Canada’s Minister of Immigration, Marc Miller, has announced plans to cap the country’s non-permanent residents to curb the high population growth and ease pressure on housing and other services.
However, an economist, Carrie Freestone, says high rates of population growth driven by immigration help to lower the costs of an aging population but create other issues. The population will be at least 2.5% smaller in 2027 than it would have been without the restrictions on non-permanent residents.
However, failing to address the growing aging population can lead to significant economic, social, and healthcare costs. The National Institute of Aging said Canada’s rapidly ageing population presents challenges and opportunities to improve the social, financial and health policy landscape for older Canadians.
Despite this news, Canada still has one of the youngest working-age populations in the G7, according to Statistics Canada. A 2022 release said immigration will primarily drive Canada’s population increase in the coming decades. It is important to note that the curb is for three years.
Immigration has long been viewed as a strategy to slow the pace of population aging since immigrants, on average, are younger than the existing population. The average Canadian is 42 years old, while the average newcomer (permanent or non-permanent resident) is over a decade younger at age 28.
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Comparison
Comparing Canada’s aging trend with other G7 countries, CIC News reported in 2022 that 2021 census data showed that Canada’s population growth over the previous five years was driven mainly by immigration. The findings revealed Canada grew about twice as fast as other G7 countries, France, Germany, Italy, Japan, the U.K., and the U.S.
According to Statista, Italy, Germany, and Japan are characterized by an increasingly ageing population, and like Canada, Germany’s population continues to increase because of migration.
An aging population directly impacts the labour force, including potential labour shortages and decreased productivity. The share of the population over age 65 is increasing rapidly as the large baby boom generation retires, even though people work longer than they used to.
However, reducing immigration also has longer-run economic costs. According to Freestone, a segment of the population stops working but still consumes, creating a mismatch between consumer demand and the amount of goods and services produced in the economy. Government funding is impacted by slow income tax revenue growth and the struggle to keep up with the demand for services such as healthcare.
Healthcare Costs
The Conference Board of Canada estimates that the average senior’s healthcare costs about $12,000 per year, compared with $2,700 per person for the rest of the population. Meeting the healthcare needs of an aging population will drive the costs of Canada’s publicly funded healthcare system higher.
Healthcare for an aging population includes the growing need for long-term care facilities and home care services. This also means increased demand for social services and support systems for older people.
Reforms to the healthcare system are needed to accommodate the higher cost of slowing immigration.
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Pension System Strain
The strain on the public pension system requires increased funding. A 2020 Fraser Institute blog post said, “If Ottawa wants to mitigate the negative effects of our aging population, it must adopt pro-growth policies with an eye on fiscal sustainability.” In reality, funds spent on an aging population must be paid at some point, passing on the costs to future taxpayers.
Canada was proactive in the 1990s by pre-emptively increasing Canada Pension Plan contributions and establishing the Canada Pension Plan Investment Board (CPPIB) so that the national pension system would be fully funded.
Canada continued ramping up immigration targets, knowing that more newcomers would insulate against a shrinking labour force and its consequences. Recommend policies to retain older workers and encourage workforce participation among seniors.
A Government of Canada report: Promoting the labour force participation of older Canadians – Promising initiatives, addresses workforce challenges and labour force participation hurdles older Canadians face.
These include an awareness campaign to address ageism while promoting the benefits of hiring older individuals, funding for targeted training for older individuals, and supporting initiatives that would lead to more flexible work.
More than one in five working adults is now nearing retirement, according to Statistics Canada, which is a demographic shift that will create significant challenges for the Canadian workforce in the coming decade.
According to the Conference Board of Canada, federal health transfers to provinces and territories do not consider population aging. If something is done, the federal share of health care funding will stay below 20% by 2026.
The urgency for policy interventions and reforms to lower the potential costs associated with the aging population is clear.
