Mostafa Askari Assistant Parliamentary Budget Officer, Economic and - PowerPoint PPT Presentation

Economic and Fiscal Impacts of population Ageing in Canada Presentation to the CEA-CDESG Panel Calgary June 9, 2012 Mostafa Askari Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis

The Demographic Transition per cent 3.0 60 Population 65+ relative to population 15-64 (RHS) 2.5 50 Population growth (LHS) 2.0 40 1.5 30 1.0 20 0.5 10 0.0 0 1921 1941 1961 1981 2001 2021 2041 2061 2081 Source: Office of the PBO; Statistics Canada

Projection of potential output 1. Potential, or trend, GDP is projected from the supply side of the economy using the following identity: Y   Y L L where: Y is real GDP, L is total labour input and (Y/L) is labour productivity 2. Labour input is a function of the size of the working age population (LFPOP), the aggregate employment rate (LFER) and average weekly hours worked by those employed (AHW)     L LFPOP LFER AHW 52 3. Labour productivity growth imbeds technological change and capital deepening 2

Working Age Population Growth, 1977 to 2085 (Per cent) 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 1976 1991 2006 2021 2036 2051 2066 2081 3

Employment Rate by Age (Per cent) 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 Females 20 20 Males 10 10 0 0 15 20 25 30 35 40 45 50 55 60 65 70+ 4

Aggregate Employment Rate, 1976 to 2085 (Per cent) 65 65 Trend 63 63 Actual Projection 61 61 59 59 57 57 55 55 53 53 1976 1991 2006 2021 2036 2051 2066 2081 5

Average Weekly Hours Worked, 1976 to 2085 (Level) 36.5 36.5 Trend 36.0 36.0 Actual Projection 35.5 35.5 35.0 35.0 34.5 34.5 34.0 34.0 33.5 33.5 1976 1991 2006 2021 2036 2051 2066 2081 6

Average Annual Real GDP Growth (Per cent) 6 6 Total hours worked 5.0 5 5 Labour productivity 4 4 3 3 2.6 1.8 2 2 1 1 0 0 1962-1976 1977-2010 2011-2086

Provincial-Territorial Government Health Expenditures by Age Group, 1998 and 2008 (Dollars per capita) 25,000 25,000 1998 2008 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 <1 1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90+

Provincial-Territorial Health Spending (Per cent of GDP) 16 16 2010-11 14 14 12 12 10 10 8 8 6 6 4 4 1975-76 1995-96 2015-16 2035-36 2055-56 2075-76

Federal CHT Relative to Provincial-Territorial Health Spending (Per cent) 50 50 45 45 40 40 6% CHT escalator (FSR 2011) 35 35 30 30 25 25 Average = 18.6% 20 20 Average = 13.8% Average = 11.9% 15 15 10 10 2010-11 2025-26 2040-41 2055-56 2070-71 2085-86

Federal Elderly Benefits (Per cent of GDP) 4.0 4.0 3.5 3.5 Baseline 2010-11 3.0 3.0 2.5 2.5 Inflation-only indexation 2.0 2.0 1.5 1.5 1.0 1.0 1961-62 1981-82 2001-02 2021-22 2041-42 2061-62 2081-82

Consolidated Federal and Provincial-Territorial Program Spending (Per cent of GDP) 50 50 45 45 2010-11 Consolidated 40 40 35 35 30 30 25 Provincial-Territorial 25 20 20 15 15 10 10 Federal 5 5 0 0 1961-62 1981-82 2001-02 2021-22 2041-42 2061-62 2081-82

Projection of long-term operating balance and debt-to-GDP ratio 10 10 500 500 8 8 2010-11 400 400 6 6 Federal Consolidated 4 4 300 300 2 2 0 0 200 200 -2 -2 Consolidated -4 -4 Provincial-Territorial 100 100 -6 -6 Provincial-Territorial 2010-11 Federal -8 -8 0 0 1991-92 2006-07 2021-22 2036-37 2051-52 2066-67 2081-82 1991-92 2006-07 2021-22 2036-37 2051-52 2066-67 2081-82 13

Fiscal Gap Estimates (Per cent GDP) 4 4 2.9 3 3 2.4 2 2 1 1 0 0 -0.4 -1 -1 Consolidated Provincial-Territorial Federal