Canada is aging – Some long-term implications

Canada’s population has grown from 25.8 million in 1985 to 35.9 million by 2015. The province of Ontario constitutes the largest share of Canada’s population – 36% in the mid-eighties to 38.5% in the mid 2015 (Chart 1). The saying that “young man go west” seems to have been working over the last thirty years as each of the two western provinces – Alberta and British Columbia – has increased its relative share of population by two percentage points. On the other hand, a province that lost its relative share doesn’t mean that its population didn’t grow over time. Indeed it did, but not that substantive to raise its share.

Chart 1. Provincial shares of population of Canada, 1985 and 2015

What’s the source of this growth in population, and where are these additional ten million persons living? How have they contributed to the demographic mix of provincial populations? And, what are some of the economic implications of demographic changes?

This post, first, looks at the change in provincial demographic mix by age, and then dwells on some key economic and financial implications of such changes, including provincial and federal budgets.

Change in the source of growth of population
According to Statistics Canada’s CANSIM Table 051-004, more than two-thirds of the growth in population over the 1984/85 year was due to the net natural increase, i.e. the number of births less deaths. Thirty years later, i.e. over the 2014/2015 year, the net immigration (i.e., the number of immigrants less emigrants) rather than the natural increase accounted for a similar proportion of growth in population. Canada’s low birth rate is no longer contributing that much to its population growth. Canada is now depending heavily on immigration as its key source of population growth. Evidently, a good majority of these immigrants are in the 15-64 age group – potential labour force participants, and spenders, contributing to governments’ revenues in terms of income, consumption, and sales taxes. In other words, these are the potential consumers whose spending is vital to the growth of the both the provincial and national economies.

Where these additional ten million persons settled?
According to CANSIM Table 051-0001, 96% of these persons settled in four provinces namely, Ontario (44.9%), Alberta (17.9%), British Columbia (17.1%), and Quebec (16.0%). The remaining four percent were in other six provinces and Northwest territories. Newfoundland and Labrador is the only province that actually lost population between 1985 and 2015 – just by 0.5%. All other provinces gained.

In terms of the rate of growth in population over the 1985-2015 period, Alberta topped at 74.5%, followed by British Columbia at 57.4% and Ontario at 48.4% (Chart 2). With Newfoundland showing a drop of 8.9%, the province of New Brunswick experienced the smallest growth at 4.2%.

Chart 2. Population growth by province, Canada, 1985-2015

Canada continues to age
Canada is aging. The elderly (i.e., persons aged 65 and over) constituted 11.6% of the total population in 1985 compared to 16.1% in 2015 (Chart 3). Consequently, the median age of Canadians has risen from 31 years to 41 years (Chart 4). Put simply, one-half of Canada’s population was under 31 years of age in 1985, rising to 41 years by 2015.

Chart 3. Persons 65 years old and over as % of total population by province, Canada, 1985-2015

Chart 4. Median age of population by province, Canada, 1985-2015

The national picture portrays the situation across provinces. Although the proportion of the elderly population varies among provinces – anywhere between 7.5% and 12.0% in 1985 compared with 11.6% and 19.0% in 2015. The increasing spread in the provincial proportions of the elderly shows that some provinces are aging more rapidly than others. Alberta remains the province with relatively younger population as its proportion of the elderly is still the lowest. The median age of Albertans has risen from 29 years to 36 years compared with 30 years to 45 years for New Brunswickers – their proportion (19%) of the elderly was the highest of all provinces in 2015.

The aging process is also tilting the sex ratio as the proportion of women rises as one moves from 65-74 to 75-84 to 85+ years groups. For example, women accounted for around 55% of all persons in the 65-74 group, compared with around 70% of those aged 85 years and over (Chart 5). This isn’t surprising as women live longer than men – statistically speaking.

Chart 5. Women as % of total population in older age groups, Canada, 1985-2015

Population shrinking at the lower end
The proportion of population under 15 years of age has dropped considerably over the last thirty years. At the national level, it fell from 22.8% in 1985 to 17.1% in 2015 – a drop of 5.7, or roughly, six percentage points (Chart 6). The chart shows that the central and western provinces with relatively bigger in-takes of immigrants experienced smaller losses in their proportions of persons under 15 than the four eastern provinces that experienced losses anywhere between eight and thirteen percentage points. This is again due to the low rate of birth in Canada. Canadians seem to prefer having smaller families or voluntarily restrain to have more children because of the rising costs of raising children in an uncertain economic environment.

Chart 6. Persons <15 years of age as % of total population by province, Canada, 1985-2015

Largely because of immigration, the core of the age distribution, i.e., the 15-64 group’s proportion, has remained in tact. Nationally, this group comprised two-thirds of the total population at both points of time, whereas across provinces, the proportion ranged between 62% and 69%. In fact, the two larger central provinces have experienced a drop in their respective proportions of the 15-64 population – Quebec losing 2.7 percentage points while Ontario about one percentage point. This could be largely be due to the shift in immigrants’ desire to settle in Alberta and British Columbia rather than in Quebec and Ontario, for better job prospects and associated economic gains.

There is a cost to bear for losing population. Under the Canadian federal system, federal government gives social and/or equalization transfers to a province and the amount of this transfer is based on the number of persons in a province – or, on a per head basis. So any province losing population would get a reduced transfer as well. For those not familiar with the Canadian federal system, this federal transfer is meant to ensure that Canadians across the land receive similar services. The delivery of most of these services is administered by  provinces.

Some economic implications of changes in the age structure of Canada’s population
Let’s first look at the consequences of the shrinking proportion of those under fifteen years of age. The first and foremost is its potential long-term effect on the primary and secondary schools, the number and types of employment these offer. If we didn’t have a stable and rising flow of home-grown students, we would not have enough of schooling population, and hence, educated and skilled workers needed for a healthy, productive, and competitive economy. Granted, we could fill the void at post-secondary institutions by having more students from abroad, but we can’t do the same to fill the primary and secondary schools.

The shrinking number of children also means lesser expenditure on schooling, child care services, as well as lesser child/family benefits to families, which in turn, implies lesser spending by families as well. Such consumer spending is essential for a growing economy.

On the other hand, the rising segment of the elderly would call for private and government measures to provide adequate incomes for the elderly, their living arrangements in retirement, nursing, or community care homes, medical and hospital facilities to care for the chronic and long-term ill with debilitating or terminal disease, home care, mobility, etc. What it all means is that both federal and provincial governments would have to spend more on the care of older persons.

Since the expenditure on education and health primarily falls under provincial jurisdiction,the changing demographic mix would enforce provinces to spend more on health than on education. Since these two expenditures account for the lion’s share of the total expenditure of each provincial government, the share spent on health is likely to grow considerably for years to come.

Another consequence of the rising number of older persons is the way they could impact lives of their family members including children. Those married with children, already in the throes of balancing home and job life, would have additional responsibility to care for their older parents or relatives. This is the so-called ‘sandwich generation’, who is not only responsible to attend to the needs, including financial, of their children, but also to those of their older parents/relatives. This added responsibility is likely to stress out many young and middle-age families, some culminating in separations or divorces – adding more social problems.

Again, from an economic point of view, the rising proportion of the elderly means lesser consumer spending – as older people no longer need any heavy duty items. They may have more wealth, but they remain frugal spenders.

Canada’s population is not only aging, but also due to its low birth rate, losing population under 15 years of age. That means, more spending on health to look after the needs of older persons, and less on education – especially on elementary and high school. This changing demographic mix would likely keep federal and provincial governments to keep adjusting their budgets on education, health, and other social services – designed strictly for children and the elderly. For any province losing population would also mean lesser transfers from the federal government.

In economic terms, both the shrinkage in the number of children and the rising number of older persons are detrimental to the overall consumer spending, and that, in turn, means dampened future growth of the nation’s economy. Considering the constrained spending of the majority of the 15-64 group, who is already carrying financial obligations on mortgages and other debts, and with little or no change to spare or save, the future of consumer spending in Canada, vital to is economy, doesn’t look that rosy.

Tags: Canada’s population, Canadian provinces, Population by age, Consumer spending, Economic/social implications of aging, Statistics Canada