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Marc Garneau: As Canadians move across provinces, Ottawa must address equalization

Our most recent census showed that there is an increasing age-related shift in our population, as young Canadians move to Canada's booming western provinces. While the wagon-train westward is undoubtedly a boon for our country, Statistics Canada projects that age differences between provinces and territories will only grow starker.

Don't get me wrong: federal policy should promote workers moving to seek better jobs. Such migration strengthens ties across our country. However, government policy cannot be blind to the differential demand for public expenditures resulting from age differences between provinces and territories. This is particularly true in healthcare spending.

According to recent news reports, it now appears Canada's federal government is considering ways to amend Canada's equalization formula – the formula calculating transfer payments from the federal government that ensures provinces and territories have sufficient revenues to provide comparable levels of public services across the country. While controversial, this is a good thing.

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As baby boomers become senior citizens, aging will propel Canada-wide healthcare expenditure growth by roughly another percentage point annually. These age-related costs will hit provincial coffers just as Canada's labour force growth slows and – absent a major boost to productivity – the trend pace of national economic growth falls by roughly a percentage point.

Yet, indifferent to age differences between provinces, the Harper Conservatives plan to tie federal funding for healthcare to the growth of the national economy after 2017, holding per capita health transfers equal between provinces.

But per capita healthcare costs increase with age. Across Canada, the average cost of healthcare for a person aged 65 to 75 is four times that for someone aged 25 to 50. As far as healthcare spending goes, a Canadian over 80 costs nearly 10 times that of one aged 25 to 50. These age differences across provinces will strain provincial budgets, affecting programs and taxes across the board.

As a young worker, where would you want to live? A province where you get low taxes and plentiful government services? Or a province where higher healthcare costs crowd out other public spending?

Let me state here that in no way am I arguing that elderly Canadians are a burden. What I am arguing, however, is the federal government must fulfill its constitutionally-mandated role to ensure "provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation."

This constitutional requirement for equalization has an economic rationale: workers should be able to move for better wages, but should not be encouraged to move because they can get more public services for less taxation. We shouldn't create tax incentives for young people to flee certain provinces.

The good news is that, since getting older is unavoidable, it isn't unexpected. The very predictability of this looming threat means we can prepare for it, mitigate it, and there are various paths we can take. Former governor of the Bank of Canada, David Dodge, has proposed stronger federal efforts to improve growth in eastern Canada to address regional imbalances and head off the potentially growing tensions over equalization. The federal Conservatives have been exploring amending the equalization formula. More ambitiously, a federal government more open to working with its provincial and territorial counterparts could champion the implementation of a pan-Canadian insurance plan: a flexible, portable plan that could cover the costs of drugs and long-term care. Working together, the federal, provincial and territorial governments could lower costs of care.

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There are many more examples of how the issue could be addressed. Statistical evidence must guide any policy. However, the potential fiscal distortions from an increasingly uneven age distribution across the country cannot be ignored.

The bottom line is that the federal government must confront the demographic shifts facing our country. Our approach to healthcare funding must confront the reality that a Canadian born in Ontario and educated in the Maritimes may retire on the West Coast after spending her working life on the Prairies. The federal government – and only the federal government – has the responsibility to ensure that wherever Canadians live, they receive comparable levels of services at reasonably comparable levels of taxation.

Marc Garneau is Canada's first astronaut, a former Commander in the Canadian Navy, the former President of the Canadian Space Agency and currently the Liberal Member of Parliament for Westmount–Ville-Marie.

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