One of the biggest changes taking place in the developed world today is its aging. Here in B.C., those aged 65 and older make up about 15 per cent of the population, up from 10 per cent in 1979; that portion is expected to reach 23 per cent by 2030, according to BC Stats. And similar shifts are being seen in wealthy nations around the globe.
The baby boom generation is like the biggest ship in the bay: its giant wake influences the course of all others. And as that generation slides out of its current wealth-churning place in the workforce and into traditionally high-maintenance old age, leaders everywhere – both in politics and in business – struggle to imagine and prepare for the consequences. And that’s where things get tricky.
Does the greying of our population constitute a crisis to our health-care and finance systems that will compel us to make serious sacrifices to our standard of living? Or is that just fearmongering? Are we in fact better prepared for the shift than we realize – already making the subtle changes in our economy that we’ll need to adapt?
To help sort out where B.C.’s economy and public policies stand relative to this slow and predictable evolution, we’re joined by Andrew Ramlo, executive director of the population research institute Urban Futures; Gloria Gutman, professor emeritus and founder of SFU’s gerontology research centre and co-leader of the B.C. Network for Aging Research; and Adrian Dix, health critic for the BC NDP and former chief of staff to premier Glen Clark.
What is B.C.’s demographic situation today?
ANDREW RAMLO (left): There is a lot of talk about an aging population, and that’s quite simply manifested itself in the post-World War II baby boom generation. Right now the leading edge of that generation is over the age of 60, approaching 65. And the most typical person in B.C. is in their late 40s. Under a lot of common projections, the population over the age of 65 is going to grow almost five times more rapidly than the working-age population, those aged 25 to 64.
GLORIA GUTMAN (centre): Population aging occurs for two reasons: because you have more and more people living to be old and because there is a drop in the birth rate. People are not getting married and not making babies, and the birth rate has dropped around the world like a rock. We are down to 1.5. In Korea, they are down to 1.2. Around the world in various countries they’ve tried paying money to women, but that doesn’t do it. The Scandinavians have gotten themselves back to the replacement level, 2.1, basically by beefing up child care.
What is it about our aging population that has people so concerned?
GUTMAN: Well, it depends on whether you want the doom-and-gloom or the good-news scenario. Because the doom-and-gloom scenario is that all those old people are going to overwhelm the health-care and pension system. But it really depends on how you do your projections. If you project from a static situation, then you see some increases in health-care costs, but there are changes in practice and changes in the health of the population that need to be taken into consideration. When my father-in-law had his cataracts out, he was in the hospital for two weeks lying there with tea bags on his eyes. Today a cataract operation takes 20 minutes. You are in there for maybe two hours, total. And there are a number of other kinds of health-care practices where it’s been the same kind of thing.
So what does this look like from Victoria’s perspective? Surely this situation presents a challenge for future governments.
ADRIAN DIX (right): We’ve seen this dramatic increase in life expectancy in the 20th century, and this is all good news for us as human beings. The bad news, I’d argue, is that the way the baby boom generation has engaged in politics is problematic for its own self-interest. The development of the welfare state really benefited the baby boom generation when we got education. The advance in post-secondary education, K-to-12 education, all those things, were built up over those times and paid for by the generation who are currently seniors. And when the generation that benefited from that welfare state got to its highest earning years, there were dramatic cuts in marginal tax rates. Baby boom politicians and baby boom voters have engaged in these kinds of policies – things that will not benefit them perhaps when they move to become seniors. If we continue to limit the capacity of the state to support us when we need those services – which are important for the quality of life of seniors – it’s going to really come back to haunt us.
GUTMAN: With the last recession, much of the blame was put on the seniors population, and that was an excuse to cut services 10 years ago. If you look at the continuing-care system in B.C., it was a model for the rest of the world when it began in 1978; literally, people came from afar to study our system. But over time it has been eroded. Now to get into a bed in a care facility, you have to be very, very frail. The average entry age is 85. At the same time, there were cuts in the home-care side. So the preventive side got cut too. We’re now trying to maintain what we’ve got and trying to regain a little bit of what was here before. In terms of future cuts to senior services, I don’t see what they’re going to cut, because they already did it.
DIX: But they are going to cut. The health authorities are dealing with a shortfall of $319 million.
RAMLO: These cuts are economically driven, in the short term, and we’ve certainly seen other challenging times where there have been cuts to the general system. But these demographics change like a glacier: very, very slowly. And we can look and see what these longer-term changes are within some of the economic cycles.
The reality is, the cost of providing quality care to everyone is going to be falling on the shoulders of the working-age population, which is rapidly decreasing relative to the seniors population. Over the last decade, we’ve seen about a 35 per cent increase in per-capita health-care spending, once adjusted for inflation – well in excess of what the population has grown. And the rule of thumb is that as you get into those older stages of the life cycle, for every 10 years, your health-care costs on a per-capita basis just about double, and the last couple years of life are the most expensive. That demographic pattern of increasing costs with age plus increasing cost generally has the potential to pose some real challenges to the system.
DIX: But it’s not correct to say that the growing seniors population is a primary driver of that increase in health-care cost; it has been the per-patient cost. There is a tendency to discuss these issues in terms of seniors being some sort of burden on society, which isn’t true.[pagebreak]
And there’s also a problem in that we’re talking about health-care cuts being driven by short-term economic factors. Gutting your health system and your education system doesn’t make sense when we know that economic growth has been fairly stable over decades. It was almost exactly the same under the NDP in the ’90s as it has been in the Liberal decade; it just hasn’t been very stable year to year. Another way to look at health-care costs is that they have stayed fairly stable as a share of GDP.
RAMLO: Most definitely, you are right on the per-capita side: the largest increase in per-capita spending was actually in the 45-to-54-year-old age group, so it’s not the seniors. But looking at the demographic pattern, if I move from the 55-to-64 group into the 65-to-74 group, my health-care costs increase very, very significantly. And if you think that GDP is going to grow relatively constantly, even just maintaining that current pattern of age-specific health-care spending is going to gobble up a larger share of the GDP.
DIX: It is an argument for being smarter. The largest driver of health-care costs in recent times is prescription drug costs: outrageous profit-making in the pharmaceutical industry. But there are some opportunities coming because a whole bunch of drugs are coming off patent, which is good news for public health-care costs. So we’ve got to be smart about these things.
RAMLO: I agree. I don’t see any of these things as problems; I see them as challenges that we as a society have to deal with.
DIX: The other thing that we need to do now is have a discussion of our pension system. Currently B.C. has the second-highest or highest rate of seniors in the country living in poverty. And the really profound shift we’ve seen has been from progressive income taxes to flat taxes, and a cut in the marginal tax rates is really to the advantage of high-income working people against seniors. So we see seniors having to choose between prescription drugs and food and homes. People who have been working all their lives, who are getting full-fledged Canadian Pension Plan support, are still having to make those choices because PharmaCare in B.C. shifted costs onto middle-income seniors.
GUTMAN: And you see that approximately 50 per cent of women aged 65 and over who are widowed, divorced or never married are at or below the poverty level. This is in Canada; we are not talking about a Third World country.
DIX: If we make the decision to increase the rates, that has real costs to the economy now, but that’s the main way that we would lift incomes of the vast majority of seniors down the road. But you can’t decide 20 years from now that you want to lift it; you have to decide to start talking about lifting it now.
But if we need to deliver more health-care services and more pension support when the ratio between retired people and working people starts getting stretched, are we really going to be able to fund everything?
RAMLO: The current economic environment is going to give people some incentive to work longer. They are looking at retiring at 65, but that’s maybe 2½ decades of retirement they have to live through. There may be a lot of people out there saying, “Maybe I need to build my nest egg.”
DIX: Public policy has actually driven early retirement for a long time. I would guess that the number of people working between 55 and 59 has dropped dramatically, especially in the public sector. In the self-employed side, it hasn’t changed that much; my dad is still working at his business at 79 – he’s driving the scale up. And then on the private-sector side, it’s not as happy a story as the public-sector side because some of the industries simply had layoffs. So you have to change the incentives.
With some of these changes to the workforce, is it still realistic to expect that our economy can keep growing at a regular rate of more than two per cent?
RAMLO: Oh absolutely, but the system that we are going to see that will make that happen is going to be much different than what it was in the past. There is going to be a lot more grey hair, and the productivity gains specifically for the B.C. economy in the coming years are going to be much more challenging than they have been over the last 30. On the resource side, you can only give a guy a dump truck or an excavator that is so big – and on the service side, you can only put in so many self-serve kiosks.
How do you expect the aging population to affect B.C.’s political landscape?
DIX: Seniors have an increasing political power, but it is not exercised collectively in Canada the way it is in other jurisdictions. There are some very vocal and effective seniors groups in B.C., but they don’t have the force that some of the groups in, say, the United States have had in some of their debates around social security and other things. And I think this is something that is going to change. I think this may drive the primary-care and the home-care discussion. That will be the force that will drive some of these positive changes.
GUTMAN: The boomers have been relatively quiet. It is somewhat surprising to some of us, given that they should be concerned about their parents as well as themselves. But I think we will see some interesting things as they start to get into that age. If the dormant political power that we saw in the ’60s comes back, you can just imagine people chaining themselves to the door of the nursing home with a sign saying We’re Not Going to Eat That Slop. But at the moment, they are busy fighting the thought that they should be aging.
So what are we supposed to believe: that we have to make radical cuts to services to deal with all the costs associated with more seniors, or that we can make some smart decisions and keep delivering the services we’re used to, trusting that the economy will be strong enough to carry us through?
RAMLO: We are coming through a great demographic dividend as the post-World War II boom came through the labour force. We had great increases in wealth and productivity and all those great things. But now we are faced with a demographic dilemma. We are going to have to take a hard look at all of the systems and how we go about doing things. Because it is going to change, and we need to put in place some strategy to deal with those things in a creative and constructive way. But from my perspective as a forecaster and a numbers nerd, I look at the picture that my numbers paint and it doesn’t paint doom and gloom.
GUTMAN: The fact is we do have lead time. Thirty years ago, the Economic Council of Canada said that down the road we’re going to need everybody to work who could work. And that is the situation. It is progressive that we finally got rid of mandatory retirement, but our major federal retraining policy up to now has been for workers up to 40. Anything after that and they just said you are too old and we aren’t going to retrain you. We need to open up retraining opportunities for people if we want them to stay in the labour force and be productive, unless you want a self-fulfilling prophecy. But if you say, yes, they are trainable, then we should be able to maximize those who wish to continue working. They may not work five days a week, nine to five, but take the best of them and use them to the advantage of the economy.
DIX: I think there is a tendency, and we’ve seen it, to treat this as a justification for reducing the scope of public health care, to transfer cost essentially from the tax base to the sick. We have a system that has consistently cut primary care and home support. We can do better than this. I think that the pessimistic view is not the right view. We have to be aggressive and optimistic on what it means to have more seniors and aggressively support policy that will continue to mean a high quality of life for people who are living longer.
RAMLO: We are going to need to recognize that the coming decades are going to be much different than what the past has been. This is really system-wide. And it’s through creative conversation, research and information that we are going to be able to come up with some creative solutions.