Despite Canada’s aging population, sound policy can spur economic growth

TORONTO—Despite gloomy pronouncements from some analysts, Canada’s aging population does not guarantee an era of slow economic growth, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

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“Canada’s population is getting older, and there’s nothing we can do about that, but the right government policies will help spur economic growth despite our millions of aging baby boomers,” said Philip Cross, former chief economic analyst for Statistics Canada and author of Is Slow Growth the New Normal for Canada? For example, governments in Canada could remove regulatory barriers and create a more conducive environment for innovation. Governments could also open up industries (telecommunications, for example) to more competition. On the employment front, Canada’s adult unemployment rate (5.8 per cent) remains at historically low levels. With this low rate, rather than increasing or extending unemployment insurance benefits, governments could encourage the unemployed to move to jurisdictions with lower unemployment. Among provinces, Ontario’s plan to raise taxes and introduce a provincial pension plan has damaged its investment climate. And both Ontario and Quebec remain heavily in debt. In the United States, policy uncertainty, including the Obama administration’s dithering on the Keystone pipeline, creates uncertainty in Canada. But as the U.S. economy improves, Canada should benefit. “Thanks to Canada’s stable financial sector and labour markets, it’s well-positioned to take advantage of an upturn in the U.S. economy. An improving economy south of the border will also help Canada overcome slumping commodity prices,” Cross said. “Canada’s aging population, combined with the lingering effects of the ’08 recession, has made some economic analysts unduly pessimistic about economic growth. But pro-growth policies work in any economic environment.”