According to a new research report by Schroders, Canada has been facing up to the economic challenges of an aging population, but will still need to do more. The authors--Virginie Maisonneuve, Head of Global Equities at Schroders, and Katherine Davidson--conclude that Canada has been quick to recognize its impending demographic transition and adjust its institutions accordingly. The only ways to break the relationship between reduced labor supply as baby boomers retire and lower GDP growth is "to increase immigration or raise participation rates, especially of older workers" and Canada is doing just that.
The report says, however, that future growth will have to be driven by improvements in labor productivity and Canada is expected to face the highest age-related spending of any OECD member state. Here, too, Canada looks to be in good shape, with a strong record in controlling costs. For example, it spends 10% of GDP on health care versus the US at 16%, and it relies less on the state for pension provision with private pensions and other investments providing over 40% of retirement income, compared to the OECD average of 20%.
Source: PR Newswire News Release (July 21, 2011)