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Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)
Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)

AGING POPULATION

Demographics will put Quebec’s back to the fiscal wall Add to ...

Quebec is transfixed by two problems – one invented, the other real. Meanwhile, a longer-term problem creeps up on Quebec, just as it does in varying degrees on other Canadian provinces: the aging of its population.

Every working day, the National Assembly listens to testimony about the proposed Charter of Values, the classic wedge political issue that represents a non-solution to a non-problem. The charter was designed to be, and remains, a political tool for the re-election of the Parti Québécois, via a disturbing but predictable animation of fears of dilution of the French fact by the “other.”

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Every working day, too, the Charbonneau commission listens to more alarming testimony about deep-seated corruption in municipal governments, the construction industry and unions, a stain that kept spreading without anyone, until very recently, talking about it, let alone trying to stop it.

Now arrives the latest evidence of Quebec’s longer-term challenge – an aging population that will inexorably cause a serious deterioration in public finances. Unless hard decisions are taken, or productivity takes off – a highly improbable development – Quebec’s back will be against a fiscal wall. And so, too, will be the backs of other provinces with rapidly aging populations and slow growth, such as Ontario, Manitoba and the Maritimes.

Consider these numbers. In 1971, there were nine people aged 15-64 in Quebec, compared to one person over 65. By 2013, the ratio had dropped from 9 to 1 to 4 to 1. By 2050, it will be 2 to 1.

Drip, drip, every year the number of people working will decline, resulting in a smaller taxable base. Those still working will be supporting programs, notably health care, for those who are not.

Quebec cannot balance its budget now. How will it do so in the future with this demography against it? The same question can be asked nationally and for a majority of provinces.

Quebec’s dilemma is outlined by five economists, including the well-known Luc Godbout and Pierre Fortin, in a recent paper that got less coverage than the testimony about the charter and corruption. The five are not the first by any means to ring the bell about what’s coming for Quebec, although previous bell-ringing has not done much good in waking up the population. The future, it is thought, will take care of itself, as will the next generation.

The economists mix many variables into their analysis and arrive at optimistic-to-pessimistic scenarios. The optimistic ones are worrisome; the pessimistic ones, terrible.

What drives both scenarios are health-care costs, which are likely to rise at about 5 per cent a year. Those costs mean that overall government spending will rise faster than government revenues – unless taxes are increased or economic growth somehow improves. Deficits will grow, as will Quebec’s debt load. Therefore, onto the shoulders of the next generation will fall either fewer government services, more taxes, or both. Is this fair?

For Quebec, the authors write, “It seems unjust that the demographic changes that are coming in the next years will prevent the government of Quebec from offering at relatively comparable costs to future generations public services that today’s generation enjoys.” Of course, changes to policies will occur, and projections are just that, projections. Things will change, but for the better?

Remember that Quebec is already the country’s most-taxed province and carries a high debt load. It also receives $9.3-billion a year in equalization payments. If today’s policies, spending and taxing are carried forward without any change, then the burden on the next generation of Quebeckers will be heavier. Do they know this? Has any political person explained this?

Quebec’s dilemma is something that the Organization for Economic Co-operation and Development has been warning advanced industrial economies about for years, as have economists and think tanks across Canada, notably the C.D. Howe Institute. The Parliamentary Budget Office, too, weighed in recently with a report that while federal finances are sustainable, provincial ones are not.

Aging and intergenerational inequities ask politicians in a democracy to think very long-term, and to explain to today’s voters why gratification might be delayed or burdens made heavier for the sake of those who will come next. This kind of thinking and explaining is necessary and admirable – but usually a recipe for defeat.

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