. By contrast, OAS spending will rise by $28-billion that same year – nearly six times more. If the government’s goal is to shift fiscal room toward building the future, the numbers show that spending on today’s older voters still dominates.
Third, he pointed to housing and the Youth Climate Corps as evidence that young people are a budget 2025 priority. Again, the dollars tell a different story.
The Youth Climate Corps receives just $20-million a year – not even a rounding error next to OAS spending.
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And capital investments for housing are set to fall from $4-billion in 2023 to $3.4-billion in 2029. A temporary bump between 2025 and 2027 is followed by the end of National Housing Strategy funding, creating a major risk unless Ottawa renews and strengthens that strategy soon.
Two other housing measures offset that decline: eliminating the GST for first-time homebuyers and helping municipalities with development charges. After factoring in the capital drop, budget 2025 amounts to roughly $1.6-billion in net new housing spending in 2029 compared with 2023.
It is hard to call this $1.6-billion a “generational investment” when the same budget allocates $28-billion in additional spending on retirees that year alone, including support for couples with high incomes and significant home equity.
I appreciate that Mr. Champagne closed his recent remarks by expressing openness to a meeting on OAS reform, citing my research. I plan to accept.
The need is pressing. Too many young Canadians live in a financial vise grip, and 400,000 seniors remain below the poverty line, even as OAS delivers generous subsidies to retired households with incomes twice the national median. If we are serious about building “the best economy in the G7,” modernizing OAS is essential – unlocking the scale of investment younger and future generations need while ensuring no senior is left behind.
Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on X, Facebook, Bluesky and Instagram, as well as subscribe to Paul’s Hard Truths podcast.
