Aging Population: Big Risk to Canada’s Prosperity
Aging population is a demographic issue whereby the population of agiven country consists of more people with 65 years and above thanyoung people. Generally, it is a sign of future decrease inpopulation and a country may have to rely on immigration for asustainable source of employment. Canada is currently experiencing asignificant demographic change characterized by increased agingpopulation. According to Statistics Canada (2015), the primary causeof population growth in Canada is immigration because the localpopulation faces the challenge of low fertility rate and agingpopulation, and by 2030 the number of deaths will be more than thenumber of births. CIA World Factbook (2015) suggests that the agestructure of Canada consists of more aging population than youngpopulation. For example, in 2015 people with over 65 years accountedfor 17.73% of the total population compared to young people agedbetween 0 and 15 years who accounted for only 15.46% of the totalpopulation. In fact, the median age of the total population is 41.7years. According to Employment and Social Development Canada (2011),the median population of Canada in 1971 was 26.2 years which rose to39.9 years in 2010. This shows that the aging population of Canada isincreasing significantly over the years.
Figure 1: Age Distribution in Canada, 1971-2061 (Langlois, 2012).
The aging population puts the prosperity of Canada at risk becauseit causes a shortage of labour force. Aging population affects thedecisions made by the government in terms of policy making andimplementation. As a result, Canada lacks youthful generations to runthe country’s political and economic activities. Aging populationposes serious challenges to sustainability of Canada’s economybecause it causes an increase of more aged people who are supportedthan younger people who could support the economy (Katsumata, 2000).According to the life-cycle income theory by Modigliani and Brumberg,people usually save at their early life stages in anticipation forretirement in future. When they grow old, they start using theirsavings and investments. In other words, people may not be able tocontribute anything to the kitty of prosperity at old age. Therefore,the aging population poses a significant risk to the futureprosperity of Canada. The country needs to identify the causes andeffects of the challenge in order to develop long term solutions.
Causes and Impacts
Causes of Aging Population in Canada
One of the major causes of aging population in Canada is slowerpopulation growth. Like other developed countries, Canada isexperiencing low population growth rate. CIA World Factbook (2015)suggests that the population growth rate of Canada in 2015 is 0.75%.Canada’s birth rate is also 10.28 births for every 1,000 populationand the death rate is 8.42 deaths for every 1,000 population. Thislow population rate is a clear indication that the future generationswill consist of aging population because only a few people are bornannually. In fact, Statistics Canada (2015) suggests that by 2030 thenumber of deaths will be more than the number of births in a givenyear.
These low birth rates are caused by various factors. First, it isexacerbated by a decline in fertility rates in Canada (Langlois,2012). The total fertility rate in Canada is 1.59 children born perwoman, compared to 3 children or more in 1940s. In this case, thenumber of births is extremely low compared to the number of deaths.The new rate of fertility is far below the natural populationreplacement rate (Health Canada, 2002). Another reason for the lowbirth rate is women’s participation in the labour market. Women inCanada and other developed countries perform several duties outsidethe home, giving them little time to interact with their spouses andgive birth to children. In other countries, women’s roles revolvearound domestic chores and rearing children. Canadian women are moreenlightened and spend most of their time performing economicactivities. Education is also a significant cause reason for the lowbirth rates registered in Canada. Most Canadians have attained higheducation. In this regard, women spend a lot of time at school, andwhen they finally settle down they will be past the child-bearingage.
Increase in life expectancy of Canada’s population also leads tothe growth of the aging population (Vieira, 2011). With theincreasing efficiency of healthcare, the aging population is likelyto live longer. As the birth of children declines, the agingpopulation rises because death rates decrease as healthcare andsanitation improves. There was also a baby boom after the SecondWorld War because soldiers and other men returned to their wivesafter a long time of war. The babies born at that time are now agingbut a few children are born, causing an increased ratio of agingpopulation to young people and a large aging population.
Aging population is also caused by migration of Canadian skilledworkers to United States of America and other countries with betteropportunities. Due to unemployment issues in Canada, qualifiedworkers move to United States in search of employment opportunities.Apart from the skilled workers entering Canada from other countriesas immigrants, there are several others who leave the country asmigrants to United States. When situations become different in othercountries and immigrants stop flowing in, the country will suffer netloss as people migrate to United States, causing brain drain andleaving aging population behind. The migrants to United States aremainly those who have higher education and higher income earners.When brain drain occurs, the unskilled workers who are left behindare not able to support the aging population adequately, adding tothe misery of aging population in the country.
Impacts of Aging Population in Canada
The aging population in Canada has caused significant strain onnational health and medical care. The aging population is oftensusceptible to diseases and injuries, causing the need for heath careprovision. Instead of channeling their efforts in other economicbenefits that could increase Canada’s prosperity, the governmentand local communities dedicate their efforts to providing healthcarefor the aged population. According to Health Canada (2002), one amongfour aged people in Canada faces restrictions in their normalactivities due to health problems. Furthermore, 80% of old people inCanada are affected by chronic diseases. The rate of injuries anddeaths caused by injuries also increase with age. This limits theirperformance. Therefore, if the country relies on them due to theaging population then the economic prosperity of the country willdecline significantly.
Due to the increasing health problems of the aging population, thedemand for health services increase with age. Therefore, agingpopulation in Canada will utilize health services more than youngpopulations elsewhere in the world. By 2013, the governmentexpenditure on health was the largest expense in its books, amountingto $27 billion (Public Health Agency of Canada, 2014). As the agingpopulation problem persists, the government will spend even moremoney on healthcare. Considering the fact that the aging populationcontributes little efforts to economic development, there will be adeficit in the government’s budget as more money is used withoutmore income being earned. Aged populations suffering from chronicdiseases also require home health and social services which call forthe participation of families and communities. This diverts effortsfrom economic prosperity to supporting the aging population.Therefore, aging population affects the prosperity of Canada byincreasing budgets of healthcare services and diverting the effortsof stakeholders from economic development to support the agingpopulation.
Moreover, aging population limits economic development because itcauses low participation in the labor market. Aging generation is notactive in the labor market. People usually become less productive asthey advance in age. Young people are active in the economy becausethey have the energy and will to improve their income, invest, andsave for their retirement. However, the situation in Canada isdifferent because the unproductive aging population is larger thanthe active young population. The young people in Canada not onlystrive to invest and save for their lives, but also struggle tosupport the aging population which is not able to vend for its dailyneeds. Therefore, productivity in the labor market decreases and thecauses a decline in the level of the country’s prosperity.
Furthermore, aging population affects the country’s prosperity dueto its impacts on government finances and economic growth (PublicHealth Agency of Canada, 2014). Because the working population issmaller than the dependent population, the rate of productivity andeconomic growth is likely to decline in future. The aging workforcemay also affect Canadian businesses because they are likely toproduce small profits due to their less productivity. Labor shortagesmay also cause low productivity and profitability in the businesssector, leading to decreasing economic growth. The government alsospends a lot of money to fund health and support services for theaging populations in Canada.
Aging population also leads to low levels of education, skills andknowledge in Canada. These aspects are required in the labour marketto enhance greater productivity, but Canada is disadvantaged due tolimited education among the aging population. According to HealthCanada (2002), many people aged over 65 years have never finishedhigh school. This lack of education makes Canada less competitive inthe business world, leading to slow development and prosperity.
In order to solve the challenge of aging population and achievegreater prosperity, it is important for everybody in Canada to beaware of the problem. The government plays an important role increating awareness. It may develop awareness programs intended toeducate people in Canada about the issue of aging population, itseffects and how it may be handled. Through the awareness programs,the government should advocate for increased young population thatcan provide the required labour, skills and knowledge needed to runthe country economically and politically to achieve prosperity.
The young population working in Canada can be increased throughseveral ways: increasing birth rates, increasing immigrations intoCanada, and reducing migration to other countries (Vieira, 2011). Inorder to increase immigration into the country, the government needsto develop essential policies that result in creation of employmentfor people entering the country in search for jobs. The immigrationpolicies should also be made less stringent so that it becomes easyfor young people from third world countries to migrate into thecountry and participate in the labor market, leading to increasedproductivity and future prosperity of the country. Migration of youngpeople from Canada to other countries should also be minimized byproviding employment to skilled workers within the country. This canbe achieved by providing a stable political environment and freemarkets where business people can exercise their freedom to innovate,improve their business profits, and be able to attract skilledworkers.
Health Canada (2002) suggests that the problem of aging populationcan be solved by providing effective retirement benefits systemwhereby aging populations are guaranteed of minimum income uponretirement. This will ensure that the living standards of the agedpeople are not disrupted and they do not have to rely on thegovernment for health service and support. Currently, people aged 65years and above benefit from Old Age Security program which ensuresthat everyone aged 65 years and above gets some pension. This pensionis adjusted for inflation, and covers even disability and deathbenefits. This system needs to be balanced across Canada andimplemented successfully so that the aging population can benefit andbecome less dependent on younger generations. This system isimportant because it allows the government and the young populationto focus on other areas instead of supporting the aging population.However, the aged people need to be educated on how to utilize andinvest their pension so that it can cover them throughout theremaining years of their lives.
Another intervention mechanism is to increase the retirement age sothat people who can work even after 65 years may participate in thelabor market and improve the productivity and economic progress ofthe country (Vieira, 2011). This solution may lead to poorperformance at the workplace, but the government may providecontinuous education and training for aged people so that they cankeep up with the changing technology, knowledge and skill needs.
Indeed, aging population is a serious problem that poses great riskto the prosperity of Canada. The median age of Canada has increasedsignificantly over the past few decades, and the percentage of peopleaged 65 years and above is greater than that of people aged between 0and15 years. This aging population increases the rate of dependenceand reduces the number of participants in the labour market, causingincreasing expenditure and decreasing income in the economy. Thisproblem can be solved by implementing pension schemes effectively andin a balanced manner so that all aged people can improve their livingstandards and reduce their dependency levels. The government shouldalso develop programs to increase employment for young people inCanada to avoid migration to other countries, and attract youngimmigrants into the country.
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