Canada's aging, but will anyone deal with it?
The Vancouver Sun
Sat 30 Sep 2006
Page: D4
Section:
BusinessBC
Byline: Michael Campbell
Column: Michael Campbell
Source:
Vancouver Sun

Management guru Peter Drucker once said: "I never see
anything in the future. I don't believe in it. I look out the window. I look for
things that have already happened, but not yet had the consequences, and are not
yet perceived."

Welcome to the wonderful world of demographics: The future that is already
written.

The consequences of the aging baby boomers hitting the healthcare and pension
systems are the Rodney Dangerfield of political issues: Despite the fact that no
single issue is going to have a greater impact on politics and society, the
challenges of an aging population never seem to get any respect when it comes to
grabbing our attention.

Maybe that's because it scares the heck out of politicians. And rightly so,
considering that virtually every politician that has suggested the need to
change the pension formula in Europe -- due to the declining ratio of workers to
retirees -- has paid a heavy political price. In Germany, France, Austria and
Italy literally hundreds of thousands of workers have taken to the streets at
the mere suggestion of changing the system, and woe to any politician who
ignores them.

In Canada, you won't hear Jack Layton, Gilles Duceppe, Stephen Harper or any
of the front-runners in the Liberal leadership contest say anything meaningful
about the challenges of an aging population. Yet, as Drucker reminds us, the
future is already written, and that means big changes for the pillars of the
social safety net.

The aging population is an issue that trumps political philosophy and
overwhelms wishful thinking. Whether we acknowledge the implications or not,
Statistics Canada reports that there are two-thirds more people over 65 today
than in 1981. Furthermore, there are 20 times more people over the age of 85
today, (approximately 430,000), than in 1921. And the reality is that the first
wave of baby boomers is just starting to hit the system.

The bottom line is that the use of health care by seniors increases
significantly with age, which means that today's financial strains are only
going to compound. For example, is it any wonder the feds didn't want any part
of a national pharmacare system? Not only is there a huge growth in the drug
therapies available, but by 1997, 84 per cent of seniors reported taking
medications regularly.

It has been reported that Canada currently has more than $3.5 trillion in
unfunded liabilities, and that doesn't include health care. Unfunded liabilities
refer to promises made by government to provide pensions and other services, but
no money has been put aside to provide them.

Today's workers make the contributions necessary to pay benefits to today's
retirees. But what happens when the number of today's workers shrinks in
comparison to the number of retirees? At some point something has to give. While
the Canada Pension Plan has already made adjustments by increasing contribution
levels, European governments haven't done near enough to guarantee their
solvency.

This week, the C.D. Howe Institute burst the bubble for those people who
suggested that we could grow out of our pension and health-care problems through
immigration. The research found that in order to maintain today's status quo, in
less than 15 years we'd have to admit over two-and-a-half million people
annually, which is more than 10 times the annual average over the last decade.
It simply can't be done, even without major dislocation.

The bottom line is that major changes are going to have to take place in
order to deal with the demographic challenges. But to date there is little
appetite to alter the status quo, which only delays the inevitable.

Michael Campbell's Money Talks radio show can be heard on CKNW 980 on
Saturdays from 8:30 to 10 a.m.

Edition: Final
Story Type: Business; Column

Length: 622 words