Population Aging: Demographic
Tsunami, or Apocalypse No ?
 life expectancy, health-adjusted life
expectancy, health inequality
 conventional body count demo-doom
 looking at workers
 broader pension adequacy projections
 health care – who is in control; who
even understands what is happening?
Michael Wolfson, uOttawa
1
Shades of Grey, Toronto
7/28/2016
Speech from the Throne, June 3, 2011
“Canada’s workforce is aging, and it will no
longer grow as it has in the past. This
demographic challenge will impact our
economic future and put long-term pressures
on our pension and health systems that must
be addressed. (p3) … Canadians want
better results from the health care system, at
the same time as an aging population is
putting unprecedented pressure on the
system’s ability to deliver. (p8)”
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2016-07-28 1:57 AM
Life Expectancy in Canada and
Trends (years, 2006-2008)
Life Expectancy at Birth
recent increase per decade
Life Expectancy at Age 65 - Years
Life Expectancy at Age 65 - Age
recent increase per decade
Men Women
78.5
83.1
2.9
1.8
18.3
21.5
83.3
2.0
86.5
1.0
Source: Statistics Canada
3
Shades of Grey, Toronto
7/28/2016
Life Expectancy (LE) and HealthAdjusted Life Expectancy (HALE) by
Income Decile (years – 50, ~2000)
Men
4
Women
Source:Shades
McIntosh
of Grey, Toronto et al., 2009
7/28/2016
Alternate Views of the “Aging Burden”
(LifePaths estimates)
Demographic Ratios
0.50
0.45
0.40
0.35
0.30
Old Age Ratio
Total Ratio
0.25
0.20
1
0.15
0.10
0.05
0.00
51971
1981
1991
2001
2011
Shades of Grey,
2021
2031Toronto
7/28/2016
Alternate Views of the “Aging Burden”
(LifePaths estimates)
Demographic Ratios
0.50
0.45
2
0.40
0.35
0.30
Old Age Ratio
Total Ratio
0.25
0.20
1
0.15
0.10
0.05
0.00
61971
1981
1991
2001
2011
Shades of Grey,
2021
2031Toronto
7/28/2016
Working Life Table Results, Canada
average age at
7
number of
Year
entry to
labour
force
retirement
death
1921
16.5
63.7
67.6
47.2
3.9
1931
17.0
64.0
68.4
47.0
4.4
1941
17.2
64.1
69.1
46.9
5.0
1951
17.5
63.9
70.4
46.4
6.5
1961
18.2
64.0
71.2
45.8
7.2
1971
19.8
63.3
71.3
43.5
8.0
Shades of Grey, Toronto
retireworking ment
years
years
7/28/2016
Recent Trends in Labour Force
Participation Rates (%)
males
8
females
Shades of Grey, Toronto
7/28/2016
Alternate Views of the “Aging Burden”
(LifePaths estimates)
Annual Paid Hours of Work / Person
Demographic Ratios
0.50
3
1000
0.45
Female
2
0.40
Male
800
All
0.35
0.30
600
Old Age Ratio
Total Ratio
0.25
400
0.20
1
0.15
200
0.10
0.05
0.00
91971
0
1981
1991
2001
2011
Shades of Grey,
2021
2031Toronto1971
1981
1991
2001
2011
7/28/2016
2021
203
National Labour Supply Per Capita (~2000)
Annual
Hours,
Emp / Pop
Country Employed Ratio (%)
Italy
1,614
37.2
Belgium
1,529
39.5
France
1,561
40.1
Germany
1,474
44.7
Netherlands
1,364
49.4
Spain
1,815
39.6
Sweden
1,614
47.7
United Kingdom
1,710
47.4
Canada
1,787
48.5
United States
1,828
47.4
10
Shades of Grey, Toronto
Annual
Hours Per
Capita
600
604
627
659
674
719
769
810
867
867
7/28/2016
Alternate Views of the “Aging Burden”
(LifePaths estimates)
Annual Paid Hours of Work / Person
Demographic Ratios
0.50
3
1000
0.45
Female
2
0.40
800
Male
4
All
0.35
0.30
600
Old Age Ratio
Total Ratio
0.25
400
0.20
1
0.15
200
0.10
0.05
0.00
11
1971
0
1981
1991
2001
2011
Shades of Grey,
2021
2031Toronto1971
1981
1991
2001
2011
7/28/2016
2021
203
Demo Doom: Really?
 Canada’s old age demographic ratio is projected
to approach < 25% by 2031, when the trailing
edge of the baby boom cohort reaches age 65
 but a number of rich EU countries already have
old age demographic ratios ~25%
 and using a more relevant measure, paid hours
per capita, Canada’s level
• is projected to fall by less than 10%
• and will remain about 30% higher than a
number of wealthy EU countries that today
already have 25% old age demographic ratios
12
Shades of Grey, Toronto
7/28/2016
Trends in Workplace Pension Plans
(RPPs), Numbers by Type and Size
(small ≡ members <10)
13
Shades of Grey, Toronto
(tax
planning?)
7/28/2016
Trends in Workplace Pension Plan
(RPPs) Members (000s) by Type
members (000s)
14
Shades of Grey, Toronto
7/28/2016
Criteria for an Adequate Retirement
Income System
 avoid poverty / “low income”
 support continuity of consumption /
maintenance of living standards into
retirement
 provide “safe” pensions = reduce
uncertainty (or at least share risks
fairly amongst individuals, employers,
fellow employees, taxpayers)
15
Shades of Grey, Toronto
7/28/2016
What is the “Net Replacement
Rate” (RR)?
 ratio of post-retirement “consumption
possibilities” to those prior to retirement
 norm or objective: 100%; i.e. ability and
likelihood of maintaining pre-retirement living
standards after retirement
 “consumption possibilities” ≡ gross income
less income and payroll taxes less savings
plus dis-saving (i.e. running down assets)
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Shades of Grey, Toronto
7/28/2016
Comments on “Net Consumption
Replacement Rate (RR)”
 not the same as “gross income RR” or “net
income RR”
 income RRs are easier to estimate and analyze,
but not as close to the desired concept of
“consumption possibilities”
 next slide shows basic accounting
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Shades of Grey, Toronto
7/28/2016
Replacement Rate (RR)
Adequacy – Basic Accounting
add
Pre-Retirement
Post Retirement
earnings
public pensions
RPP, RRSP and RRIF “income”
imputed rent on owned home
imputed rent on owned home
net withdrawals of home equity
subtract
income and payroll taxes
income taxes
RPP and RRSP contributions
mortgage principal payments
divide
EAU (= equivalence scale)
EAU (= equivalence scale)
result
“consumption” pre-retirement
“consumption” post-retirement
not included: work-related expenses, other investments (income, saving, dissaving), consumer durables, business assets, inheritances and gifts inter-vivos
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7/28/2016
Prime Age (40 – “65”) Earnings
percent
indiv’s
22
20
18
16
14
12
10
8
6
4
2
0
.1 - 15
~ 50%
females
males
19 - 27%
19 - 26%
15 - 25
25 - 35
35 - 50
50 - 65
65 - 80
80 - 100 100 - 125 125 - 150
>150
earnings age 40 – “65” $000s
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Shades of Grey, Toronto
7/28/2016
Average Net Replacement Rates by Prime
Age Earnings – Main Result (1960-65 cohort)
%
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
replacement rate declines with pre-retirement earnings
for the middle 50% of earners in this birth cohort,
average decline in consumption possibilities is in the 15
to 35 percentage point range, with declines ~5 – 7
percentage points higher for men
females
males
.1 - 15
~ 50%
15 - 25 25 - 35 35 - 50 50 - 65 65 - 80 80 - 100
100 125
125 150
>150
earnings age 40 – “65” $000s
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Shades of Grey, Toronto
7/28/2016
Basic Conclusion
 about half of the “baby boom” population
(those born between 1945 and 1970)
 in the middle 50% of the earnings
distribution for their prime working age
years (i.e. age 40 to 65)
 can expect a decline in their net
replacement rate (RR) / consumption
possibilities after retirement
 of at least one-quarter
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7/28/2016
(PBO FST p16)
PBO Data on Health Care Costs
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7/28/2016
(PBO FST p16)
PBO Data on Health Care Costs
Aging
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Shades of Grey, Toronto
7/28/2016
(PBO FST p16)
PBO Data on Health Care Costs
“population and health care
enrichment will put significant
pressure on … health spending”
(PBO FST p20)
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Shades of Grey, Toronto
7/28/2016
Heart Attack Survival in Relation to Treatment
by Health Region, Seven Provinces
Johansen et al., 2009
Heart Attack Survival in Relation to Treatment
by Health Region, Seven Provinces
Johansen et al., 2009
Heart Attack Survival in Relation to Treatment
by Health Region, Seven Provinces
Johansen et al., 2009
Important Caveats for the AMI →
Revascularization → Mortality Results
 other clinical aspects of treatment not taken into
account, e.g. thrombolysis, post discharge Rx
 no risk factors considered – e.g. obesity, physical
fitness, smoking, hypertension, lipids
 no socio-economic factors considered
 n.b. in related analysis, co-morbidity (Charlson
Index) was included, with one-year (versus 30 day)
mortality follow-up – results essentially unchanged
 revascularization is also intended to relieve
symptoms, but no health-related quality of life
(HRQoL) data available
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Shades of Grey, Toronto
7/28/2016
“Wall of Ignorance”
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Concluding Comments
 demography – challenges, yes; doom, not
• count of seniors – will double
• trend in “economic dependency” – manageable
 workplace pension plans (RPPs) – big changes not (yet)
visible in current data, though trends emerging
 retirement income adequacy – for middle 50% of baby
boomers, about half will face at least 25% NET decline
 health care – major issues
• costs not under control or even well understood
• “wading in waste” (CEO, Saskatoon) / “30%
unnecessary” (CEO Ottawa Hospital) / “doing the right
thing right” - not
• information systems still in dark ages (privacy chill,
medical associations, Infoway et al., where are you?)
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Shades of Grey, Toronto
7/28/2016