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Winnipeg Free Press - PRINT EDITION
Aging population will strain economy: Bank of Canada
OTTAWA -- The economy is starting to pay a price as a result of the aging population, and the cost will grow unless Canadians adjust, says the Bank of Canada.
In a speech to the Economic Club in Toronto, deputy governor Jean Boiven said the aging workforce will reduce potential growth in Canada by about 0.2 percentage points by 2014. "The aging of the population has begun and it will soon accelerate," he said in notes released in Ottawa.
"Ultimately, if we ignore the reality of aging and make no adjustments, the consequence will be a lower standard of living."
By 2031, one out of four people will be 65 or older. By the central bank's calculations, the average income of Canadians could be as much as 20 per cent lower in two decades than it otherwise would be due to the aging population.
Boiven said the demographic squeeze -- caused by baby boomers, low birth rates and longer life expectancy -- has major implications for both governments and businesses.
Aging will put pressure on the labour markets, he said, as well as individual savings rates, government finances and the redistribution of wealth across generations.
"The pressure points show that change is upon us no matter what we do," he said. "To avoid drastic declines in our living standards or shifting too great a burden on the next generations, there are only three options -- more work, greater productivity and higher savings."
The federal government has already taken some action. In December, Finance Minister Jim Flaherty capped future growth in health care spending to match the growth in the economy. In last week's budget, Ottawa said it will move the retirement age for the purpose of receiving old age security benefits to 67 from 65, starting in 2023, in part to encourage Canadians to work longer.
Boiven said the most effective way to minimize the impact of aging is for firms to become more productive. As much as two-thirds of expected average income loss caused by aging could be regained, he said, if the country's productivity rate returned to its average over the past 50 years.
-- The Canadian Press
Republished from the Winnipeg Free Press print edition April 5, 2012 B4
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