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POL3513 (2)


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Political Science
Ibtihel Bouchoucha

During the baby boom that followed the second World War, the average fertility rate in canada was 3.6 children per woman. Partly due to the increase in women participating in the canadian labour force, canada’s fertility rate dropped to 1.7 children per women by 2007. This change in the fertility rate is expected to continue to slow the population growth rate. Thanks to healthier lifestyles and improved technology, the average life expectancy of a canadian has risen from 68.5 years in 1951 to 80.5 years in 2006. The combination of fewer younger people entering the population and the current population living longer will act together to increase the average canadian’s age over the next few decades. The aging of the baby boom resulted in a significant increase in the working-age share of the population, from 58 percent in 1962 to about 69 percent in the early 1980s. The youngest baby boomers came of age in the early 1980s, and in the subsequent three decades there were no significant changes in the working-age share of the population. But the oldest baby boomers reach 65 in 2011, and so for the next twenty years there will be an inexorable decline in the working-age share of the population, a decline that roughly mirrors the increase from thirty years earlier. With the ongoing aging of canada’s baby-boom generation, a growing fraction of the population will fall into these older age categories, thus reducing the economy’s overall labour force participation rate. The overall participation rate is projected to decline from over 67 percent today to below 61 percent by 2040, even with the assumption that age-specific participation rates increase by up to 4 percentage points between now and 2030, and remain constant thereafter. The falling labour force participation rate will cause a decline in the future growth rate of average living standards, as measured by real per capita GdP, leading to two policy conclusions. First, productivity growth is likely to account for more than 100 percent of growth in real per capita GdP over the next few decades, meaning that canadians and their governments must take seriously the issue of increasing productivity. second, the reduction in the labour force participation rate taken by itself will reduce the growth rate of real per capita GdP (for any assumed productivity growth rate) and thus reduce the growth rate of canadian governments’per capita tax base. The aging of the canadian population will force canadian governments to face a significant two- part fiscal challenge. First, the aging of the population will lead to a slowing of national income, the primary tax base for governments, thus slowing tax revenues. second, key canadian public spending programs will become more costly as a share of GdP, especially those providing healthcare and income support for the elderly, even as the tax base slows considerably. confronting this fiscal challenge will likely create political tensions between provincial and federal governments and will force governments at all levels to make some difficult fiscal decisions. Confronted with spending demands that rise faster than tax revenues, future canadian governments will be faced with three broad choices. First, they can attempt to reduce the growth rate of overall spending. second, they can attempt to increase the growth rate of revenues through increases in tax rates. Finally, they can choose to increase their public borrowing. of course, the third option is not a permanent solution since the debt eventually needs to be repaid and such repayment ultimately requires a command over resources, which in turn requires either spending reductions or increases in tax revenues. in the hypothetical situation in which future governments do not make any adjustments in spending or taxation but instead merely increase their borrowing, canada’s net public debt is projected to increase by between 25 and 50 percentage points of GdP by 2040. Durant le baby-boom qui a suivi la deuxième guerre mondiale, le taux de fécondité moyen au Canada était de 3,6 enfants par femme. Cependant, due à l'augmentation des femmes participant au marché du travail canadien, le taux de fécondité au Canada a chuté à 1,7 enfants par femme en 2007. Ce changement dans le taux de fécondi
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