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Age Gap in Canadian Social Spending

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Victoria Launch

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@CPC_HQ Family Tax Plan: Real $, Right Goals, Wron...

@CPC_HQ Family Tax Plan: Real $, Right Goals, Wrong Policies #cdnpoli http://t.co/tER99mjYeX @evansolomoncbc @acoyne @bruceanderson

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Conservative Family Tax Plan: Real Money, Right Goals, Wrong Policies

The political landscape is upside down when the Conservative Party is the big social policy spender. But that’s what the Prime Minister has done with his new $5 billion Family Tax Plan. The NDP’s recently proposed child care plan would take 8 years to phase in annual spending on child care at the level the PM proposes for family tax benefits next year. Even the Liberals never proposed spending as much, including former PM Martin’s promised investments in national child care in 2005.

PM Harper made clear this week that there is and ought to be significant fiscal room to invest in the generation raising young kids. He’s right.

However, commentators are raising two key questions. First, can we afford it? Second, are the Conservatives spending $5 billion in the best ways? The answers are Yes and No.

We can afford what we prioritize. Today, Canadians prioritize spending an extra $65 billion annually on medical care and retirement income subsidies for citizens age 65+ compared to 1976. This makes the PM’s family policy price tag look modest, especially given that government spending on cash support, parental time, and child care services for families with kids has changed little.

While PM Harper is putting real money on the table for the generations raising children, he’s selected policy tools that won’t solve the primary problems. Younger Canadians are squeezed by housing prices that are nearly double what they were a generation ago, which they must pay with salaries that are several thousand dollars less a year. To cope, they devote more time to the labour market, paying expensive child care fees and sacrificing time at home.

The PM wishes that his Family Tax plan would significantly reduce this squeeze. But just 38 per cent of families with children will benefit from his plan to permit income splitting. The maximum benefit is $2,000/year. Only well-off one-earner couples will save the maximum. Most will save $1,000 or less at a cost to tax payers of $2 billion annually.

For the two-thirds who don’t benefit from income splitting, the Conservatives increased the universal child care benefit (UCCB) to $160/month for kids under age six – far from enough to pay for child care services, which generally cost more than university tuition. The UCCB is to child care what the cost of books is to attending postsecondary.

Still, the UCCB is expensive, costing taxpayers nearly $6 billion annually. Add the cost of income splitting, and we could pay the full cost of a flexible, high quality $10/day child care system delivered by the non-profit and private sectors. This would save families tens of thousands before their kids reach age six, including the many one earner couples who put their children in preschool.

Saving this much won’t reverse the fact that housing costs hundreds of thousands more than in the past, or that younger Canadians earn thousands less per year. But it is a far bigger savings than the Conservatives’ plan at an especially expensive time for families – when kids are not yet in school.

You might think PM Harper addressed the cost of child care services by adding $1,000 to the child care expense deduction. The numbers show otherwise. This change costs just $65 million – or 1 per cent of the UCCB. It will save a few hundred per year for even fewer families than income splitting, again primarily higher earners.

The Conservatives’ goal of saving time and money for the generations raising kids is laudable, as are the dollars they are allocating. But their policies don’t maximize bang for the buck.

As a result, the additional $5 billion that the PM allocates to families opens the door for other parties to propose equal spending on policies that are better able to reduce the time and money squeeze for the full diversity of families.

Generation Squeeze has developed a plan to reduce child care fees to $10/day within one election cycle, while also reducing the squeeze on parental time at home in ways that are more inclusive and fair than the Conservatives’ Family Tax plan. We believe the policies that compose our New Deal for Families are among the best solutions available.

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Northern Ontario Squeeze

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NDP spend less on families than Conservatives, but spend smarter: $15/day child care

Child care services often cost more than university at the moment many parents are trying to pay down their own student debts. They often cost as much as a second mortgage, on top of housing prices that are nearly double what they were a generation ago.

Given this context, the federal NDP deserve credit for committing to reduce the cost of child care to $15/day, down from the daily rate of $30-plus that is common outside of Quebec.

As founder of Generation Squeeze, which developed a $10/day child care recommendation for Canada, I applaud Tom Mulcair for talking honestly about the investment required to lift Canada from our status as an international child care laggard. To make his Party’s goal a reality, Mr. Mulcair says that an additional $5 billion in federal spending is required annually, along with near-matching dollars from provincial governments.

This honesty is better than when former Liberal Prime Minister Martin campaigned on a promise to spend $5 billion in total over five years. Research showed his promise was insufficient to build a child care and early education system, leaving his Party to campaign more on rhetoric than reality. The strategy wasn’t successful.

It wasn’t successful, because Prime Minister Harper countered with $2.7 billion annually for the Universal Child Care Benefit to provide $100 monthly payments to families with children under age six. This spending is not enough to pay for child care services, nor make it affordable for a parent to remain home. But the electorate knew what it would get in the short term, and Mr. Harper outspent Mr. Martin to make this concrete action happen.

The NDP risk walking into a similar scenario. They aim to win votes now by promising less than $2 billion in new annual spending for families four years hence. By contrast, Prime Minister Harper continues to support income splitting for families with kids next year, starting at an annual payment of another $2.7 billion.

Problems with income splitting are increasingly acknowledged, including by former Finance Minister Flaherty. The Conservative Party’s own numbers show their latest $2.7 billion annual promise will benefit only 38 per cent of families with children. Couples in which both parents earn similar amounts don’t benefit. Nor do lone parents.

A small minority of couples with a stay-at-home parent will save around $6,500 a year from income splitting when the breadwinner earns over $125,000. But earnings at this level are not enjoyed by the majority of one earner couples with kids, whose median income is around $42,000 when the earner is male, and $25,000 when the earner is female. Income splitting saves these more typical families no more than $1,100.

When you consider the typical young couple in 1976 earned $65,360, often on one salary, saving $1,100 doesn’t close the financial gap that couples face today compared to the past. The only thing that closes this gap is a second income. And second incomes generally require many thousands of dollars in annual expenditures for child care services.

Let me be clear. It’s not a problem for political parties to strive to save families with kids $6,500 annually. Thinking on this ambitious scale is necessary, because the typical 25 to 34 year old earns over $4,000 less a year for full time work than did the same aged person did in 1976, and then has to pay average housing prices that are up hundreds of thousands of dollars.

It is a problem, however, if the Conservatives propose to burn through $2.7 billion in public funds to generate these savings primarily for select high income households who occupy the sweet spot in their electoral base.

Government investments in child care and early education services are a more efficient, equitable, and inclusive way to reduce the time and money squeeze on younger generations. This is especially so when these investments are made in combination with additional expenditures on parental time as Generation Squeeze recommends.

Generation Squeeze will release a new study this winter showing that Canadian governments added nearly $400 in social spending per person age 65+ during the 2014 budget cycle, compared to around $66 per person under age 45. If spending increases per young person matched those of retirees, not only could Canadians implement $10/day child care within one election cycle, we could also reduce the squeeze on parental time at home in ways that are more inclusive and fair than income splitting.

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New Post has been published on http://gensqueeze.ca/canadaland-clarifications/

Canadaland clarifications

A few weeks ago I gave an interview with Jesse Brown from Canadaland on the topic of Generation Squeeze.

Jesse’s a sharp, funny broadcaster who bills himself as a critic of mainstream media. He’s currently looking for patrons to keep his show alive.

It being my first live interview on the subject – GS expert Paul Kershaw normally takes these – I muddled a couple of things.

Some points of clarification:

The parental leave component of our New Deal for Families is better than I thought. It actually anticipate and adapts to the challenges of precarious work by removing parental leave benefits from Employment Insurance so that they are available to the self-employed. We have even designed the policy details so that benefits would be available to Canadians who don’t report any income, at least for their first two children. Further details are available in our fact sheet.

While I carry on about old age security (OAS) modifications at the end of the show, this is not a priority for Generation Squeeze. OAS modifications are certainly an option – and a controversial one – to free up some tax dollars, but for several reasons they are nowhere near the top of our list. Reasonable people will disagree on the best way to decrease the generational spending gap, but first we need broader agreement that the gap itself is a problem.

And it’s worth repeating that we’re not out to pit generations against each other, even while Jesse intentionally plays that conflict up

Our vision is a Canada that works for all generations.

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Squeezed for Money

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Ideas for the Bond Family

In a recent blog, teacher, mother-of-two and Gen Squeeze supporter Julie Bond courageously lays out her family’s financial squeeze and asks how families like hers can make ends meet. We turned to personal finance expert Preet Banerjee for advice. 

From the surface, it looks like the angst is not due to income problems, but rather, expense problems. Julie is correct that they make more than a lot of households. Their income is well above the median household income in Canada. There are a lot of people feeling squeezed, but how much of that squeeze comes from external factors versus individual choices varies. In this case, I think there is room to make a real difference if some tougher trade-offs are made.

For example, long distance commuting in a truck doesn’t seem to make much fiscal sense, and is quite a drain on cash flow. It seems like a relatively expensive truck given the loan payments. I imagine the fuel efficiency wasn’t the initial selling feature, and the insurance seems high, too. While it might seem like a difficult trade-off, selling the truck to buy a less glamorous, fuel-efficient commuting vehicle may significantly ease the financial stress.

Editors note: Since writing, Julie and Noel have traded in their truck for a more fuel efficient minivan!

When it comes to budgeting, one of the things I noticed was that some payments that were made “bi-weekly” were converted incorrectly into monthly totals, and this can often catch people out. If you have a payment due once every two weeks, ten months of the year you will have two payments, and two months of the year, you’ll have three payments. Those two months with the extra payment can make it feel like it’s impossible to get ahead. So make sure to consider the exact timing of your income and expenses when using a budget.

Creditor-provided life insurance (where the lender provides the insurance) may be replaced with private life insurance to possibly reduce the cost, and increase peace of mind. Usually, with private life insurance, the underwriting is performed at time of application, as opposed to at time of claim (as is usually the case with creditor-provided life insurance).

Underwriting is basically the process of determining if you are insurable in the first place. Imagine finding out that you weren’t insured after you tried to make a claim? Private life insurance is also more flexible as the death benefit can be used to pay off the mortgage, or not. You get a cheque and decide the best use of funds. Creditor provided insurance just pays off the mortgage – and remember, the mortgage goes down over time so the benefit is always decreasing.

This is by no means an exhaustive list of all the things the Bond family may want to consider but here are a few more items. Once you’ve got a detailed budget you need to do a line by line check to see where you could be saving money. I would spend some time getting online quotes for all the insurance policies they have. Ditto with all the services they are paying for such as cellphones, cable, and internet. You can also call up existing providers to ask about bundling, cheaper options, or better rates. Even credit card companies may lower the interest rate if you call up and ask. Every little bit counts.

Perhaps most importantly, I would set up a separate, dedicated short term savings account so they actually “save the savings”. If they manage to lower their monthly expenses by $600 per month, then $600 per month should go into this account. Perhaps once per quarter then can then decide on the best use of this money. Perhaps it’s accelerating debt repayment (most likely), or perhaps it’s to set aside for upcoming repairs, or other non-monthly expenses like birthdays and vacations.

Preet Banerjee is a speaker, broadcaster, writer and personal finance expert. 

Editor’s note: Generation Squeeze believes individuals, businesses, communities and governments all have a role to play in easing the squeeze. A New Deal for Families would go a long way in helping people like Julie and Noel Bond. 

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New Brunswick Government Seeks Re-Election with Budget that Invests in Retirees. Cuts Spending for Younger Generations.

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Generation Squeeze Campaign Video

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False Choice

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Upstream Thinking for Generation Squeeze

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Need to Know: Gen Squeeze Ontario election analysis

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New @GenSqueeze study: Ontario polit parties ignor...

New @GenSqueeze study: Ontario polit parties ignore gen equity. Important Info to Guide Your Vote… http://t.co/JbIeFbOCnJ

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Wondering how the Ontario Parties stack up on Generational Equity?

Important Info to Guide Your Vote

For Ontarians who were hoping to see this week’s provincial election shine a light on the new challenges confronting younger generations, Generation Squeeze has some bad news.

A new Gen Squeeze study of the Ontario election shows that the Liberal, Conservative, NDP and Green Parties are all campaigning on platforms that will raise government spending for older generations, but do little to help younger generations adapt to pressing new economic and social pressures that are shaping the 21st century.

This election was triggered by the budget tabled by Ontario Liberals May 1 2014. It proposes an annual spending increase of $1.5 billion for Ontarians age 65 and older. This sizable increase for retirees is not matched by any significant increase in spending for the much larger population that is under age 45.

Since the other parties refused to support the Liberal budget, you might expect them to be proposing something significantly different. Unfortunately, Canadians under 45 are disappointed again. Our analysis of social spending in the NDP and Green Party platforms show their proposals coming in within just half of one per cent of Liberal projections. All three Parties clearly have decided it is important to find new money to spend on retirees, without showing the same concern for younger generations.

The PC Party evades direct comparison with the Liberals, NDP and Greens by failing to cost most of its campaign promises. However, the Generation Squeeze study concludes that the Conservatives are likely to grow Ontario’s generational gap in spending even more than the other parties by targeting funding cuts to programs that primarily affect younger generations.

The decision of all four contenders in the Ontario election to prioritize spending on retirees with far more urgency than they propose adapting for younger Ontarians is out of step with new economic realities. The rise in housing prices that increased wealth for retirees who bought homes decades ago is weighing down younger generations with heavy debts which they must pay with lower wages, despite greater investment in obtaining credentials through postsecondary education.

All four major parties are effectively asking Ontario voters to accept public policy trade-offs that they wouldn’t support in their own families. We don’t know many parents or grandparents who want governments to adapt to their needs as an aging population at the expense of adapting to new pressures facing their kids and grandchildren.

This trade-off being offered to Ontario electors makes clear that it is increasingly important for young and old alike to organize in advance of elections to shape Party platforms. For this reason, Generation Squeeze is building the political clout of younger generations in order to complement the important generational organizing that the Canadian Association of Retired Persons (CARP) has performed for decades.

Wondering whether it is important to vote, even when the Parties don’t provide much to choose between when it comes to investing in younger generations? The answer is yes. Until generations exert equal power to influence the world of politics, political parties are unlikely to respond equally to the needs of all generations. Platforms are designed around those who show up on election day, and those who make their voices heard in effective ways well before the writ is dropped.

If we want Ontario to work for all generations, we will ultimately need to mobilize younger Canada to build a powerful organization to speak up for its interests, one that invites Boomers and seniors to join forces in search of a better generational deal for their kids and grandchildren. Such activity in combination with the important work of CARP will be required to build a province and country in which all have the chance to live up to their potential, enough time and money to enjoy life, and the opportunity to work together to leave our country and planet better off than we found it. This is the vision of Ontario and all of Canada for which Generation Squeeze is organizing.

Paul Kershaw is the Founder of Generation Squeeze, and co-author of the new study of Ontario Election Platforms.

Andrea Long is a Gen Squeeze volunteer.

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A path to majority government runs through Gen Squeeze

As the Ontario election kicks off, party leaders have two paths to majority government. Convince Ontarians who voted for a different party last time to switch parties. Or convince Ontarians who didn’t turn out in the last election to vote this time.

Because fewer than one in two Ontarians cast a ballot in the last provincial election, the second route holds promise. Attracting even a modest portion of this large group could win any party a majority.

We know that Canadians who abstain from voting are disproportionately under age 45. Many in this group tune out from politics because political parties tune them out.

Consider Ontario’s budget last week. After analyzing health, education and social service expenditures by age, the Generation Squeeze campaign calculates that the provincial government plans to increase annual spending by $1.5 billion for the 2.3 million citizens age 65-plus. By contrast, despite announcements about the Ontario Youth Jobs Strategy and the Ontario Child Benefit, the government budgets next to no new money for the 7.8 million Ontarians under age 45 ($12 million, or less than 1 percent of the added spending on retirees.  See the Table below for further detail).

This is not a partisan issue. The Conservative and NDP leaders did not trigger the June election by rejecting the Liberal budget on the grounds that it invests in the aging population at the expense of Ontarians in their mid-40s and younger. No one questioned whether this generational division of spending is an appropriate response to the fact that younger Canadians pay housing prices that are nearly twice what they were in 1976 (after adjusting for inflation) with annual earnings that are down thousands of dollars, often despite more years of post-secondary.

There is no doubt the aging population and the socioeconomic decline for younger Canada both pose major societal challenges for which solutions are needed. Yet heading into this election, Ontario’s three major political parties propose to address only the first challenge, not the second. Their visions for Ontario will sustain the combined provincial and federal pattern of spending over $40,000 each year per retiree, while doing little to adjust upward the annual allocation of just $12,000 per person under 45.

There is hope that Ontario may yet adapt for all generations. Notably, the Premier boldly proposes an Ontario Retirement Pension Plan (ORPP) that aims to address the inadequate amount of retirement savings. This is a growing problem for younger generations squeezed by lower earnings and higher costs.

But we won’t ease this squeeze if governments fail to address the root cause. Insufficient saving for retirement by Canadians in their mid-40s and younger is not primarily a problem of failing to plan for our future. We are not saving enough because the gap between income and costs is far larger than a generation ago.

In 1976, the typical 25 to 34-year-old had to work full-time for five years to save a 20 percent down payment on an average home. Facing housing values that are higher and earnings that are lower, it now takes 10 years. For many, the 10 years only start after years of post-secondary education to compete for jobs, and paying higher tuition for the privilege. Is it any wonder that younger Canada is saving more slowly for retirement?

We have to implement new pension policy alongside policy measures that reduce current cost pressures facing young adults. Otherwise, as the ORPP garners a larger share of young people’s earnings for later retirement, it risks exacerbating the present squeeze for a generation in its prime child rearing years in order to minimize a later squeeze as seniors. The Ontario proposal to add $1.5 billion more for those age 65 and older with no increase for the much larger group under age 45 does not strike this balance.

The current failure of all Ontario political parties to question the age gap in government spending underscores why the Generation Squeeze campaign is building a powerful organization to speak up for younger Canada – one that influences politics for the selfie and stroller crowd to complement what CARP (the Canadian Association of Retired Persons) does for Canadians age 50+.

As Ontario political leaders release their platforms, Generation Squeeze will monitor how each party proposes to spend on retirees as compared to younger generations. Parties that propose significant policy adaptations for the latter while protecting our aging family members are especially likely to attract to the ballot box the biggest share of abstainers from the last election.

That’s a promising path to move from minority to majority government.

Dr. Paul Kershaw is the Founder of Generation Squeeze (gensqueeze.ca), and a policy professor in the University of BC’s School of Population Health