Intergenerational Breach of Trust

At its root, the decline in the standard of living for the generation raising young kids reflects timing.   The timing is good or bad – depending on whose shoes you stand in.  While household incomes for young couples may have flat lined across Canada since 1976, they have increased by 16% for those approaching retirement today compared to the mid-70s.  Similarly, just as the 76% real increase in the cost of housing may be the primary source of debt for young families, it is also the primary source of wealth for the Baby Boom generation that is now retiring.

With this additional income and wealth, many Boomers and junior seniors are transforming expectations of retirement.  Many in “Generation Cruise” are globetrotting or purchasing second homes in desirable destinations.  A rich and rewarding retirement is a reasonable pursuit for any population that is living longer and healthier lives than ever before, as we are in Canada.

But enriching retirement expectations while ignoring debts left for the future to pay is far less reasonable.  Three trends are alarming:

1. Statistics Canada data show that our federal debt/GDP ratio has increased 114% since 1976.  That means the debt has more than doubled relative to the size of the economy, even though the economy itself has increased by more than 100%.

2.  International Energy Association data reveal that Canada’s Carbon Dioxide emissions per person have remained constant since 1976.  By contrast, 15 other OECD countries have reduced their per capita emissions, including Sweden (-53%); France (-34%); Germany (-26%); Denmark (-23%); the UK (-20%); and the US (-13%).   Presently, Canada is among the very highest per capita emitters in the OECD.

3. UNICEF and the Organisation for Economic Cooperation and Development (OECD) ranks Canada among the very worst affluent countries when it comes to investing in families with preschool age children.

This is a bad deal.

The failure to invest in the generation raising young kids is not consistent with Canada’s proud tradition of building and adapting.

Recall in the late nineteenth century, we built public schools and universities, roads and railways, markets and banks.  We then sent soldiers overseas to defend these accomplishments.  When they returned home injured, we adapted again, building veterans benefits.  We soon extended these to citizens generally as workers compensation and unemployment insurance.  And then the busiest beavers in Canada’s history – the parents of the Baby Boomers – set in motion Old Age Security and Hospital Insurance.  By 1966, in one single year, they capped their accomplishments by launching the Canada Public Pension plan and the Medical Care Act, which remain the cornerstones of our social commitments to one another as citizens.

Our history is impressive, one I’m proud of.  But we can only rest on our laurels for so long.  We must now ask:  What have we built since?

Sure we’ve continued to build roads and bridges (but not enough transit!).  We’ve expanded markets and strengthened our banks – achievements that helped us weather the global recession better than most countries, and position us as a strong member of the G-8 despite our small population.

On the other hand, history books make clear Canadians have been reticent to build new social architecture since the 1970s in response to the dramatically different circumstances facing the Generation raising young kids today.

This reticence begs questions about an intergenerational breach of trust – Have Canadians who came of age as adults starting in the 1970s borrowed more from their children than previous generations?  Do they no longer wish their children and grandchildren to have the same standard of living from which they benefited?

The most recent federal election implies the answer is ‘Yes’ to both questions.  When the election gave attention to social issues, political leaders of all major Parties generally prioritized:

• Increasing medical care spending by 6% per year, from $135.1 billion in 2010.  Status quo increases in medical care generally benefit Canadians toward the end of life, and risk crowding out space to invest in health promotion when citizens are younger.
• Strengthening pensions, even though Canadian government spending on old age security and RRSP benefits total $60 billion annually – about three-times what a New Deal for Families will cost.
• Reducing seniors’ poverty, even though it is already less than half of the poverty rate for families with young children.

A New Deal for Families