Christopher Ragan, "Canada's Looming Fiscal Squeeze," November

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10 requires a “replacement rate” of about 2.1, so with a fertility rate of 1.7 net immigration is necessary to sustain positive population growth. Yet even if Canada’s fertility rate were to rise modestly over the near future, there would still be a need to deal with the implications of the aging of the baby-boom generation. No realistic increase in the future fertility rate could offset the effects of the large decline in fertility that has occurred since the early 1960s. No realistic increase in future fertility could offset the large decline that has occurred since the early 1960s. over the same post-war period, there has been a gradual increase in Canadians’ life expectancy. In 1951, the average newborn Canadian boy was expected to live for 66 years, and the average newborn Canadian girl was expected to live for 71 years. by 2006 life expectancy had increased to 78 years for a boy and 83 years for a girl. 2 The Inevitable Aging of the Population With these two key demographic forces at play, it is inevitable that the average age of the Canadian population has been rising. A falling fertility rate implies that fewer young people are entering the population, and this effect taken alone tends to increase the average Canadian’s age. rising life expectancy implies that Canadians are growing older before they die, and this effect also tends to increase the average Canadian’s age. As these two forces continue, they will drive Canada’s population aging over the next several decades. Figure 2 shows how the fraction of the total Canadian population accounted for by seniors (65 years and over) is projected to increase over the next three decades. This fraction is currently at 14 percent and will rise steadily with the aging of the baby-boom generation. by 2050, when most baby boomers will have died (as even the youngest baby boomers will then be 85-90 years old), the seniors’ fraction is projected to stabilize at roughly 25 percent. Figure 2 PERCENT OF POPULATION 30 25 20 15 10 5 0 THE SENIoRS’ SHARE oF CANADA’S PoPuLATIoN (2010 - 2040) 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Source: Statistics Canada, medium-growth projection, and author’s calculations. 2 Statistics Canada, Table 102-0512. Christopher Ragan: Canada’s Looming Fiscal Squeeze
Another way to see the changing age structure of Canada’s population is to consider the share of the total population that is of the typical working age, 15 to 64. Figure 3 shows this share from 1962 to the present day and projected until 2040. The oldest baby boomers were born in 1946 and so “came of age” in the early 1960s. over the subsequent twenty years, the aging of the baby boom resulted in a significant increase in the working-age share of the population, from 58 percent in 1962 to about 69 percent in the early 1980s. The youngest baby boomers (born in about 1962) came of age in the early 1980s, and in the subsequent three decades there were no significant changes in the working-age share of the population. but the oldest baby boomers reach 65 in 2011, and so for the next twenty years there will be an inexorable decline in the working-age share of the population, a decline that roughly mirrors the increase from thirty years earlier. 3 Figure 3 THE WoRKING-AGE SHARE oF THE PoPuLATIoN (1962 - 2040) PERCENT 72 70 68 66 64 62 60 58 56 54 52 1962 Source: Statistics Canada, medium-growth projection. Declining Labour Force Participation 1968 1974 1980 1986 1992 1998 2004 2010 2016 2022 2028 2034 2040 For the next twenty years there will be an inexorable decline in the working-age share of the population. Any individual must decide whether to join or remain outside the labour force, and such decisions vary considerably by age. In the aggregate, labour force participation rates among Canadians between the ages of 55 and 64 are well below those for Canadians between the ages of 25 and 54, as Figure 4 shows for 2009 data. Participation rates for people 65 years and over are much lower still. 3 Since Figure 3 does not show the result of a labour force participation decision, we can be quite confident about the longer term projections. There is obviously great uncertainty regarding when any specific individual will die, but the law of large numbers ensures that the aggregate death rate at each age can be projected with considerable precision. 2011 11
Page 1 and 2: Canada’s Looming Fiscal Squeeze A
Page 3 and 4: Table of ConTenTs Executive Summary
Page 5 and 6: The aging of the Canadian populatio
Page 7 and 8: Sommaire La présente étude rassem
Page 9 and 10: de certaines politiques et cela ne
Page 11: Some Basic Demographic Projections
Page 15 and 16: increase by up to 4 percentage poin
Page 17 and 18: more slowly in the future than they
Page 19 and 20: Figure 8 PERCENT OF GDP 4 3.5 3 2.5
Page 21 and 22: Two Illustrations of the Fiscal Squ
Page 23 and 24: This simple estimate of the increas
Page 25 and 26: the provinces. At the same time, ho
Page 27 and 28: fiscal implications that would need
Page 29 and 30: pressures on the healthcare systems
Page 31 and 32: Seen in this way, the coming fiscal
Page 33 and 34: defense, roads and highways, and mu
Page 35 and 36: office of the Chief Actuary. 2010.
Page 38 and 39: MLI Publications Winner of the Sir

Christopher Ragan, "Canada's Looming Fiscal Squeeze," November

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