“Workers pay the bulk of taxes, which governments need to fund important services, including health care and income transfers to seniors,” said study co-author Ben Eisen, a senior fellow at the Fraser Institute, in a release on May 26.
“As the relative number of seniors grows, and the relative number of workers declines, government finances across Canada will be put under increasing strain.”
The study finds that the share of Canada’s population aged 65 or older has increased from 14.1 percent in 2010 to 19 percent in 2022, while the share of the working population, those aged 15 to 64, has declined rapidly since the mid-1960s.
In 1966, the ratio of workers to seniors was 7.7, meaning there were almost 8 workers for every senior, the study said, noting, “this ratio has dropped quickly since then and stands at 3.4 in 2022.”
The study noted that Statistics Canada projects both trends to continue in the decades ahead, with the 65-plus demographic making up 25 percent of the Canadian population by 2059, and the ratio falling to just 2.3 workers to every senior by 2068.
Eisen warned of the related implications for government spending.
“As the number of seniors rise, there will be more people collecting income transfers such as the Old Age Security and the Guaranteed Income Supplement,” he said.
“Likewise, average annual per person health-care costs for people aged 65-74 is $7,751, compared to just $2,811 for people aged 35-44. This means that government expenses will increase substantially as the number of seniors rises.”
The study noted that a declining labour force participation rate means fewer taxpaying workers and slower economic growth for the country, which it said implies the tax base “will grow more slowly and, hence, that government tax revenue will grow more slowly, too.”
The authors said the shrinking ratio of workers to seniors in Canada presents a “significant headwind” for policymakers.
“Governments across Canada, particularly at the provincial level, already face long-term fiscal challenges, and the trends described in this [study] will be a significant challenge to policymakers as they try to improve the sustainability of government finances in Canada,” the report concluded.