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The Hidden Wealth Transfer from Young to Old - Explained · The Missing Middle Podcast

• 0:00
  SPEAKER_01: It's not just that young people are being squeezed from the top to pay for seniors' entitlements, but they're also being squeezed on the other side with very high housing costs.
• 0:07
  SPEAKER_00: At the end of the day, that just translates into a wealth transfer from younger people to older people.
• 0:13
  SPEAKER_01: Demographics, hosted by Mike Moffat and Kara Stern.
• 0:18
  SPEAKER_01: The demographic changes that have been happening throughout the Western world are not new.
• 0:22
  SPEAKER_01: Canada, which experienced the largest post-World War II baby boom, has an aging population and all the growing old pains that go with that.
• 0:31
  SPEAKER_00: Yeah, that's right.
• 0:32
  SPEAKER_00: Our aging demographic is a massive strain on government budgets, with the healthcare system in particular experiencing the biggest and most immediate amount of pressure.
• 0:42
  SPEAKER_00: So, for example, healthcare spending today makes up over 40% of Ontario's provincial budget.
• 0:48
  SPEAKER_00: Back in the early 1980s, when I was a kid, it was less than 30%.
• 0:52
  SPEAKER_01: Of course, the older you are, the more healthcare services you use.
• 0:55
  SPEAKER_01: And Canadians are now living on average five years longer than they did in the 80s.
• 1:00
  SPEAKER_01: And this is something to celebrate.
• 1:01
  SPEAKER_01: But at the same time, we're living longer and there are fewer working age citizens to carry the load.
• 1:06
  SPEAKER_01: In the 1980s, there were about seven working age people for every one elderly person.
• 1:11
  SPEAKER_01: And now there are only three and a half.
• 1:13
  SPEAKER_01: And just to be clear, that means that in the 80s, you had seven people working for every one retirement age person.
• 1:19
  SPEAKER_01: And those seven workers earned income, paid taxes, then paid for services like the healthcare that that one elderly person needed a lot as she grew older.
• 1:27
  SPEAKER_01: And now you only have three and a half people doing what seven people did in the 80s.
• 1:32
  SPEAKER_01: That's not sustainable, eh?
• 1:33
  SPEAKER_00: Well, it is sustainable and other countries are doing it, but we should be clear that sustainable is not a synonym for good.
• 1:41
  SPEAKER_00: This is problematic.
• 1:42
  SPEAKER_00: It means that working age people are stretched thin having to support a large share of the population that isn't working.
• 1:48
  SPEAKER_00: And tax dollars that in the past would have gone to productive investments are shifted over to supporting those who need it.
• 1:54
  SPEAKER_00: So you mentioned healthcare earlier, but another example of this is OAS, Old Age Security, which is a monthly basic income available to citizens and permanent residents of Canada who are 65 plus.
• 2:06
  SPEAKER_00: And it's the absolute largest line item in the federal budget.
• 2:10
  SPEAKER_01: I don't think people realize that.
• 2:11
  SPEAKER_01: Like that is huge.
• 2:12
  SPEAKER_01: It is larger than any other expense.
• 2:14
  SPEAKER_01: It's the single largest line item in the federal budget.
• 2:18
  SPEAKER_00: Yeah, and it's growing over time as the baby boomers uh get older.
• 2:21
  SPEAKER_00: It's going to reach over a hundred billion dollars in annual spending in a couple of years.
• 2:27
  SPEAKER_00: And it's going to exceed employment insurance, Canada Child Benefit, equalization payments, all three of those programs combined.
• 2:35
  SPEAKER_00: It's absolutely massive.
• 2:36
  SPEAKER_01: Yeah, it's the size of it, is why we keep talking about it.
• 2:39
  SPEAKER_01: I think I hear people say to me, like, why do you keep talking about old age security?
• 2:42
  SPEAKER_01: Like, why won't you just let old people have the money that they've paid into the system?
• 2:46
  SPEAKER_01: You know, they spent their lives paying into it, directly paying into it, or they've paid taxes for decade.
• 2:51
  SPEAKER_01: And now that they're older, they need to, they need to be able to get something back from Canada.
• 2:55
  SPEAKER_01: But first of all, it's huge.
• 2:57
  SPEAKER_01: So I keep being like, it's just going to get bigger.
• 2:58
  SPEAKER_01: Like, this is a big problem that's coming down.
• 3:01
  SPEAKER_01: But then also, they haven't actually paid for it, right?
• 3:04
  SPEAKER_00: No, they haven't.
• 3:05
  SPEAKER_00: OAS comes out of general revenue, like most government programs.
• 3:08
  SPEAKER_00: It's not a pension you pay into with a dedicated fund, uh, like the Canada Pension Plan.
• 3:13
  SPEAKER_00: It's government spending.
• 3:14
  SPEAKER_00: So, you know, they didn't pay into OAS, they paid into the OAS of their parents.
• 3:20
  SPEAKER_00: And as you mentioned earlier, you know, you had seven workers able to do that for one person.
• 3:26
  SPEAKER_00: Now that we go to three and a half, each working person has to uh contribute more.
• 3:32
  SPEAKER_00: So there's no fiscal way around that unless programs like OAS were to be substantially scaled back.
• 3:38
  SPEAKER_00: You know, we can and do debt finance some of those programs, but that's not a get out of jail free card.
• 3:44
  SPEAKER_00: That just, you know, basically pushes those payments down the road.
• 3:47
  SPEAKER_00: It increases debt interest for both current and future generations.
• 3:51
  SPEAKER_01: Although I can see how someone might get upset because if they paid into it for their parents to have it, then all of a sudden they want it and they're hearing people say, you know what, we can no longer afford it.
• 3:59
  SPEAKER_01: Like that's that's not great.
• 4:01
  SPEAKER_00: Well, but we should also keep in mind that the program today is far more generous than the one that they so-called paid into in the in the 80s and 90s.
• 4:11
  SPEAKER_00: So that's not exactly an apples to apples comparison.
• 4:13
  SPEAKER_01: Okay, so that's the fiscal picture, growing spending on older people, which crowds out the spending priorities of young people.
• 4:20
  SPEAKER_01: And all of this is falling on the shoulders of a shrinking workforce.
• 4:23
  SPEAKER_01: But here's where it gets worse because it's not just that young people are being squeezed from the top to pay for seniors' entitlements, but they're also being squeezed on the other side with very high housing costs.
• 4:32
  SPEAKER_01: So that's what we wanted to talk about today, the idea that they're kind of being squeezed in both directions.
• 4:36
  SPEAKER_01: High cost programs squeeze out the ability for governments to do things like help young people, like pay for tuition supports, pay for childcare, anything else.
• 4:44
  SPEAKER_01: And programs like OAS keep being made more generous over time because it's quite politically popular.
• 4:49
  SPEAKER_01: But at the same time, young people are finding their disposable income is just disappearing because the price of housing, both rents, home prices, everything's rising much faster than their incomes are.
• 4:59
  SPEAKER_00: Yeah, and that would be one thing if the high cost of housing was just an accident of nature, but it wasn't.
• 5:05
  SPEAKER_00: We can identify specific policies that make home prices and rents more expensive than they used to be.
• 5:11
  SPEAKER_00: So one would be the shifting of municipal infrastructure costs away from property taxes, which are paid for by current residents, to development charges, which are paid for by new residents and young people.
• 5:22
  SPEAKER_00: We can look at zoning rules uh that prevent existing neighborhoods uh from changing, from being able to add in additional uh housing for younger people.
• 5:32
  SPEAKER_00: Uh, we could look at land use restrictions uh that prevent cities from building out.
• 5:36
  SPEAKER_00: That if you look at you know the suburbs that were built in the 60s and 70s and 80s, that was those cities getting kind of built out.
• 5:42
  SPEAKER_00: And we kind of decided as a society, hey, we we stopped doing that.
• 5:46
  SPEAKER_00: And you know, there are benefits and costs to that, but it does mean that the type of housing on cheap land that was available to baby boomers isn't available to millennials and Gen Z.
• 5:59
  SPEAKER_00: So, you know, while young people were getting squeezed twice, boomers got a dual benefit because all of these policy decisions made housing more expensive.
• 6:09
  SPEAKER_00: So programs were made more generous, but also home prices went up, driving up their net worth.
• 6:14
  SPEAKER_00: So if we bake all of this together, we look at OAS and healthcare spending, but also the policies that made homes more expensive.
• 6:23
  SPEAKER_00: At the end of the day, that just translates into a wealth transfer from younger people to older people.
• 6:29
  SPEAKER_01: Why do you think our economy evolved this way?
• 6:31
  SPEAKER_01: Was it like a conscious effort?
• 6:33
  SPEAKER_00: Well, I just think that uh the baby boomers, there's a lot of them and they have a political clutch there, there's power in numbers.
• 6:40
  SPEAKER_00: So naturally they are going to uh vote for policies that support them.
• 6:46
  SPEAKER_00: You know, we often hear a lot that, you know, governments built a lot of housing in the 1970s.
• 6:51
  SPEAKER_00: Why can't they do that now?
• 6:52
  SPEAKER_00: It's like, okay, well, what's different from the 1970s?
• 6:55
  SPEAKER_00: And what's different is in the 1970s, the baby boomers needed housing, right?
• 6:59
  SPEAKER_00: And they were the largest voting cohort.
• 7:01
  SPEAKER_00: Nowadays, they don't.
• 7:03
  SPEAKER_00: So, you know, it's those kinds of changes in a political clout that that make a difference.
• 7:11
  SPEAKER_00: And generations like mine, Gen X, you know, sometimes stuff works out for us, sometimes it doesn't, but we've never had that power and numbers to be able to change the system to benefit our cohort specifically.
• 7:24
  SPEAKER_01: So it's not necessarily that they're like, you know, we got what we have and we want to pull the bladder behind us.
• 7:29
  SPEAKER_01: We want to keep what we have and make sure our investments are getting bigger.
• 7:31
  SPEAKER_01: Like, I don't I don't think that that's what people are doing.
• 7:34
  SPEAKER_01: I mean, some people are jerks, so maybe.
• 7:36
  SPEAKER_01: Uh, but I think in in general, most people are probably just going, this is what the bulk of the population is talking about.
• 7:41
  SPEAKER_01: This is what's going to affect most people.
• 7:43
  SPEAKER_01: And so we need to focus on that right now.
• 7:45
  SPEAKER_01: And that's what politicians will listen to because so many people are talking about it.
• 7:49
  SPEAKER_00: Well, and so many people are voting for it.
• 7:51
  SPEAKER_00: So yeah, no, I absolutely agree that there's not this big kind of big conspiracy here.
• 7:56
  SPEAKER_00: And I don't think that any generation is trying to actively uh screw the other generations.
• 8:03
  SPEAKER_00: Uh, and I don't think like people think in terms of systems, right?
• 8:06
  SPEAKER_00: They think in terms of, hey, the uh waiting time at uh the hospital is too long.
• 8:12
  SPEAKER_00: Uh, you know, we need to put more money in into healthcare.
• 8:16
  SPEAKER_01: Or hey, we built a lot of houses and now we are losing a lot of our greenfields.
• 8:19
  SPEAKER_01: Now we need to protect the city limits and make sure we don't continue expanding it.
• 8:23
  SPEAKER_00: Yeah, that that's that's another one where you know we we look at the kind of building in the 60s and 70s and go, wow, okay, that used up a lot of land, that increases infrastructure.
• 8:32
  SPEAKER_00: Let's not do that anymore.
• 8:33
  SPEAKER_00: Okay, that that's fine, but there's no kind of reparations or anything put in place to recognize that those policies have an impact on younger generations and means that housing is going to be more expensive, particularly family-sized housing.
• 8:51
  SPEAKER_00: It's going to be more expensive, difficult to get.
• 8:53
  SPEAKER_00: So you've got all of these policy decisions that are made for very good reasons, but we we tend not to look at the kind of second-order effects and voters and the general public.
• 9:05
  SPEAKER_00: We don't think about all of these acting in systems.
• 9:08
  SPEAKER_00: We kind of make all these decisions in silos and not kind of look at the big picture as a whole.
• 9:13
  SPEAKER_01: Yeah, I'm not sure how many people actually understand that because like I hear from a lot of people like, oh, why are you so resentful of boomers?
• 9:19
  SPEAKER_01: It's not millennials against boomers.
• 9:21
  SPEAKER_01: It's not like stop looking at it from a generational warfare perspective.
• 9:24
  SPEAKER_01: And I know that there's nothing like intentional about this.
• 9:27
  SPEAKER_01: I know, but it's like these little things that have happened that altogether stack the system against millennials.
• 9:33
  SPEAKER_01: And I say millennials, I also mean Gen Z as well, because I always remind myself, like, as hard as it was for me in my 20s, it's much harder now if you're in your 20s.
• 9:42
  SPEAKER_01: And I think people don't understand how they're being squeezed from both ends that way.
• 9:47
  SPEAKER_01: Like they know how expensive things are for sure.
• 9:49
  SPEAKER_01: And I think that they realize that they probably won't gain the same wealth through their homes that boomers did.
• 9:53
  SPEAKER_01: But I don't think that people understand just how much we're all paying and we're continuing to pay for supports for people who have assets.
• 10:00
  SPEAKER_01: A lot of people will see it as paid into, like the same way many boomers do.
• 10:04
  SPEAKER_01: I speak to a lot of people about this, and I hear across the board that people think, well, you know, people paid into it.
• 10:10
  SPEAKER_01: They don't realize how huge it is in our budgets.
• 10:12
  SPEAKER_01: Every time I tell someone it's the biggest line of them, they're like, What?
• 10:15
  SPEAKER_01: Really?
• 10:15
  SPEAKER_01: Really?
• 10:16
  SPEAKER_01: Because it's like it's shocking.
• 10:17
  SPEAKER_01: It's uh people don't understand just how big it is.
• 10:20
  SPEAKER_00: They don't.
• 10:21
  SPEAKER_00: And they also don't understand how uh the system has evolved over time, that the OAS payments that people get today are a lot more generous than they were 40 or 50 years ago.
• 10:33
  SPEAKER_00: Uh, you know, the healthcare treatments uh are uh a lot better than they were 40 or 50 years ago.
• 10:40
  SPEAKER_00: And that's a good thing that has contributed uh to the increases in life expectancy, right?
• 10:46
  SPEAKER_00: But 2026 healthcare looks a lot different than like 1976 healthcare.
• 10:51
  SPEAKER_00: I think people tend to forget that.
• 10:53
  SPEAKER_00: And when it comes to the you know, overall amount of money that that goes into these programs, you know, how kind of lopsided government spending is, it's not clear to me how Canada could ever change it.
• 11:05
  SPEAKER_00: That, you know, the population of people who kind of benefit from the system being like it is, uh, from more and more money going into things like OAS, they're only growing in numbers and they already have a disproportionate amount of political clout.
• 11:19
  SPEAKER_00: Like they're the folks who are more likely to vote, they're more likely to donate to a political party, they're more likely to write an op-ed to the local newspaper or attend a community meeting.
• 11:29
  SPEAKER_00: And so I don't really see how you get around that and how we can uh you know rebalance the system any just because the people who benefit from the system have a disproportionate amount of political clouds.
• 11:42
  SPEAKER_01: You put millennials and Gen Zed together, would they outnumber boomers at this point?
• 11:46
  SPEAKER_00: Yeah, no, they they absolutely would, but you'd have to keep in mind that they don't have a lot of money, which is part of the problem here.
• 11:52
  SPEAKER_00: They're they're they're working uh like mad.
• 11:56
  SPEAKER_00: Uh, so you know, they don't have time to attend community meetings and so on.
• 12:00
  SPEAKER_00: But we should also recognize that, you know, for uh a cohort of that population, they're actually looking to inherit a lot of this wealth, right?
• 12:09
  SPEAKER_00: So the interests of millennials and Gen Z aren't necessarily aligned within the same generation, right?
• 12:17
  SPEAKER_00: Because you can have some that don't have a lot of parental support, maybe they're they're newcomers to Canada, um, and they're starting on ground zero.
• 12:26
  SPEAKER_00: Whereas others might say, well, yeah, housing's expensive, but but my folks are gonna help me out, and that kind of gives me a leg up.
• 12:34
  SPEAKER_00: And if home prices were gonna fall a lot, that actually might make my life more difficult.
• 12:39
  SPEAKER_00: So you also get the fact that there are uh differences in in interests within the same generation, which makes that kind of coalescing uh difficult.
• 12:49
  SPEAKER_01: I know I've always heard people say that if home prices drop to the amount that a lot of people, like housing advocates, want them to drop, then we'll have a giant recession.
• 12:56
  SPEAKER_01: We'll have a lot of economic problems of this country and people are gonna lose their jobs.
• 12:59
  SPEAKER_01: And so what I'd always hear is like, well, you won't be able to afford that home anyway.
• 13:03
  SPEAKER_01: So like you shouldn't be counting on home prices dropping and you shouldn't be hoping for it.
• 13:07
  SPEAKER_00: That relationship is they got the causality backwards that people look at home prices falling in the past and go, okay, that happens in bad economic times, right?
• 13:18
  SPEAKER_00: My mind, that argument is that we shouldn't start selling more umbrellas because that's going to cause it to rain.
• 13:23
  SPEAKER_00: Um, it gets a causality exactly, exactly backwards.
• 13:28
  SPEAKER_00: If homes are cheaper and more plentiful, we are wealthier as a as a society.
• 13:34
  SPEAKER_01: So to sum up, baby boomers have done exceedingly well.
• 13:38
  SPEAKER_01: And Canada is a great country to be old in right now, not a great country to be young in right now.
• 13:43
  SPEAKER_01: Look at the unemployment rate, look at like the cost of living everything altogether.
• 13:46
  SPEAKER_01: Millennials and Jed Z are living through a slow growth era without the benefit of home asset appreciation.
• 13:52
  SPEAKER_01: And boomers have so much political clout that this is unlikely to change.
• 13:56
  SPEAKER_01: So the main thing I want people to understand is that if you're a millennial or Gen Z or Gen Alpha or something to this, no one is coming to save you.
• 14:02
  SPEAKER_01: You have to get organized and save yourselves because the system is not working for you.
• 14:06
  SPEAKER_01: And that starts with recognizing how the system is working in these two different ways for different generations.
• 14:12
  SPEAKER_01: So I think it comes down to things like getting organized, maybe running for office, talking to your MPP or MP or city counselor.
• 14:19
  SPEAKER_01: If you can show up to meetings, like that would really help because you you have a lot of these public consultations that are really stacked against you because you have people who live in the neighborhood who have houses and they don't want to see change showing up.
• 14:31
  SPEAKER_01: They have time.
• 14:32
  SPEAKER_01: A lot of them are retired.
• 14:33
  SPEAKER_01: And so it's important that you get organized and find a way to show up and try to make a difference.
• 14:39
  SPEAKER_01: But I think that just waiting on this to change is not a good solution because I don't think it's going to happen.
• 14:45
  SPEAKER_00: Yeah, no, that that's absolutely right.
• 14:47
  SPEAKER_00: Uh, that's, you know, until younger generations, you know, use the fact that there are a lot of you out there, until you develop the strategies to use that power in numbers, uh, you're going to continue to lose this fight.
• 15:00
  SPEAKER_01: Thank you so much for watching and listening.
• 15:02
  SPEAKER_01: Our producer is Meredith Martin and our editor is Sean Foreman.
• 15:06
  SPEAKER_00: If you have any thoughts or questions about selling umbrellas on a sunny day, please send us an email to missingmiddlepodcast at gmail.com.
• 15:13
  SPEAKER_01: And we'll see you next time.