Government shouldn’t pit seniors against Generation Squeeze

The federal government spends nearly $21,000 annually per retiree compared to $4,350 per person under age 45

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VANCOUVER, BC Oct 9, 2015/ Troy Media – Over the last 10 years, the Conservative federal government has invested more in the oldest third of the Canadian population while cutting their taxes.

Even my 71-year-old mother doesn’t believe this is good. She knows it means too little attention is being paid to the growing economic and environmental risks facing her kids and grandchildren.

Despite one of Prime Minister Stephen Harper’s favourite talking points – that middle incomes have increased on his watch – out of context, this fact obscures the bigger picture. Compared to a generation ago, twice as many young Canadians now give up years in the labour market to pursue post-secondary education in order to compete for jobs. After spending more time and money on education, young adults struggle to land stable, full-time work with benefits. For those who do, full-time earnings have not kept pace with housing prices.

The average cost of housing is up $116,000 after inflation, compared to 2005. Housing costs more even as apartments get smaller in our bigger cities. This squeezes younger generations for space, time and money just when we want to start our families. Compared to when Harper became PM a decade ago, we must work an extra two to three years to save a 20 per cent down payment.

Then we must carry larger mortgages, working an extra month to make annual payments compared to a generation ago – even though interest rates are low compared to the 1980s.

For many, this crushes dreams of home ownership while imposing rents driven up by higher property prices.

The housing market that frustrates Generation Squeeze has been good for my mom’s demographic. The average person 55 and older has realized more than $165,000 in additional value in their homes after inflation, compared to 1977.

I’m glad my mom accumulated this wealth. But she and I wonder why the federal government prioritized cutting taxes for the aging population. Income splitting for seniors costs Ottawa $1.1 billion annually. The pension income credit costs $1.1 billion. The tax break for anyone 65 and over costs the government $3 billion.

Not done there, Harper doubled the contribution limit for Tax Free Savings Accounts in his election budget. Canadians 60 and older are three to five times more likely to max out their TFSAs than those age 18 to 49. TFSAs shelter deposits from further taxation no matter how well investments pay off.

Harper also cut $168 million a year in taxes for affluent seniors by changing rules governing Registered Retirement Income Funds – at a cost that is greater in one year than all that Harper added to student grants over the next three years.

Ironically, the opposition parties accuse Harper of cutting government spending because of his tax cuts. But this isn’t entirely accurate. Annual spending on Old Age Security increased by $8 billion after inflation over Harper’s decade in power, and the Canada Health Transfer increased $10 billion. Forty-seven per cent of health-care spending goes to 16 per cent of the population aged 65 and over.

What Harper didn’t increase substantially is spending on younger generations. A ground breaking new study shows that the federal government spends nearly $21,000 annually per retiree compared to $4,350 per person under the age of 45. This calculation includes the PM’s universal child-care benefit, and income splitting for one in three families with kids.

Harper’s main rivals as we head toward the Oct. 19 federal election promise to do better. However, their projections don’t always budget enough to get the job done.

The New Democrats talk about $15 per day child care. But the $1.9 billion they would budget isn’t a quarter of what is required.

The Liberal platform budgets the most of the big three parties for families raising kids. But their promise to extend parental leave by six months is backed by too little money to make a meaningful difference, and they would invest less directly in child-care services.

By the platform numbers, the national party last in the polls is first for proposing bigger changes for younger Canadians. The Greens would eliminate tuition for a first post-secondary degree, may reallocate three times more money for child-care services than the NDP, and promise more money than other parties for a national housing strategy.

No matter which federal party you prefer, it’s time all parties commit Ottawa to reporting how government spending breaks down by age, and whether we are leaving at least as much as we inherited.

Dr. Paul Kershaw is a policy professor at the University of BC, and Founder of Generation Squeeze (gensqueeze.ca).

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