PETER DOLEZAL: North America’s demographic financial challenge

There's an emerging crisis precipitated by drastically changing demographics.

North America faces several daunting challenges over the coming decades.

Global warming and climate change, at the top of the news cycle, are beginning to be addressed world-wide.

Much less discussed, and even-less acted upon, is the emerging crisis precipitated by drastically changing demographics.

Over the past 50 years, medical science has greatly extended longevity. Most of us will live into our 80s, many well beyond.

However, as the number of seniors has exploded, birth rates have declined drastically. Couples now often wait until their 30s to have children — rarely more than two. With these trends showing no sign of reversing, both the U.S. and Canada need aggressive action to avoid a future economic crisis brought on by these accelerating changes in demographics.

Today in North America, there are approximately four 20-to-64 year olds, for every person over the age of 65. By 2030, this is forecast to drop to 2.6 working-age adults for every senior.

Left unchanged, this trend bodes economic disaster.

Taxes on the shrinking proportion of the workforce will need to drastically increase; or, the costs of seniors’ social and health care programs will need to be severely curtailed; or, a combination of the two. These reactions would create a huge drag not only on GDP growth, but also on the lifestyle of the average citizen.

A partial solution will result from the already-emergent trend of individuals continuing to be partially, and even fully, employed beyond age 65. This impact will not however, be nearly enough to solve the problem.

The only realistic solution is a very significant boost in immigration.

In Asia, for example, where there are eight people of working age for every senior, millions of well-educated young people would jump at the chance to start a new life in North America.

Is North America taking full advantage?

The Trump Administration is clearly inclined to severely limit immigration — exactly the opposite strategy needed to alleviate its own demographic challenges.

Unemployment levels, below five per cent, are at historic lows; shortages of applicants already exist in many sectors of the economy. At the same time, the Trump Administration proposes to deport several million illegal immigrants — only exacerbating the problem.

Unless this proposed policy quickly reverses, the U.S. will face economic stagnation which bodes poorly not only for Canada, but also the entire world.

Myself a childhood refugee from communism in  Europe, I have been a proud Canadian for decades. For centuries, Canada has been a world leader in opening its doors to immigrants, including refugees in desperate need of sanctuary.

Statistics Canada reports that during the past year, Canada’s population increased by 438,000, (1.2 per cent).

Of this number, 73 per cent — 321,000 individuals — were newly-landed immigrants. Of this influx, only about  34,000 were desperate Syrian refugees.

A common trait among our immigrants is that they tend to be much younger than our average Canadian population. Many, well educated, already speak English. Yes, it may take up to two years of our support before the average refugee becomes a productive and contributing individual — much longer than for most immigrants.

But even so, the price is well-worth paying.

Our federal government has announced its intention to further boost levels of immigration in coming years — exactly what is needed to address our demographic challenges.

We are leaders in the struggle to moderate global warming; we are also leaders in welcoming immigration.

As we continue to assist individuals and families in relocating to Canada, we are at the same time, taking a major step in at least moderating our demographic challenges.

We can only hope that our good neighbours to the south take notice of Canada’s leadership in its immigration policies, see the benefits, and perhaps one day, follow suit.

 

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his Second Edition of The SMART CANADIAN WEALTH-BUILDER.

 

Contact Panorama Rec Centre to register for Peter’s Elder College Spring session – Financial & Investment Planning for Retirees & Near-Retirees (Wednesday mornings; March 15 to April 12).

 

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