Population Aging Is Really About Babies
Let's compare what two documents say about the aging of the Canadian population. One is the speech from the throne. The other is the "Fiscal Sustainability Report" recently issued by the Parliamentary Budget Officer.
"This demographic shift poses a challenge to the sustainability of our social programs and our economy," the speech from the throne says. "Our government will meet the demands of the aging population." How will it do that? There was a promise to protect the income of retirees. And a promise to create a "Seniors Day." And that's it. There wasn't another word about one of the biggest challenges facing the country in the coming decades.
The PBO report agreed that population aging is a big problem. No surprise there. Anyone who's paying even the slightest attention to public affairs knows that. But then it looked at the causes of aging. And it talked about babies.
"Over the last 50 years, Canada, like most industrialized countries, has observed a sharp decline in its total fertility rate and a significant increase in life expectancies at birth," the report notes. "As a consequence, the current structure of the Canadian population makes it inevitable that the share of the population 65 years of age and over will rise significantly over the next three decades. Going forward, the ratio of prime working age Canadians to individuals of retirement age ... is projected to fall from approximately five-to-one in 2008 to 2.5-to-one by 2033, stabilizing at two-to-one by 2070."
Population aging is about babies. We used to have lots. Now we don't. Hence, the population is aging rapidly.
But try to find a politician who talks about aging like that. Or a journalist. The PBO's headline-grabbing alarm about long-term structural deficits was premised on demographic projections that assumed continued low fertility rates -- and yet media reports ignored the subject entirely.
That's all too typical. Of the countless speeches and stories about population aging I've read, I can't recall one that discussed the baby bust. They rattle on about old folks and health care and social services. There's often a reference to immigration, usually to note (correctly) that it's no solution. But there is never any mention of fertility rates and babies. (Outside Quebec, that is. In this regard, as in so many others, Quebec is a distinct society.)
This is bizarre. It's like having a big discussion about coping with the flu -- prepare more hospital beds! plan for workplace absenteeism! -- without mentioning that the flu is caused by a virus whose transmission can, to a certain extent, be controlled.
Canada's fertility rate hovers around 1.6 babies per woman. A population needs a fertility rate of 2.1 babies simply to maintain itself. The difference between 1.6 and 2.1 may not sound like much but it's huge. It's the essential cause of the population aging we are about to experience. And if it doesn't change it will, eventually, lead to rapid population decline. No modern country has ever experienced rapid population decline but it's safe to say that for a society like ours -- with growth woven into its DNA -- it would be nasty.
Think of population aging as the light rain before the thunderstorm.
This is not a new problem: The fertility rate slipped below the replacement level in the 1970s and has been stuck there ever since. But the effect of a demographic watershed like that is obscured by the glacial pace of demographics generally and by what is known as "demographic momentum" -- which ensures a growing population will continue to grow for decades beyond the moment when fertility rates stop contributing to the growth. So we look around, see nothing has changed, and shrug.
But something has changed. And it's profound. Remember that if we get to the point of rapid population decline, it will also generate demographic momentum, but in the other direction.
This is why it's critical to talk about babies now. It's too late for a rise in fertility rates to do anything to offset the pressures of population aging that will afflict us over the next decade or two. But if nothing changes now, those pressures will only get worse.
So why don't politicians talk about it? They will, actually. But only in private -- a strange phenomenon I'll discuss another day.