Mostafa Askari Assistant Parliamentary Budget Officer, Economic and - - PowerPoint PPT Presentation

Mostafa Askari Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis

Presentation to the CEA-CDESG Panel Calgary

June 9, 2012

Economic and Fiscal Impacts of population Ageing in Canada

The Demographic Transition

per cent

Source: Office of the PBO; Statistics Canada

10 20 30 40 50 60 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1921 1941 1961 1981 2001 2021 2041 2061 2081

Population 65+ relative to population 15-64 (RHS) Population growth (LHS)

Projection of potential output

1. Potential, or trend, GDP is projected from the supply side of the economy using the following identity:

where: Y is real GDP, L is total labour input and (Y/L) is labour productivity

2. Labour input is a function of the size of the working age population (LFPOP), the aggregate employment rate (LFER) and average weekly hours worked by those employed (AHW) 3. Labour productivity growth imbeds technological change and capital deepening

L Y L Y  

52 AHW LFER LFPOP L    

2

Working Age Population Growth, 1977 to 2085

(Per cent)

0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 1976 1991 2006 2021 2036 2051 2066 2081

3

Employment Rate by Age

(Per cent)

10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 15 20 25 30 35 40 45 50 55 60 65 70+ Females Males

4

Aggregate Employment Rate, 1976 to 2085

(Per cent)

53 55 57 59 61 63 65 53 55 57 59 61 63 65 1976 1991 2006 2021 2036 2051 2066 2081 Trend Actual Projection

5

Average Weekly Hours Worked, 1976 to 2085

(Level)

33.5 34.0 34.5 35.0 35.5 36.0 36.5 33.5 34.0 34.5 35.0 35.5 36.0 36.5 1976 1991 2006 2021 2036 2051 2066 2081 Trend Actual Projection

6

Average Annual Real GDP Growth

(Per cent)

5.0 2.6 1.8 1 2 3 4 5 6 1 2 3 4 5 6 1962-1976 1977-2010 2011-2086 Total hours worked Labour productivity

Provincial-Territorial Government Health Expenditures by Age Group, 1998 and 2008

(Dollars per capita) 5,000 10,000 15,000 20,000 25,000 5,000 10,000 15,000 20,000 25,000 <1 1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90+ 1998 2008

Provincial-Territorial Health Spending

(Per cent of GDP)

4 6 8 10 12 14 16 4 6 8 10 12 14 16 1975-76 1995-96 2015-16 2035-36 2055-56 2075-76

2010-11

Federal CHT Relative to Provincial-Territorial Health Spending

(Per cent)

10 15 20 25 30 35 40 45 50 10 15 20 25 30 35 40 45 50 2010-11 2025-26 2040-41 2055-56 2070-71 2085-86

Average = 18.6% Average = 13.8% Average = 11.9% 6% CHT escalator (FSR 2011)

Federal Elderly Benefits

(Per cent of GDP)

1.0 1.5 2.0 2.5 3.0 3.5 4.0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1961-62 1981-82 2001-02 2021-22 2041-42 2061-62 2081-82

2010-11 Inflation-only indexation Baseline

Consolidated Federal and Provincial-Territorial Program Spending

(Per cent of GDP)

5 10 15 20 25 30 35 40 45 50 5 10 15 20 25 30 35 40 45 50 1961-62 1981-82 2001-02 2021-22 2041-42 2061-62 2081-82

2010-11

Federal Provincial-Territorial Consolidated

Projection of long-term operating balance and debt-to-GDP ratio

13

100 200 300 400 500 100 200 300 400 500

1991-92 2006-07 2021-22 2036-37 2051-52 2066-67 2081-82

2010-11

Provincial-Territorial Federal

Consolidated

• 8
• 6
• 4
• 2

2 4 6 8 10

• 8
• 6
• 4
• 2

2 4 6 8 10 1991-92 2006-07 2021-22 2036-37 2051-52 2066-67 2081-82

2010-11 Provincial-Territorial Federal Consolidated

Fiscal Gap Estimates

(Per cent GDP)

2.4 2.9

• 0.4
• 1

1 2 3 4

• 1

1 2 3 4 Consolidated Provincial-Territorial Federal