The provinces and the federal government must coordinate their efforts to deal with the “grey tsunami” of population aging.
In July 2015, Canada hit a new milestone: for the first time ever, the number of Canadians over the age of 64 surpassed those under the age of 14. At the same time, Statistics Canada reported that the 65-plus cohort is growing four times faster than the population at large.
Some have called this phenomenon a “grey tsunami,” and it isn’t stopping — by 2030 we can expect approximately one in four Canadians to be over the age of 64.
This trend is evident across the developed world. From an international standpoint, Canada is still in the early of stages of this shift, with 15 percent of its population in the 65-plus age group. This is compared with 20 percent in Germany and Japan. With the last of the baby boom generation reaching retirement age, the next two decades will be a crucial period for rolling out a proactive policy.
The challenge with taking action is that the aging of the population spans multiple interdependent policy domains. Three main pressure points exist: (1) increased burdens on health; (2) increased burdens on pensions; and (3) decreases in the relative size of the workforce, which negatively affects tax revenues. Keeping our society strong will require tackling all three of these challenges and, like so many policy problems, it is important not only to find compelling solutions to them but also to establish accountability.
The federal government has been called upon to help coordinate health and pension reforms, but addressing an aging population can start closer to home. The delivery of health care and social services is a provincial jurisdiction, and the provinces can therefore be leaders in preparing for an older population while still maintaining Canadians’ quality of life. (If you doubt the provinces’ experimental and innovative capacity, remember that universal health care started with provincial leadership).
Taking action provincially means there are fewer competing interests to juggle and the policies can be targeted toward local realities. Provincial action could also force the federal government to act in areas where it has been slow to move. Importantly, provincial action does not have to mean acting in isolation. Coordination among the provinces can lead to greater bargaining power and less administrative duplication.
Working in coordination, the provinces need to address all facets of an aging population and develop targeted policies for pension reform, health care and labour force participation.
Reforming pension contributions
The good news is that progress is being made on pensions. While action has finally come at the national level, with the provincial and federal governments agreeing this summer to expand the Canada Pension Plan (CPP), it is important to note that movement on pension reform began provincially.
Ontario’s announcement of the Ontario Retirement Pension Plan (ORPP), which now will not move forward because of the CPP enhancements, showed leadership that was sorely lacking. These considerations include the fact that, as Jim Leech and Jacquie McNish point out, just over 40 percent of the workforce is expected to retire in the next 20 years, and longer life spans mean that the length of pension withdrawals will be extended. In recent decades, the number of employer-sponsored pensions has also declined, such that 60 percent of Canadian workers of all ages have no workplace pension.
Before the announcement of the ORPP, Ontario had been pushing the Conservative government to rework the CPP, to no avail. Since the agreement to update CPP was achieved, the Ontario government has said clearly that its provincial program was an important bargaining chip and good example of how pension reform should be approached on a national scale. Looking forward, innovations at the provincial level should be encouraged and collaboration to harness sound ideas at the national level should be paramount.
Being care aware: Reducing health care costs
In health care, the provinces have also started taking steps to address an unsustainable situation and should be encouraged to further their efforts.
Nationally, health care spending in 2015 was projected to make up just over 10 percent of GDP. The Conference Board of Canada forecasts that by 2020, health care will eat up as much as 44 percent of provincial budgets. One of the major driving forces in health care spending has been the cost of drugs, and Canada has the second highest drug expenditures per capita in the OECD.
Together, the provinces are creating a national drug strategy under the Pan-Canadian Pharmaceutical Alliance and, to date, they have lowered pharmaceutical spending by $712 million annually. This success has come from harnessing joint bargaining power, and it highlights the need for provincial action.
In terms of next steps for provincial leadership, housing is an often-overlooked lever, and it is a major social determinant of health. For seniors, the long-standing approach has been to provide long-term care for those who cannot live independently. But long-term-care facilities are expensive for the health care system, costing approximately $60,000 per person annually. As the Canadian Medical Association has advocated, seniors with varying care needs may be better served by options such as assisted living in their own homes, where costs are significantly lower. An interprovincial focus on streamlining assisted living would allow the provinces to learn from each other’s failures and successes in order to help alleviate demand for expensive long-term care facilities. Ultimately, better health has the potential for positive spillover effects in another key area of concern: labour force participation of older Canadians.
Retain and retrain: Increasing labour force participation among older Canadians
The number of workers in the labour force who are 55 years or over is projected to rise from about 17 percent in 2010 to 25 percent by 2021. Where pensions and health care are an increasing strain on provincial coffers, the risk of a quickly diminishing work force potentially will have consequences for economic growth. Provincial governments are best positioned to understand provincial labour market dynamics, and they should focus on policies that encourage workers of all ages and occupations to join, rejoin, or remain in the workforce longer.
In terms of areas to be targeted, two key considerations are the current lack of time flexibility in jobs, and an impending skills gap that prevents older workers from adapting to changing workplaces. To the former point, surveys reveal that almost half of retirees say that they retired earlier than they wanted to, and older workers would delay retirement if they could work part time. At the same time, studies show employers are often unwilling to retain and retrain older employee talent, partly because there is a stigma attached to doing so, and partly because they believe that their investment will not pay off due to a shorter working horizon.
The provinces could take a leadership role in this by piloting job flexibility programs and launching training initiatives targeted at employed older workers, unemployed younger workers and disadvantaged workers — the groups that could remedy the skills mismatch. The potential for success has been demonstrated by the Targeted Initiative for Older Workers (a federal-provincial cost-shared program launched in 2006), which has helped unemployed workers aged 55 to 64 re-enter the workforce in small communities. Building on this example, the provinces have a blueprint to offer similar programs to already employed older workers who require skills upgrading, and to other target population groups with low labour force participation, such as unemployed youth. Additionally, programs where older workers can mentor younger ones could also assist in retaining the vast knowledge base the older generation possesses.
The silver lining
These options are designed to address the multidimensional issue of the aging Canadian population, by helping to manage the fiscal burden and harness the power of interprovincial coordination. Importantly, no one option could work effectively alone, but a coordinated effort would help to address the full breadth of the policy problem. By taking these steps now, we could ensure the sustainability of our labour force, health care system and pension system, positioning the country for long-term success and better quality of life. We can and should aim to achieve a “silver lining,” rather than wait for a “grey tsunami” to roll in.
This article is the presentation by the winning team in the 2016 National Public Administration Case Competition. Eleven teams of students from universities across Canada prepared policy options and recommendations to address Canada’s aging population. The challenge was to address the problem in such a way that the Ontario and Quebec governments could address the issue in collaboration.
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