Friday, February 19, 2010

Watch out – an army of greedy geezers is coming

Are you going to have enough money when you retire? If you’re too young to worry about that, are you prepared to start paying big taxes to pay for better pensions and health care for all those boomers?

Federal budget officer Kevin Page reported this week that Canada isn’t doing enough to get ready for the impact of millions of retiring baby boomers.

I’d been looking at similar issues in B.C., prompted by the government’s pension review.

It’s fascinating — and very worrying — stuff (at least for a numbers geek).

Consider this. In 1971, there were 6.2 British Columbians of working age for every person over 65.

Today, the ratio is 4.3 to one.

By 2034, there will 2.4 people of working age for every person over 65. Basic public pensions — old age security and the guaranteed income supplement for those with little or no other income — come from current tax dollars.

So back in 1971, about six people of working age shared the cost of providing a basic pension for each retired person. (And for their health care.)

By 2034 — which is closer than 1971 — just 2.4 people will be picking the tab for each retired person. That’s a way bigger commitment.

It’s not quite that simple. Back in 1971 children — those under 18 — made up 35 per cent of the population. By 2034 they will be less than 18 per cent. People in the 1970s were paying for fewer seniors each, but more children. (And there were more stay-at-home moms in 1971.)

Still, you can calculate a rough dependency ratio. In 1971, about 56 per cent of the population was working age. The rest were under 18 or over 65.

The percentage of people of working age increased steadily over the last 29 years. That has benefits because people of working age pay the taxes and generate the economic activity that supports the young and the old. (Not entirely, of course.)

That also made the last few decades a good time to be in government.

The working-age population in B.C. is set to peak next year at 65 per cent and then start declining again.

By 2034 it will be down to 58 per cent.

Why does that matter? The more people in the working-age group, the lighter the individual cost of providing services for young and old. Better services are affordable. Or people can choose to pay less in taxes. Or they can choose and encourage governments to borrow against the future.

That’s another aspect of all this — the political clout of the baby boomers. It’s not that we’re selfish, necessarily. But there are a lot of us, so politicians pay attention to our interests.

When baby boomers were interested in schools for their children — the late 1970s and early 1980s — governments thought schools were important. When our hips and knees started going, waitlists for those operations became a health-care priority.

And pretty soon we’re going to worrying about retirement incomes and residential care.

Watch out, you young ’uns.

Again, consider the numbers. Back in 1971, people over 65 made up 14 per cent of the voting-age population. Today, they’re about 19 per cent.

And in 2034, people over 65 will make up 25 per cent of the voting age population.

Add in the fact that younger voters tend not to bother to cast ballots and the support of geezers is going to be critical to political parties. So if we want better health care and richer pensions, governments will look for ways to provide them. Even if that means higher taxes for those of working age or deficits and debt that will have to be repaid after we’re dead.

The changes are all predictable. Which makes it that much more surprising that we have done so little to prepare for them.

Footnote: Planning hasn’t been so great at the other end either. The number of school-age children has been declining since 2000 and the government pushed for school closures. But in three years, the numbers will begin climbing sharply. Within 13 years, the school population will be the largest in B.C.’s history.


Anonymous said...

"...since 2000 and the government pushed for school closures. But in three years, the numbers will begin climbing sharply. Within 13 years, the school population will be the largest in B.C.’s history."

This is worth a column itself. Do the closed schools match up geographically with where the future schools will be needed? How do budget strapped school districts pay for 'mothballing' school facilities for 10 - 15 years.

DPL said...

I guess I'm one of the geezzers with their hand out. I worked for the fed for 35 years, both in the military and for a crown corporation. We often made less wages than civilian equivalent trades, and went where sentwithout question. Paid toward a pension in both places. When I got old enough to apply for early CPP I got it (with of course )a large deduction but the big kicker was my ex employee the federal government took a hugh deduction from my federal pensions to almost equal the CPP. It was called " fair by them" and if affects all federal employees. If I worked anywhere else and got a pension there would have been no such deduction. Most others have a bridging clause, we didn't and still don't. Don't suggest to me that we are grubbing for money, we paid 6 percent of our income for all those years. Cast your eye toward our MLA's and MP's who pay much smaller percentages and you and I pay the rest for them. And of course they can claim after a very short time. Yes there are inequities in pensions but the guys and gals who vote for their own raises and pensions are the politicians who are now burning their hair telling the citizens, there must be cut backs, and that after bailing out a few large corporations. They are a sick bunch of puppies, who sure look after themselves. Heck we were even restricted in our buying RRSP's as well. Sure a lot of people don't have pensions and I recall that the BC Federation of Labour keps suggesting changes must be made to cover the others

Anonymous said...

I agree with 3:17pm that this is an important topic. However as a school district administrator I can tell you that government has introduced strong start centers, neighbourhoods of learning. And most recently all day kindergartens precisely to try and make better use of under utilized schools in the hopes they can remain open and contribute to the social fabric of residential areas.

It is disappointing that Mr.Wilcocks fails to recognize these new programs that are both successful and cost effective for the taxpayer.

Anonymous said...

Two comments --first I'd like to review the school statistics Mr. Wilcoks is referring to and agree with 3:17 that demographics are very important if Boards of Education wish to be proactive.

Second, I'd like to remind 8:49, the school district administrator, that while these are great initiatives I've yet to see any of them fully funded --including full day kindergarten.

Districts across the province have been in a structural shortfall situation for nearly a decade. Recently this growing shortfall has been further compounded by the disappearance of the Annual Facilities Grant and the government's most recent round of cuts to education and its partners.

Anonymous said...

9:25 am. “Fully funded” is not the problem. The problem is that funding formula and how it disproportionately affects districts with a declining enrollment compared to districts with a more stable enrollment.

As far as the AFG grant’s we warned of the possibility this would occur and in our district we planned around this circumstance, other districts were less fortunate. We would always like to see more resources come our way and this is why the funding formula needs to be updated.

The Ministry is aware of the problem and there is a small task force currently looking to resolve the funding formula challenges. Obviously we do have our fingers crossed with the upcoming budget as well.

paul said...

Hey anon 9:25 a.m.
I should have noted the numbers are from BC Stats; you can review them here -
They are in Excel format, so you can look at them in a variety of ways.

Anonymous said...

Hey Paul, when did the pabbots start stalking your blog?

Anonymous said...

Bad as it`s going to be ,and it will be bad for many,i`ll take some comfort in the fact that some of us eating dog food in our old age will deserve it, having voted for campbell, harper and their ilk.

Anonymous said...

I don't agree that future governments will be able to get away with higher and higher burdens of tax and debt for the "young'uns". We have been greedy. We've been supportive of the systematic denial to them of low-cost advanced education; of full-time employment; of jobs with benefits and pensions; of even the dream of home ownership. As 11:58's comment infers, we (boomers) should not expect much sympathy from many of them.


Bernard von Schulmann said...

One thing to look at is the portion of the Canadian population in the workforce. Currently Canada has one of the highest levels of anywhere in the first world, we are at 67.3% of Canadians over the age of 14. Even with kids counted, it is 56.3%

Most countries would be happy to achieve a labour force participation rate of 56.3%. Our overall dependency ratio is low, most countries it is well over 50%.

Canada also has a quickly rise participation rate by seniors. As of 2008 10% of seniors were working.

We have a much more sustainable system than most countries because so many people are working

Anonymous said...

I am one of the young ones and ive been left in a position where i know i will need to save for my own success in retirement as well as paying for my kids to manage education at any decent levels and mostly because the older generatiosn were damn greedy and took theirs without thought to their kids and grandkids paying the tab so suck it up like the rest of us and to future generations get smarter look into your future and prepare

Jan Courtney said...

If you want to know where boomers are headed, just look at what their parents are "enjoying" now. Here's the link to an article published yesterday online and out in the March 2010 issue of Focus, and an excerpt from the article. Read and weep.

Seniors’ Care Homes in Need of Care
February 22nd, 2010 by Rob Wipond

With 70% of South Island residential homes rated medium or high risk, will the Ombudsperson’s report, new regulations from government, and more frequent inspections be enough to prevent the deepening crisis in seniors’ care?

In previous Focus articles (see “Who Has the Right to Control Your Life?” January 2009 and “Surviving the Borg,” March 2009), it became clear that seniors could far too easily and unscientifically be declared “incapable,” “incompetent” or “mentally ill” under BC’s archaic and draconian Patients Property Act or Mental Health Act, and instantly lose all of their rights. This opened the door to a variety of ills, including medical maltreatment, abuse from staff or family members, and care homes being unresponsive to complaints. Basically, as long as seniors’ rights weren’t strong, not much institutional will or political pressure to address their concerns could be generated.

A rescue plan lay in the wings, though: A modernized Adult Guardianship Act, many years in the making with stakeholders and already passed third reading in the legislature, would replace the Patients Property Act, and provide seniors in different circumstances with a much more variegated set of powers, rights and options.

Unfortunately, as Public Guardian and Trustee Jay Chalke, Q.C. laments in his latest annual report, that “long overdue” legislative change has been postponed indefinitely by the BC Liberals, supposedly “because of economic conditions.”

Ombudsperson Carter’s foremost finding is that the BC government has “not adequately identified the province’s commitment to care and the rights of seniors in residential care facilities.”

Reading the article, you begin to see that the governments in the U.S. are far more open that here in BC about abuse and infractions. For the first time in my life, I am looking longingly at the protection afforded citizens in the U.S. compared to here in BC. What a shame to see what we've become.