Prospective Aging of the Population and Its Implications For the Labour Force and Government Expenditures

Abstract

AbstractCanada's demographic situation in the future will differ substantially from what we have known in the past. Unless there is an early return to high fertility the average age of both the population and the labour force will increase substantially, while the overall dependency ratio will be low by historical standards. Our analysis suggests that up to about 2010 population change will have less of an impact on the real (i.e., constant—price) level of aggregate government expenditures than on the size of the real gross national product However, we can anticipate compositional changes in government expenditures as a result of population change: very large increases in the real social security costs, lesser (but still large) increases in health costs, and a reduction in education costs. Finally, a relatively large portion of the aggregate expenditure increases will be at the federal government level.