An Evolving Problem

Fate and demographics have a good deal in common.  In either case outcomes are inevitable.  The consequences are predictable.

For example, a recent National Post story noted that in Canada in 2010 there were 4.9 workers for each retired person.  By 2030 there will be 2.7.  The story addresses the idea that workers pay more taxes than retirees.  Worse yet, retirees use more services.  In particular health care.

Rising costs, declining revenue does not work for my budget and I suppose not for governments either.

Governments will have choices.  In decreasing order of probability they will:

  1. Increase taxes.  Or find new revenue tools if anyone listens to Ontario’s premier Wynne.  Good luck with that.  There is a finite limit to how much taxation people will tolerate and Ontario at least is pushing on the limit.  I expect to see an estate tax or something very similar.  Nearly inevitable in my view.
  2. Cancel or significantly downsize some of the current programs.  There may be the choice of downsizing ones that are popular so that people will accept taxation instead of the cuts.
  3. Increase immigration.  That only works if the new immigrants are young and can make an economic contribution.  Refugees are not an answer at least in the short run.  Controlling where they settle in Canada will be an issue.
  4. Choose to provide only useful services.
  5. Become efficient at supplying services.  Services people are pleased that the government can provide at such a good price.  There may be an issue about what “useful” means and there could be problems with the civil service unions.

The problem is inevitable and it is difficult to solve.  Governments should begin their work sooner rather than later.  Earlier reduces the chaos.  Emergency measures serve no one.  Look at the situation in Greece or Spain or Portugal.

People in general are aware of limits.  People are practical and they will act reasonably if they are given accurate and timely information.

Governments can solve the problem if they stop acting stupidly and begin to educate and enlist the help of the people.  I suppose that one could have been the least probable in the list.

You should consider the impact of this problem on your retirement and estate plans


Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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