Chris Young/The Canadian Press
I’ve spent this fall engaging readers about the problem governments created decades ago by failing to prepare for the costs associated with boomers getting older. Old Age Security and medical care are concentrated in later life, yet taxation has been largely age-blind.
The result is now unavoidable. As the share of seniors doubled from 10 to 20 per cent over the past half-century, the annual cost of OAS has risen rapidly. Its price tag in 2029 will be $60-billion higher than in 2014, more than the entire federal deficit projected for the decade’s end. At the provincial level, population aging adds $66-billion annually to medical budgets, shifting nearly every province from surplus to deficit.
This means boomers’ wallets are protected by government borrowing – comforting in the short term but risky over time.
The politics of Old Age Security reform are shifting
Younger Canadians face the flip side. Since boomers’ costs were never fully prepaid, most of the gains from economic growth now flow to priorities for older generations, leaving less for housing, child care, postsecondary education and climate action – even as younger generations contribute more income taxes to finance boomers’ retirements.
Fixing this problem requires clarity about when policy should be less sensitive to age, and when it should be more so. Cash subsidies are best targeted based on need, not age. But universal access to essential services must be protected by paying closer attention to age – accounting for whether different generations will, or will not, fully pay for the services they use.
That’s why I’ve argued OAS should be modernized by asking retirees with six-figure household incomes to accept smaller subsidies. Today, only 4 per cent of seniors have incomes too high to qualify, so $14-billion of OAS’s $83-billion budget flows to retirees in households enjoying more than $100,000 in annual income.
Under my proposal, that share would fall to about $7-billion. The savings would eliminate seniors’ poverty with an extra $5,000 for every poor retiree, while still freeing billions to ease affordability pressures facing younger generations.
Reducing cash subsidies for financially secure boomers can help correct governments’ past failure to raise enough revenue to fund their generations’ retirement benefits and medical care. But asking people to accept less cancer care or reduced access to specialists would be neither just nor cost-effective.
Some might think the solution is to make wealthier boomers pay more at the bedside. But decades of research show that public medical systems function best when everyone enters through the same door at the point of care, with more affluent citizens contributing more through progressive taxation.
A boost to OAS would help too little where it’s needed, and too much where it’s not
Charging wealthier patients fees at the bedside pushes them toward private alternatives. Profit-motivated providers then skim easier, lower-cost patients, leaving the most complex and expensive care to the taxpayer-funded system – while also shrinking its tax base.
Protecting universal access will therefore require a revenue discussion. Since younger generations already pay 20 to 40 per cent more income taxes toward older people’s well-being than boomers did at the same age, financially secure retirees may need to make up for lost time through annual medical-care premiums collected through the tax system – much in the same way boomers were asked to absorb 68-per-cent CPP premium increases starting in the late 1990s.
Some may try to deflect by focusing only on the ultra-wealthy. While they do control a frightening share of global resources, Canada’s fiscal math makes clear that a resilient revenue base cannot start and end with the top 1 per cent.
Consider the NDP’s proposed wealth tax in the 2025 election campaign, estimated to raise $23-billion a year from fortunes above $10-million. That sounds substantial – until you recall that Ottawa’s deficit now exceeds $70-billion and population aging adds $66-billion to provincial medical spending.
This makes the work ahead politically difficult. Year’s end invites reflection on the values that should guide us forward.
Cash subsidies ought to be targeted by need. Essential services such as health care, education and child care should be universal at the point of entry – funded through progressive taxation that reflects how costs fall across generations. That is how we protect boomers’ healthy retirements and keep faith with the generations that follow.
Dr. Paul Kershaw is a policy professor at UBC. and the founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on X, Facebook, Bluesky, and Instagram, as well as subscribe to Paul’s Hard Truths podcast.