Addressing reporters before tabling the federal budget implementation bill yesterday, Finance Minister Jim Flaherty called for fiscal restraint from provincial governments in light of a new Macdonald-Laurier Institute report warning that some jurisdictions might be heading for a Greek-style crisis in the next two or three decades. Then, as Maclean’s John Geddes noted, when asked about whether equalization payments to the provinces should be adjusted to take into account the fact that some face higher costs than others tied to population aging, he proceeded to say that Canada’s swelling ranks of seniors do not represent a particularly worrying trend for our public coffers.
That is ironic, because population aging is the first risk factor the MLI report mentions when discussing the outlook for provincial budgets 20 to 30 years from now. “Due to population aging, the provincial models forecast lower labor force participation, less economic growth and higher health spending in later years,” writes author Marc Joffe, a public sector credit consultant in San Francisco and former Moody’s Analytics senior official.
That surely is bad news for the Atlantic provinces, where the gray-haired share of the population is the largest in Canada and rapidly expanding. The West, by contrast, is still relatively “young,” with Alberta leading the pack with the lowest share of persons aged 65 and over, according to Statistics Canada. But before you go, “ah-ha! This is really all about Eastern Canada vs. Western Canada,” you should know that Alberta is one of the fastest-aging jurisdictions in the country. And that, along with high deficits and an economy particularly vulnerable to volatile energy markets, is why the MLI study calculates the provinces has the highest risk of defaulting 30 years from now.
Joffe’s warnings have been received with some scepticism, his model rejects some commonly used metrics of fiscal stability and his assumptions, as he openly acknowledges, are up for debate. But the point he makes about Alberta’s demographics is one that has gone under the radar for far too long. As the chart below shows, Alberta stands right behind Atlantic Canada in terms of the speed at which its population will be aging between now and 2036:
*Source: Maclean’s calculations based on Statistics Canada. Table 052-0005 – Projected population, by projection scenario, sex and age group as of July 1, Canada, provinces and territories, annual(persons). Scenario selected: M1, (medium growth based on 1981-2008 historical changes). What we called “pace of population aging” is simply the difference between the shares of population 65 and over in 2036 and 2012.