A new round of data from the 2021 census details what has long been known: Canada, you’re getting old.

While Canada is younger than Group of Seven countries such as Germany and France (but older than the United States and Britain), the number of Canadians aged 65 and over is steadily surging. In 2021, there were seven million – 19 per cent of the population, up from 16.9 per cent five years earlier. And the 65 and older cohort is poised to get much larger: There are 5.2 million people aged 55 to 64 and this soon-to-retire group outnumbers those entering the work force by a million. The gap is the biggest ever, and a reversal of generations past.

The sheer size of the wave of aging baby boomers has an outsized effect – including on federal spending for Old Age Security and the Guaranteed Income Supplement.

Ottawa’s outlook for its future program expenses is helpfully buried away on page 252 of the most recent federal budget. Elderly benefits, at $68.2-billion, is the largest line item among transfers to people and governments. In four years, the figure is expected to be $87.2-billion. Then and now, elderly benefits cost more than the Canada Health Transfer and equalization, combined.

The rapid increase accounts for the bulk of Ottawa’s additional spending in coming years, ahead of health care, child care, housing or climate. This is in part because OAS and GIS are entirely paid by taxpayers. That makes the falling ratio of workers to benefit-receiving retirees a pressing concern. (The Canada Pension Plan, in contrast, is funded by the contributions of workers and employers.)

In 2016, the Trudeau Liberals enriched the GIS. And that was a good idea. GIS goes only to poor seniors, making it a great way to reduce poverty among the elderly – something that used to be widespread. In the 1970s, seniors were more than twice as likely to live in poverty as the average Canadian. By 2020, just 3.1 per cent of seniors were low income, according to Statistics Canada – half the Canadian average.

But as the Liberals improved the targeted GIS, they reversed a Harper government plan to raise the age of the almost-universal OAS pension to 67 from 65. The payment is worth about $7,800 a year, and is given to virtually all Canadian seniors. A percentage of the money is clawed back if your income is more than $79,000, but seniors with incomes as high as $133,000 a year still get some OAS.

The Harper government’s plan to gradually up the OAS age to 67 was to have started next year. The Liberals scrapped that, and last year raised OAS benefits by 10 per cent for those 75 and older, starting this summer.

In a world of finite taxpayer dollars, that should raise questions.

Given that people are living and working longer, is 65 still the right age for OAS? Should the income level at which the clawback starts be lower? And should a senior couple with a combined income of $150,000 get full OAS payments? Their cheques are, after all, being paid by taxpayers – nearly all of whom are younger, and have lower incomes.

The good news is that rising OAS and GIS payments aren’t going to destroy the country’s finances. The actuarial outlook sees the cost at a peak of 3.27 per cent of gross domestic product in a decade or so, compared with 2.8 per cent now. But that half percentage point of the economy is $13-billion a year – about 60 per cent more than Ottawa plans for its share of national child care.

Seniors vote, and their numbers are growing, which is why no political party wants to be accused of cutting grandma’s benefits. In 1985, when Brian Mulroney tried to partially de-index OAS from inflation, he was confronted by 63-year-old Solange Denis, who famously told the PM: “You lied to us. I was made to vote for you and then it’s ‘Goodbye Charlie Brown.’ ” Mr. Mulroney caved.

Or consider France. President Emmanuel Macron has long wanted to raise the normal pension age to 65 from 62 – but the move is opposed by almost three-quarters of the country. In the U.S., full Social Security benefits for people born after 1959 begin at age 67 – but only because of a slow-motion change made in the Reagan era. Any other tinkering is a third rail of U.S. politics.

Refusing to raise the age of OAS eligibility, and then offering bonus payments to those 75 and over, was great politics. But is it good for Canada?

source: https://www.theglobeandmail.com/opinion/editorials/article-sorry-grandma-were-cutting-your-benefits-no-politician-will-ever-say/