Over the course of our lives, Canadians move predictably between being net recipients and net contributors to public programs and back again.Fred Lum/The Globe and Mail
Sasha van Katwyk is a senior health economist based in Alberta.
Michael Wolfson is a former assistant chief statistician at Statistics Canada and current member of the University of Ottawa’s Centre for Health Law, Policy and Ethics.
Canada’s aging population has become a lightning rod for generational anxiety. Commentators increasingly warn that baby boomers are “hoarding” wealth, while draining public coffers through pensions and health care and leaving younger generations to foot the bill.
This framing is emotionally resonant – and deeply misleading.
The average boomer does indeed hold a sizable share of household wealth while being a net recipient of public pensions and publicly funded health care. But this is not the result of an intergenerational raid on public resources; it is the outcome of decades of asset accumulation by households and sustained taxation to finance a robust welfare state.
Over the course of our lives, Canadians move predictably between being net recipients and net contributors to public programs and back again. We receive publicly funded health care at birth, education in youth, and pensions and health care in old age. During our working years, we fund these services – both for others and for our future selves. This is explicit in pension contributions, and implicit in income and consumption taxes.
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From this lifetime perspective, most Canadians are net beneficiaries of the welfare state. Based on our analysis of current patterns, roughly the bottom 60 to 70 per cent of the population by income receive more in public pensions and health care over their lifetimes than they pay in taxes. It is primarily the top decile of earners who contribute substantially more than they receive.
Wealth is mostly accrued over a lifetime, so generational narratives that paint boomers as identically extractive obscure far more consequential wealth inequalities within generations.
This matters because focusing narrowly on intergenerational fairness distracts from the real problem Canada faces. While claims that boomers are “ripping off” younger generations are overstated, public concern about the long-run fiscal implications of population aging is, if anything, not serious enough.
Official projections, including those from the Parliamentary Budget Officer, suggest that Canada’s public finances are broadly sustainable.
But given the current trends of wealth distribution and growing affordability crises, we may need to brace ourselves for a different picture. Costs associated with public pensions and health care are projected to outpace revenue growth by tens of billions of dollars over the next three decades.
This is not a crisis today, but it will become one if ignored. Without growing deficits, there are only two broad responses: raise taxes or cut spending.
There are many worthy options for gradual tax increases.
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For cuts, one potential reform is gradually increasing the normal eligibility age for Old Age Security and the Canada and Quebec Pension Plans from 65 to 70, while maintaining – and strengthening – the Guaranteed Income Supplement for low-income seniors. Done properly, this could protect the most vulnerable while reflecting increased life expectancy.
Importantly, though, we find that this pension reform addresses less than half the projected fiscal gap. Health care, by contrast, is where the real leverage lies.
Our projections show that gradually reducing real per capita health care spending – by roughly 0.9 per cent per year over three decades – would largely offset the fiscal pressures of population aging. That may sound implausible in a system already strained by family doctor shortages and emergency room backlogs, but these pressures are symptoms of long-standing and broader inefficiencies.
There’s a library’s worth of research pointing to concrete opportunities for improving cost-effectiveness and saving billions: expanding the role of nurse practitioners, implementing comprehensive pharmacare, deprescribing unnecessary medications, scaling telemedicine, fully adopting interoperable electronic health records, reducing inappropriate hospital procedures, and addressing stark regional variations in care. While saving billions, these deeper reforms would, if anything, improve access and quality.
One exception is long-term care, where spending should rise, not fall. Doubling funding in this area would ease pressure on hospitals by preventing the warehousing of seniors in acute care beds.
Taken together, these reforms show that Canada’s challenge is not that older generations unfairly benefited from the welfare state. It is that subsequent generations are inheriting a system weakened by shorter-term patchwork changes that fail to address more fundamental problems.
The welfare state has not failed the young. Neglecting it will.
Editor’s note: A previous version of this article incorrectly characterized the Parliamentary Budget Officer’s assumptions regarding the fiscal sustainability of taxes, old-age pensions, and health care as unrealistic. That characterization has been removed.