Canada’s next political spectrum shift

Scott Hennig
March 16, 2014
Canada’s two large political parties have always been pragmatists when it comes to assembling a viable coalition of voters. They have even completely swapped positions on the same policy at different times in the country’s history. Scott Hennig argues that the parties are about to face another shift in the coalitions, and whichever party is alert to changing age demographics will have the keys to the kingdom.

Canada’s next political spectrum shift

Scott Hennig
March 16, 2014
Canada’s two large political parties have always been pragmatists when it comes to assembling a viable coalition of voters. They have even completely swapped positions on the same policy at different times in the country’s history. Scott Hennig argues that the parties are about to face another shift in the coalitions, and whichever party is alert to changing age demographics will have the keys to the kingdom.
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Canada’s two storied political parties, the Conservatives and Liberals, have ruled the country for its entire existence. They have done so by embracing the big tent concept, cobbling together coalitions of diverse interests.

Ideologues such as social conservatives, fiscal conservatives and libertarians have largely found a home in the Conservative Party. “Progressives,” social liberals and, at times, labour (although normally with the NDP) have often found their home in the Liberal Party tent.

Liberals have historically owned the Catholic vote, while Protestants leaned Conservative.

Regional cleavages have resulted in prairie socialists voting NDP in provincial elections but supporting the PCs, then Reform, then Conservatives during federal elections.

Unionized workers have worked hard for the NDP while both the Liberals and Conservatives have, at different times, been viewed as the party of big business.

The truth is that religion, language, economic class, region and ideology have all been major factors in dictating the vote for, and shaped the policies of, Canada’s two main federal political parties since their inception.

However, demographics – specifically the onslaught of retiring baby boomers – could play the largest role in dictating new cleavages in the political spectrum over the next two decades. In fact, due to entitlements promised to the rapidly retiring baby boomers, the left-right party system in Canada could be in for a significant shakeup.

Those who select an ideology or philosophy to follow are often disappointed with the Liberals’ and Conservatives’ occasional flip-flops or their complete abandonment of ideology.

While the NDP’s recent regional alignment has put stress on its claim to be the purest ideologues in the Commons, the truth is that the ideological bend of Canada’s two main political parties has at many times been an afterthought.

The 1891 federal election featured the Conservatives of John A. Macdonald defending their imposition of tariffs while their opponents in Wilfred Laurier’s Liberals pushed for “unrestricted reciprocity” with the United States. Nearly a hundred years later, Brian Mulroney’s Progressive Conservatives campaigned in the 1988 election on a free-trade deal with the United States, and John Turner’s Liberals fiercely opposed it. 

The Liberals under Laurier also strongly supported provincial rights, while the Conservatives favoured greater federal control over the nation. This was first demonstrated by Macdonald’s argument for Canada to be a unitary, rather than a federalist, state. Liberals eventually embraced the idea of a large, powerful federal government – especially one that could litter Québec with financial incentives to stay within Canada. Today, the Conservative Party would tend to support provincial rights significantly more so than in the past; this is best demonstrated by the Harper government’s tendency to reject foreign takeovers opposed by the provinces.  

The current Liberal leader, Justin Trudeau, voted in favour of mandatory minimum sentences for growing marijuana in 2009 but moved to favour decriminalization in 2012 and full legalization in 2013.

These about-face changes in position or ideology did not happen overnight or through a leadership coup (although had David Orchard beaten Peter MacKay for the Progressive Conservative leadership in 2003, that could have happened on free trade). They evolved over time, based on the ability of the political party in question to form a large enough voting bloc.

With a significant demographic shift in Canada already under way, another very startling positional or ideological shift could be in its infancy today.

Canada’s post-war baby boom is generally described as the years between 1946 and 1964. During this 18-year period, Canadian mothers went from giving birth to about 250,000 children a year to nearly 500,000.

Baby boomers started to retire about five years ago, but the bulk of them will retire over the next five to 10 years. We have already seen the ratio of workers to retirees drop from 5.4 to 1 in 2000 to 4.6 to 1 today. The federal government projects that in only six years this ratio will be down to 3.6 to 1 and then by 2030 it will be down to 2.7 to 1.

Put another way, in 2010, 14 per cent of Canada’s population was over 65 years of age. By 2030, 23 per cent will be over 65.

Politically, this would seemingly be good news for Canada’s Conservative party. Traditionally, older Canadians have preferred the Conservatives, while the NDP has been the choice of Canada’s youth. Recent polling backs this up, showing that despite the Conservatives trailing the Liberals overall in voting intention, the polls get a lot closer once you look at those aged 65 and over.

An Environics poll last summer gave the Conservatives 36 per cent of the 60-and-over vote and only 16 per cent of the 18 to 29 vote. Conversely, the NDP could muster only 19 per cent of the 60-plus vote but 34 per cent of the 18 to 29 vote. The Liberals, on the other hand, were largely supported equally by every age range (32 per cent to 35 per cent).

An Ekos poll last fall showed similar results, with the Conservatives gaining nearly 32 per cent of the 65-and-over vote and only 18 per cent of the under-35 vote. The Liberals, again, saw similar numbers in nearly every age range (34 per cent to 41 per cent).

The silver lining for the Conservatives is that older Canadians are more likely to vote than younger Canadians. Data from the 2011 federal election show that more than 75 per cent of Canadians between the ages of 65 and 74 voted versus only 39 per cent of those 18 to 24.

The bottom line is this: The number of seniors is growing, these seniors nearly always vote, and they are most likely to vote Conservative.

It is in no small part due to our voting system that single-interest political parties have a tough time existing, let alone wielding any influence in Canada. Otherwise, these growing numbers of retirees might create a seniors-focused party and seek election. In Europe, with its proportional voting systems, these same demographic shifts are resulting in the founding of seniors parties, or ‘grey parties,’ dedicated to protecting or even enhancing seniors’ benefits. In the Netherlands, the 50PLUS party was founded in 2009, and it now holds nine provincial legislative seats, two seats in the national parliament and one senate seat. The HSU (Croatian Party of Pensioners) won an important three seats in 2003, giving it the kingmaker role in parliament and winning pension enhancements.

Even without the type of pension improvements some seniors groups are achieving, due to the glut of baby boom retirements, there will be a significant financial impact on our nation.

Old Age Security (OAS) and the Guaranteed Income Supplement are the major government programs providing financial assistance to the elderly. Currently, as long as a senior is earning less than $115,000 ($230,000 for a couple) and has lived in Canada for a decade, he or she is eligible to collect OAS.

The federal government’s OAS costs are projected to grow at 5.3 per cent per year between 2013 and 2019. This growth is higher than the projected nominal GDP growth, above inflation, and certainly more than core program spending, which is expected to drop over this same period.

In 2011-2012, spending on benefits for seniors made up 15.6 per cent of all federal government expenditures. In 2017-2018, it will make up 18.6 per cent ($52-billion). Canada’s chief actuary projects that by 2030, elderly benefits will consume 23 per cent of all federal spending.

Health care costs are also expected to continue to grow faster than inflation, thus continuing to eat up larger and larger chunks of provincial spending. The Canadian Institute for Health Information estimates that between 1998 and 2008 health care spending increased at a pace of 7.5 per cent a year. While these levels of growth have slowed of late with mounting provincial and federal deficits, demographic factors make up a sizeable portion of that growth.

Increased use of pharmaceuticals by an aging population is one of the largest factors in this growth – up by more than 10 per cent a year during the same period.

More seniors, living longer, mean more entitlement program costs as well as more health care costs.

With seniors and health care costs eating up larger chunks of federal and provincial budgets, such areas as education and infrastructure will bear the brunt and see their share drop.

With the significant increase in our senior population comes a significant cost pressure on the bulk of taxpayers who will be footing the bill. While demographic shifts mean more seniors they also mean fewer non-seniors to pay the bills. Whereas five or six Canadian workers could once share the tax load of providing services to one senior, fewer than three workers will soon be asked to shoulder an even larger load.

Demographic shifts, longer lives and the resulting rising costs for seniors’ entitlement programs have been the genesis for entitlement reform around the world. In 2007, Germany moved its retirement age from 65 to 67 and is now considering a move to 69. Also in 2007, the United Kingdom started increasing its age of retirement gradually from 65 to 68. Despite making the decision in the 1980s to raise the retirement age to 67 (starting in 2003 and finishing in 2025), U.S. politicians continue to debate further ‘entitlement reform.’ In 2009, Australia raised its old age pension eligibility from 65 to 67. The Netherlands is moving its retirement age to 66 in 2019 and 67 in 2023.

Likely due to mounting pressure from its international counterparts, Canada’s Conservative government finally made a timid decision in 2012 to increase the OAS collection age from 65 to 67 between 2023 and 2029 – intentionally passing over the vast majority of baby boomers. This was after the Conservatives promised in the 2006 and 2011 elections not to cut seniors’ pensions. To date, the Conservatives have continued to refuse to move the Canada Pension Plan (CPP) eligibility age up from 65.

Just as with the Republicans in the United States, ideologically, the Conservatives in Canada would seem to be the natural party to cut spending on entitlement programs, reduce the size of government and avoid future tax hikes for younger workers.

However, seniors (who are most likely to vote Conservative) are the most likely to oppose reductions in senior entitlement programs – particularly OAS – even if it means higher taxes for younger Canadians. 

And it is not just the 65 per cent of seniors who would vote for parties other than the Conservatives who are opposed to entitlement reform.

In the 1990s, the Reform Party counted amongst its biggest supporters older Canadians who favoured reduced spending to balance the budget, cut taxes and pay down the debt. Many of these same people have been donors to, and strong supporters of, the fiscally conservative Canadian Taxpayers Federation (CTF).

However, many older, fiscally conservative CTF supporters recoil at the idea of pursuing CPP age increases or OAS cuts.

A 2011 CTF supporter survey offered 30 different policy options for the CTF to pursue, asking supporters to rank them in order of priority. Raising the retirement age came in 29th – the second lowest of all the options. 

In a survey of CTF supporters conducted in December 2013, 39 per cent of those over the age of 75 preferred significant reductions to OAS, with only 1 per cent in favour of eliminating the program. Nearly a third of age 75-plus CTF supporters favoured increasing OAS costs by eliminating all income-based clawbacks. Conversely, 71 per cent of those between 25 and 35 favoured significant reductions to OAS, including 25 per cent who gave the thumbs up to OAS elimination.

The Conservatives might have the support of many seniors who think governments should balance the budget, but they will lose a sizeable number of these seniors if they want to balance the budget through old age entitlement reform.

As the importance of the senior vote grows with every retiring baby boomer, the Conservatives’ desire to further tackle OAS payments will also drop. Seniors have become just too important a voting bloc for the Conservatives to risk alienating them through reductions in payments to the elderly.

This could put significant stress on the big tent and shift the current left-right political spectrum to one that cleaves based on age.

Ideological fiscal conservatives and libertarians under the age of 40 could feel particularly unwelcome in a Conservative party that favours cannibalizing other spending areas (or worse, tax hikes) to give seniors an even bigger piece of the pie.

Non-ideologically driven swing voters under the age of 40 may also soon view the Conservatives as a ‘grey party’ and look to other options to represent their interests.

Where will they turn? The NDP skews young but has tended to be the purest ideologically. In other words, it is unlikely to make an about-face on its positions and suddenly oppose tax hikes or support entitlement reform.

The Liberals are the most likely to attract these under-40 fiscally conservative voters. Why? They have proven highly malleable when it comes to party policy (e.g., free trade, drug legalization, deficits). Further, they have a recent track record of good financial management, having balanced the budget from 1997 through 2005. Moreover, they are currently making a play for libertarians and younger voters with the adoption of such policies as marijuana legalization.

Again, some of Canada’s most fiscally conservative voters – supporters of the Canadian Taxpayers Federation – have begun to support a move to legalize marijuana. This is especially true for the younger demographic. In the December 2013 CTF supporter survey, 69 per cent of those between the ages of 25 and 35 supported legalization of marijuana. The support drops to 64 per cent for those 36 to 50 and continues down to only 36 per cent of those over 75.

If, over the next two decades, the Conservatives predictably shift their policies to attract and protect the powerful seniors voting bloc, ideological fiscal conservatives and libertarians under the age of 40 could very well abandon the Conservative Party. If they find their new home in a Liberal Party that is open to being more hawkish on spending and opposed to tax hikes, the Liberals could leapfrog the Conservatives on the right, thereby fracturing the current left-right party spectrum.

Of course, the opposite could come true. The Liberals, in either the 2015 or 2019 federal election, could promise to repeal planned OAS changes, currying favour with seniors and those on the verge of retirement, stealing the senior vote from the Conservatives.

Whichever way the next decade plays out, the imminent intergenerational political fight will decide how Canada is governed. It will also dictate whether the Conservative Party remains the home for fiscal conservatives or whether the Liberals embrace their Laurier roots and turn the party system on its head. 

~

Scott Hennig is the Vice President, Communications for the Canadian Taxpayers Federation. Scott worked as a speechwriter and public policy researcher with the Government Members’ Research Branch in Edmonton before becoming the Alberta director.  He served as the CTF’s Alberta director from 2005 until 2012 when he was promoted to Vice President, Communications. He is a graduate of the University of Alberta where he received his Bachelor of Arts degree in Economics. Note: The views expressed in this commentary are those of the author and do not necessarily reflect the views or positions of the Canadian Taxpayers Federation.

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