Public expenditures, population aging and economic dependency in Canada, 1921–2021

Abstract

The slowing population growth and consequent aging of the population in Canada and elsewhere have raised questions of the ability of such populations to provide support to their non-working or dependent, particularly their aged, members. Previous discussions have often been focussed on demographic measures of dependency, but more recent research has shown that, in North American society, the per capita costs of providing public programmes to an elderly member are between two and three times higher than those to a younger member of society. However, these measures have made no attempt to take into account changing labour market conditions. This paper develops measures of dependency to incorporate these latter effects. Calculations with Canadian data (1921–2021) show that demographic and economic dependency in Canada are currently at historically low levels. The numerical results also suggest that the effects of the general increases in labour force participation rates, that have characterized the past two decades, have more than offset the effects of the general increases in unemployment rates, and that future increases in participation rates and, perhaps, decreases in unemployment rates could provide a significant alleviation of the impacts of population aging on government expenditures in the years ahead.