Mr. Speaker, in order to project the future, Winston Churchill always suggested looking to the past. If we are to project the future costs of the old age security program, we must look to the increase in costs we have experienced in this program in recent history.
When the Government of Canada introduced old age security, in roughly 1950, the age of eligibility was 70 and the average life expectancy was 69. That meant that the average person would not receive any old age security. People would not live long enough. Today, one can receive old age security at 65 and collect it until the average end of life, age 82. That means a 17-year average period of collection for a given Canadian. The massive increase in costs that result from this demographic reality are obvious.
In 1975, for example, there were seven working people for every single senior. Now, there are four working people for every single senior. That trajectory will not only continue over the next two decades; it will accelerate.
This is the point where we take the recent history and project it into the future in order to see ahead and look a little further down the road. Within 20 years, the cost of OAS will triple, the number of people receiving it will double and the number of workers supporting each retiree will fall by half.
Why will this occur? The first and most obvious example is that baby boomers are going to retire. This large bubble of population demographic has travelled through the age categories and is about to reach its period of golden years when the people are too old to work and are expected to collect from the system in the period after their retirement.
There is a second reason why the costs will go up. That is that the life expectancy of that larger group of people is increasing. That means that the duration during which that larger group of people is collecting OAS will lengthen.
I did some interesting research through Statistics Canada data and found that the average life expectancy is growing by 47 days each year. That means that people who die today at their average life expectancy will be about 47 days older than the people who died last year at their average life expectancy. Every year that goes by, the average person lives almost 50 days longer. Therefore, in 2031 the average person will live to about 84. That means, under the current eligibility for OAS, a person could collect for almost two decades.
This was a program that was created with the expectation that the average person would not reach the age to collect it at all, and over the last half century, because people are living longer and because the benefit has been made more generous with the eligibility age lowered to 65 from 70, there is already a very long time during which someone can collect this benefit.
We can understand, with the increase in recipients and the relative decline in contributors, that the cost of the program is going to rise. That is exactly what the research demonstrates.
Using information from a report by Christopher Ragan at McGill University, the Macdonald-Laurier Institute calculated, “...by 2040 Canada would face a $67 billion deficit (in today’s dollars) based on current policies and demographic change”. The same institute stated that the old age security program will account for one-quarter of total spending by the federal government by 2030.
It goes on to state:
The federal government currently spends about 15 per cent of all spending on OAS/GIS and that’s supposed to be go up to about 25 per cent. But if you’re going to put up spending on that by 10 percentage points of everything the federal government spends, you’re going to have to either put up taxes or make some cuts somewhere else.
Just to visualize, for every $1 that the Government of Canada spends two decades from now, 25¢ will be spent on OAS and income support for our seniors. That will mean less money for health care or higher taxes for working families in Canada. To summarize, when there are more people collecting from and relatively fewer people paying into OAS, we have eventual shortfalls. It is like a glass of water. One can only drink out of the cup what is poured into it. If there are relatively fewer people pouring into the cup and relatively more people drinking out of the cup, eventually somebody goes thirsty. That is why we must take action now to avoid such a drought.
We have a Prime Minister who, in the spirit of John A. Macdonald, seeks not short-term tactical political advantage but has the capacity to look a little farther. It is clear that there is no political advantage to the Prime Minister in making this change. It has given the opposition a great opportunity to attack the government and fear-monger with seniors, but the Prime Minister did it anyway because he is prepared to accept the short-term political cost in order to advance the long-term national interest of the nation. He is doing exactly what Germany and Australia have done, which is to gradually and with great notice increase the age of eligibility from 65 to 67, a two-year increase over a gradual period of time.
The opposition says that it opposes this approach but has no suggestion on how it would make up the cost differences that we expect due to these demographic and mathematical realities. It also proposes a 45-day work year for employment insurance, which means that somebody could work for 45 days and then collect employment insurance for the rest of the year. It has supported a Liberal bill that would make newcomers eligible for OAS after only living in the country for three years. Those proposals would cost billions of dollars and the only proposal that the opposition offers to pay for it is to increase taxes on business.
Here is the problem with that. It comes back to pensions again. The reality is that the pension system in this country is heavily reliant on those same businesses that the opposition seeks to tax. I will give one example. The Canada Post pension plan for unionized postal workers is invested in the big businesses that the opposition wants to tax. The top five holdings as of last June were TD Bank, Royal Bank, Bank of Nova Scotia, Suncor and Canadian Natural Resources, banks and oil companies, the twin villains in any left wing storyline. When we increase taxes on those companies, it is an accounting fact that they have less money to pay in distributions to their shareholders, the largest of whom happen to be pension funds that provide for seniors who worked as unionized, often blue collar people, and expect to collect a dignified retirement as a result of the after tax profitability of the companies in which those funds are invested.
We are taking responsible action to protect our safety net, to keep our economy strong and to create jobs. That is the vision of the Prime Minister. Does it take courage? Yes. Is it worth it? Absolutely.