April 2001

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April Questions & Answers and April Graph

by Joel Emes

Q: Canada's population is said to be relatively young; how do we compare to other industrialized countries? How does the age of our population affect average Canadians?

A: Of the 29 countries in the Organization for Economic Cooperation and Development (OECD), there are 19 countries with a greater percentage of their population in the 60-plus age group than Canada (see table 1). Only nine countries have a smaller percentage of their population in the 60-plus age group than Canada. Among OECD countries, Mexico has the lowest percentage of its population in the 60-plus age group (6.9%) and Italy has the largest percentage (24.1%). Another way to measure the age of a population is with median age. The countries in the world with the highest median ages in 2000 were: Japan (41.2 years), Italy (40.2 years), Switzerland (40.2 years), Germany (40.1 years), and Sweden (39.7 years). Canada's median age was 36.8 years in 2000.

The age of our population affects average Canadians because benefits for the 65-plus age group are mainly paid for with taxes on the working population. According to OECD research, the number of people of pensionable age (65 years and older) in OECD countries increased by 45 million while the population of working-age people increased by 120 million in the past 25 years. This has not resulted in any major economic or social problems for OECD member countries. The problem we face is a result of the fact that, over the next 25 years, the number of people of pensionable age is expected to increase by 70 million while the working age population is expected to increase by only 5 million. The current financing structure for social spending programs for seniors is not sustainable in the long term as the taxes required to finance the programs as they are currently structured would be so high as to discourage work and cut working people's living standards severely. In Canada, we need to consider the impact of population ageing on the Canada and Quebec Pension Plans (CPP/QPP), the Old Age Security (OAS) system, and medicare which, taken together, account for roughly 25 percent of total government expenditure.

Table 1: Percentage Distribution of the Population in Major Age Groups for OECD Countries, 2000

Q: How much longer can a Canadian born today expect to live than one born in 1960? How has life expectancy changed in other countries over this time period? Are there any estimates of life expectancy in 2050 available? How does life expectancy affect government spending?

A: The average Canadian's life expectancy at birth has increased by 7.8 years (11.0%) from 71.1 years in 1960 to 79.0 years in 1998 (see table 2). Japanese life expectancy has increased by 12.8 years (19.0%) in this time period, the largest increase in the G7. Among OECD countries, Turkey shows the largest increase (18.8 years; 37.2%), followed by South Korea (18.4 years; 34.1%), Mexico (14.7 years; 25.7%), and Japan. The US National Institute on Aging estimates that life expectancy in Canada may be as high as 85.3 years in 2050. The estimated life expectancy of the other G7 countries in 2050, in declining order, are: Japan (90.9), France (87.8), Italy (86.3), United Kingdom (83.8), Germany (83.1), and the United States (82.9). This month's graph shows life expectancy at birth for an average person in each of the G7 countries in 1960, 1998, and 2050.

Increased life expectancy means that not only will there be more people over age 65, but they will live longer, on average. This increase in life expectancy must be considered when we deal with the funding problems in the CPP/QPP, OAS, and medicare programs. For example, in 1967, the year after the CPP came into effect, Canadians could expect to live for 72 years, and thus could have been eligible to collect a pension for seven years, on average. In 1998, Canadians could expect to live to be 79, on average, and could have been eligible for a pension for 14 years. By 2050, Canadians may live to 85, on average, and could collect a pension for 20 years.

Table 1: Percentage Distribution of the Population in Major Age Groups for OECD Countries, 2000

Life Expectancy at Birth for the G7 Countries

Joel Emes (joele@fraserinstitute.ca) is Senior Research Economist at The Fraser Institute. He has an M.A. in Economics from Simon Fraser University.

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