Are you going to have enough money when you retire? If you’re too young to worry about that, are you prepared to start paying big taxes to pay for better pensions and health care for all those boomers?
Federal budget officer Kevin Page reported this week that Canada isn’t doing enough to get ready for the impact of millions of retiring baby boomers.
I’d been looking at similar issues in B.C., prompted by the government’s pension review.
It’s fascinating — and very worrying — stuff (at least for a numbers geek).
Consider this. In 1971, there were 6.2 British Columbians of working age for every person over 65.
Today, the ratio is 4.3 to one.
By 2034, there will 2.4 people of working age for every person over 65. Basic public pensions — old age security and the guaranteed income supplement for those with little or no other income — come from current tax dollars.
So back in 1971, about six people of working age shared the cost of providing a basic pension for each retired person. (And for their health care.)
By 2034 — which is closer than 1971 — just 2.4 people will be picking the tab for each retired person. That’s a way bigger commitment.
It’s not quite that simple. Back in 1971 children — those under 18 — made up 35 per cent of the population. By 2034 they will be less than 18 per cent. People in the 1970s were paying for fewer seniors each, but more children. (And there were more stay-at-home moms in 1971.)
Still, you can calculate a rough dependency ratio. In 1971, about 56 per cent of the population was working age. The rest were under 18 or over 65.
The percentage of people of working age increased steadily over the last 29 years. That has benefits because people of working age pay the taxes and generate the economic activity that supports the young and the old. (Not entirely, of course.)
That also made the last few decades a good time to be in government.
The working-age population in B.C. is set to peak next year at 65 per cent and then start declining again.
By 2034 it will be down to 58 per cent.
Why does that matter? The more people in the working-age group, the lighter the individual cost of providing services for young and old. Better services are affordable. Or people can choose to pay less in taxes. Or they can choose and encourage governments to borrow against the future.
That’s another aspect of all this — the political clout of the baby boomers. It’s not that we’re selfish, necessarily. But there are a lot of us, so politicians pay attention to our interests.
When baby boomers were interested in schools for their children — the late 1970s and early 1980s — governments thought schools were important. When our hips and knees started going, waitlists for those operations became a health-care priority.
And pretty soon we’re going to worrying about retirement incomes and residential care.
Watch out, you young ’uns.
Again, consider the numbers. Back in 1971, people over 65 made up 14 per cent of the voting-age population. Today, they’re about 19 per cent.
And in 2034, people over 65 will make up 25 per cent of the voting age population.
Add in the fact that younger voters tend not to bother to cast ballots and the support of geezers is going to be critical to political parties. So if we want better health care and richer pensions, governments will look for ways to provide them. Even if that means higher taxes for those of working age or deficits and debt that will have to be repaid after we’re dead.
The changes are all predictable. Which makes it that much more surprising that we have done so little to prepare for them.
Footnote: Planning hasn’t been so great at the other end either. The number of school-age children has been declining since 2000 and the government pushed for school closures. But in three years, the numbers will begin climbing sharply. Within 13 years, the school population will be the largest in B.C.’s history.