We tend to make assumptions about demographics and the baby boomer group is no exception. One basic assumption that often leads to inaccuracies is a simple definition of who the baby boomers in Canada are. Many people assume that baby boomers are the generation born in Canada immediately after WWII and that there is no difference between the baby boomer demographic in Canada and the United States.
However, the reality is that the baby boom in Canada did not parallel the baby boom in the U.S. and that the baby boom is indeed defined as the period following WWII (1946-1964). Read to learn more about Canadian baby boomers.
Robert Brown, a retired Professor of Actuarial Science with the University of Waterloo, confirms that dates following WWII (1946-1964) do not accurately define Canada’s baby boom. “When one graphs the number of live births in Canada, it is quite clear that the “boom” years went from 1952 to 1965 (inclusive),” Brown says, which to date are the “only years in Canadian history when live births in Canada exceeded 400,000.”
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Brown points out that the impact of this six year difference has significant implications for those of us north of the border. Whereas in the U.S. the cohort born in 1946 turned 69 in 2015, in Canada the peak of the baby boom cohort (those born in 1959) turned 56 in 2015, well under retirement age. This means that the bulk of Canadian baby boomers are still working and our dependency ratio will not peak for another decade or so.
As the Canadian system tries to ready itself for our baby boomers to enter retirement we have a rare opportunity to observe how this demographic is currently affecting our neighbors to the south and react accordingly. Our country’s ability to cope will depend on our how open-minded and flexible our society remains to the changes ahead, especially in the following four areas which have been flagged for high concern.
According to a series on baby boomers published by The Globe and Mail called“Boom, Bust and Economic Headaches,”in 2015, Canada had more people over the age of 65 than under the age of 15. This statistic is a concern for Canadian companies who are looking to fill future jobs that will require a high level of education, experience and skill in a workforce that is about to shrink due to age.
Canada’s immigration levels are one way to cope with the demographic imbalance. According to The Globe and Mailwe currently accept 250,000 new immigrants in Canada each year, almost double our natural growth rate and “on a per capita basis, Canada accepts about twice as many immigrants as the U.S., and about four times as many as Japan.” Still, as the article points out, immigration alone is not a solution.
One positive trend for Canadians is that many baby boomers are choosing to remain in the workforce for longer periods of time. According to Brown, the “average age of exit from the labor force has been steadily increasing since 2001 and many Canadians now retire after age 65, which means this major shift in our labor market may actually happen post-2024.”
Canada’s baby boomers are opting to work past the age of 65 and many are prepared to work much longer if they can reduce their part time hours or work as a consultant. According to “Boom, Bust and Economic Headaches,” Canada’s economy and job stability may rely on our ability to offer boomers flexible options to remain working as self-employed individuals or as part-time employees. Companies who are flexible on these points will keep their experienced work force and will feel less pressure from the baby boomer’s labor exit.
Health care spending increases for people who are 65 years of age and older, which means that the country’s health care system will experience significant strain in the future. Social programs like old age security as well as infrastructure like public transportation will also experience greater demand from the baby boomer generation. It is our provinces who will experience the most financial stress as a result of the demand on these provincially-run programs, but our municipalities will also need to foot the bill to ensure that seniors are well cared for.
According to The Globe and Mail, the C.D. Howe Institute has estimated the present cost of “maintaining demographically sensitive government programs, such as health care, over the next 50 years. The total ‘implicit liability’ is nearly $4.3 trillion, or $120,000 per person across Canada, with most of the burden — $107,000 [per person] — falling on the provinces.”
The Canadian Pension Plan (CPP) is going to experience extensive strain in the next few decades. With a smaller work force to make contributions and a growing number of retirees who will need to draw on the CPP to make ends meet the government needs a plan. Luckily, Canadians have $3 trillion saved in registered retirement saving plans (RRSPs) and employee sponsored registered plans which the government can tax when money is withdrawn by retirees. The tax money that will be made by the government can be used to help keep the CPP afloat.
According to The Globe and Mail, despite financial assistance from the government, “University of Ottawa retirement researcher Michael Wolfson says… half of Canada’s middle-income earners will face a significant drop in their standard of living when they retire.”
Boom, Bust and Economic Headaches also raises serious concerns about inequity between generations as a result of the strain baby boomers will put on society. “The boomers generally did very well while they were in the workplace, earning higher inflation-adjusted wages than Generations X and Y, and enjoying better pensions and benefits,” the authors write. “These younger workers are being saddled with the task of paying for rising spending needs, mainly in health care, which are eating nearly half of provincial budgets.”
Not only are Generations X and Y expected to pay more in taxes to support the baby boomer generation, many are (or will become) primary caretakers for their parents. Generations X and Y, unlike their baby boomer parents, are “sandwiched” between caring for the needs of their own children and their parents. These sandwich generations are feeling the burden financially, emotionally and physically.
Will relationships become strained between these age groups or will the sandwich generation rise above the pressure and find solutions to bridge these generational gaps? It’s a hot issue for debate.
“We built this government machine that takes tax revenues from everybody and gives them disproportionately to this growing population of older people,” says McGill University economist Christopher Ragan, who argues that “future generations should not be expected to subsidize health care for baby boomers.”
What do you think? Is Canada ready to support the baby boomers in their retirement? Will there be a strain between the different generations of Canadians as a result? Share your thoughts with us in the comments below.