Canadian millennials are facing a mounting tax burden to fund the retirement and healthcare of an aging baby boomer population. With costs expected to rise further, experts argue that the government must consider the economic strain on younger generations and potential policy solutions to balance intergenerational equity.
Millennials Feel the Tax Squeeze
Canadian millennials are increasingly footing the bill for the nation’s aging population. Today’s typical 35-year-old pays 20-40% more in taxes to support retirees’ benefits than young baby boomers did. This extra burden is largely due to a demographic shift as Canada’s elderly population has nearly doubled since the 1970s.
Escalating Costs Amid Population Aging
Population aging has driven up government spending on benefits like Old Age Security (OAS) and healthcare. As the share of the population over 65 surged from 8% in 1976 to 19% today, a larger slice of government revenue is now dedicated to seniors’ services. Dr. Paul Kershaw, a policy professor at the University of British Columbia, notes that the rising cost of senior benefits creates a financial strain on younger Canadians.
“In 1976, 5% of government revenue was allocated to seniors’ healthcare. By 2022, that figure had nearly doubled to 9.5%,” says Kershaw. The higher tax bill millennials are now paying reflects the fact that today there are only three working-age Canadians for every retiree, compared to seven in the 1970s.
Examining Tax Rates Over Time
While today’s income tax rates are generally lower than half a century ago, the increase in seniors’ share of government revenue means millennials are still paying more to fund these programs. A 35-year-old in Ontario with a middle income paid $276 more in taxes in 2022 toward retiree support than their counterparts in 1976, representing a 28% increase. For high earners, the additional burden is even greater, with a 43% hike in taxes compared to young boomers in the same income bracket.
Despite these rising contributions, tax reductions and new benefits have allowed many retirees to contribute less to the public system than previous generations of seniors. “This dual trend places a disproportionate burden on younger Canadians, who are also struggling with rising tuition, housing, and childcare costs,” explains Kershaw.
Three Potential Solutions for Generational Equity
Experts argue that addressing this imbalance will require policymakers to explore three main options:
- Increase Taxes: To fund the growing needs of Canada’s aging population, tax hikes may be required. However, raising taxes could further strain millennials and younger Canadians who already face high costs of living.
- Reduce Benefits for Wealthy Seniors: Another approach could involve targeting benefits based on income. Adjusting OAS and healthcare spending to account for income disparities may reduce the financial load on younger taxpayers.
- Increase Immigration: Boosting immigration would expand the working-age population, generating more tax revenue to support an aging demographic. However, Ottawa recently opted to lower immigration targets, a move some argue undermines the government’s commitment to generational fairness.
Calls for Policy Changes in Ottawa
Recent policy debates have highlighted the divide on this issue. The Bloc Quebecois proposed increased OAS benefits without income restrictions, while Ottawa scaled back immigration goals—decisions that could ultimately exacerbate the financial burden on younger Canadians. Jack Jedwab, CEO of the Association for Canadian Studies, says it’s crucial to consider the implications of these choices on generational equity.
“Without clear policy aimed at reducing the strain on younger generations, we risk further eroding intergenerational solidarity,” warns Jedwab. “Canada must take steps to ensure that the burden of supporting retirees is distributed fairly.”
The Path Forward
As Canada faces peak population aging in the coming years, the financial burden on millennials and Gen Z will only grow unless steps are taken to address the intergenerational divide. By carefully evaluating taxation, benefits adjustments, and immigration, Canada has the opportunity to create a fairer system that better balances the needs of all generations.
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