What to Do About an Aging Population

Well if you didn’t hear about this report, I’m not surprised.  I didn’t even hear about it until one of my news searches picked it up.  It’s a report by the Special Senate Committee on Aging on the increasing aging population in Canada and lists a massive 84 recommendations on how to improve things for seniors.

Of course the government has no obligation to do any of the recommendations, but they are interesting to read.  Some suggestions include:

  • Establishing a volunteer tax credit
  • Work with the provinces to change the Canada Pension Plan so that individuals between the ages of 60 and 65 who want to apply for CPP and continue working no longer have to quit work or earn up to the maximum of CPP in the months prior to the application
  • Make OAS/GIS benefits non-taxable if they are the only source of income
  • Work with provincial governments to increase the income replacement rate for the CPP (currently 25% of income up to the average wage) and/or to increase the maximum pensionable earnings beyond the average wage
  • Introduce an Age-Based Expenditure Needs Component to Equalization

That is just a sample of some of the ideas the report gives.  Overall I have to agree with a fair number of the ideas.  They make sense.  A volunteer tax credit is a great idea regardless of an aging population.  Also not taxing those who only make OAS/GIS again makes sense (I would guess the revenue loss to the government would be very minor as most people do get some CPP income).

It’s the fourth point I’m a bit frightened of happening.  Why?  Because any sudden policy change on CPP at this stage is going to mean an increase in premiums for all the younger workers to cover all the benefits of the older works who are now just about ready to leave the work force.  There is no way the baby boomers can dump enough cash into the CPP program in a handful of years to offset any significant increase in benefits.

Actually in general this is going to be a problem for the government to balance off in the future.  As the baby boomers retire they will start paying much less tax and as that revenue vanishes, the younger generations are going to have to start to pay more in tax to pick up the slack or the government will have to start cutting services.

In some regards this entire market crash which has forced many boomers to push off retirement is a blessing to the government.  They will continue to get income tax revenue from those that would have likely pull out in just a few years.

So in general some of the recommendations in this report to keep seniors engaged and involved are even more critical to a government that is doing any long term planning.  The issue I fear is long term planning is out the window utterly until the economy recovers.  And even when that happens governments are not known for their ability to do long term planning, so likely this report will be forgotten about in just a few short months.

So what are your thoughts on this?  What should governments be doing to prepare for the aging population?

4 thoughts on “What to Do About an Aging Population”

  1. There’s got to be a better nexus between understanding immigration policy, skills and training, education spending and health care in connection with an aging population. The issues are tackled on a compartmentalized basis.

    You can’t change the fact people grow older. The question is whether there is a sufficient skilled and trained worker basis to contribute to CPP, OAS etc. which requires some integrated thinking about immigration, training and education (alas, there’s a federal/provincial split in responsibilities on this issue).

  2. Thicken,

    Good point. Problems often are not just one sided.


    Thanks for the link.


  3. Not sure that the tax situation cannot be rectified. Perhaps an estate-tax change could help, where boomers who die pay for boomers who survive.

    As well, services after boomers die will hopefully be much cheaper because boomers consume a lot of the services, especially expensive medical. While they’re still alive, for 20 years, maybe we can just keep the system running until we get out the other side.

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