School of Policy Studies

School of Policy Studies
School of Policy Studies

BOOM, BUST AND ECONOMIC HEADACHES

The dramatic greying of Canada’s population will reshape the economy, stifle growth and force governments to provide for a growing number of seniors with a shrinking pool of taxpayers

Don Drummon in David Parkinson, Janet McFarland and Barrie McKenna
The GLobe and Mail, 8 November 2015 

The waves of retiring baby boomers are putting governments in an increasingly uncomfortable fiscal squeeze. 

On the one hand, the boomers’ exit from the labour force will slow economic growth, eroding the tax base and eating into government revenues. 

Meanwhile, this growing bulge of seniors needs and demands more from their governments – most notably, health care and income support programs, such as Old Age Security. Health care spending in particular increases significantly for people 65 and older.

The result is that boomers are putting intense and growing pressure on government budgets. The provinces in particular generally aren’t prepared for what’s coming, warns Don Drummond, a former senior federal Finance official and Toronto-Dominion Bank chief economist.

“The potential growth rate is about to come down fairly sharply in Canada. Almost all forecasters have missed that,” says Mr. Drummond, now a visiting scholar at Queen’s University.

n a recent study for the Centre for the Study of Living Standards, Mr. Drummond and two research colleagues estimated that Canada’s economy will grow an average of 1.6 per cent a year from 2014 to 2038, well below the 2-per-cent pace experienced from 2000 to 2014. 

“People tend to think of demography as slow moving,” he says. “It’s not, and particularly not over the next 20 years. It’s moving very rapidly.”

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