On CTV yesterday, human resources minister Diane Finley said (45 seconds into this interview): “As we go forward, we’re going to have three times the expense in Old Age Security as we do now, but we’re only going to have half the population to pay for it.”
That sounds pretty scary. If the total cost triples, with only half as many people to pay it, each Canadian would have to pay six times as much for Old Age Security (OAS)!
The Chief Actuary does estimate that the cost of OAS, in nominal dollars, will almost triple by 2030. But where is Finley getting her population figures?
Even the low-growth scenario in Statistics Canada’s latest population projections has our population increasing from 34.8 million this year to 39.3 million in 2031. Although seniors pay taxes (including on their OAS benefits), Finley may have been referring to the “working age” population.
In the same scenario, Statistics Canada projects that the population aged 20 to 64 will grow from 21.8 million this year to 22.1 million in 2031. Over the same period, the number of Canadians between the “prime” working ages of 25 and 54 increases from 14.9 to 15.1 million. However you slice it, there will be more (not half as many) taxpayers to fund OAS going forward.
The most charitable interpretation of Finley’s comment is that she meant Canada will have half the working-age population relative to the number of seniors. The senior population, and hence the “dependency ratio,” is projected to approximately double between now and 2031.
At best, Finley is counting this increase twice. The near tripling of OAS costs reflects the rising number of seniors plus inflation.
The Chief Actuary’s report (page 9) also projects that nominal Gross Domestic Product (GDP), which approximates the federal tax base, will double between now and 2030. As a share of GDP, the combined cost of OAS and the Guaranteed Income Supplement will rise from 2.41% to a peak of 3.14%. That’s not insignificant, but it hardly warrants reducing or delaying benefits.
Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.