who funds consumption across canadian regions ......1 who funds consumption across canadian regions?...
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Who funds consumption across Canadian Regions? Leveraging age-based
National Transfer Accounts to evaluate the role of the family, the State,
and individual resources
Authors:
- Julien Navaux, Department of Economics, University of Ottawa.
Room 5033, FSS building, 120 university private K1N 6N5 ON, Ottawa, Canada
- Marcel MΓ©rette, Department of Economics, University of Ottawa.
Room 217, Tabaret Hall, 550 Cumberland Street K1N 6N5 ON, Ottawa, Canada
Abstract National Transfer Accounts (NTA) integrate micro and macro database to measure the ways
individuals of various ages produce, consume, save, and share resources. This country-based
methodology has been applied to seventy countries around the globe following the rules
established by the United Nations. This paper provides the theoretical foundations of NTA at the
subnational level and introduces the first regional analysis across five Canadian regions covering
1997-2013. Results suggest that per capita consumption increases more rapidly for dependent
age groups (youth, aged 0-24, and seniors, aged 65 or more) in the two most populated provinces
of Canada (Quebec and Ontario); the funding for that additional consumption has been covered
by public transfers. However, in most of the regions we find that middle-aged individuals decrease
the share of individual resources that they transfer to dependent age groups through the public
reallocation system. Together, these results suggest upcoming tensions on the Canadian public
transfer system due to the ongoing aging transition.
Keywords: Population Aging, National Transfer Accounts, Subnational Regions.
JEL Classification Numbers: C80, H70, J10, R10
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Introduction
Applied and quantitative methodologies have contributed significantly to the understanding of
the economic challenges related to population aging. In the 1990s, Generational Accounts were
developed by Kotlikoff and colleagues in order to provide rigorous assessment of the fiscal burden
on future generations posed by aging populations (Auerbach et al., 1992). This methodology, first
used in the United States, has been applied in several countries around the globe (see for instance
Kotlikoff & Raffelhuschen, 1999) and also at the regional level (Cattoir & Docquier, 2004). In the
2000s, the National Transfer Accounts (NTA) methodology expanded the Generational Accounts
methodβs capacity to contrast the fiscal burden of current versus future generations by providing
a complete picture of economic flows by age (Lee & Mason, 2011). Since National Transfer
Accounts are consistent with National Accounts, the success of the NTA approach has been rapid,
with applications in approximately 70 countriesi. Such global success has led to many relevant
static international comparisons (Lee, 2013) of age profiles on labour income, consumption and
savings, etc. More recently, efforts have been made to develop time-series perspectives. The few
countries so far to provide longitudinal NTA accounts include Australia (Temple et al. 2017),
France (dβAlbis et al., 2018), Taiwan (Lai & Tung, 2015), the United States (Donehower et al., 2011)
and Canada (MΓ©rette & Navaux, 2019).
In Canada, the challenges of managing an aging population have been widely studied at the
country level. Generally, these studies evidence a relatively sustainable redistribution system,
especially concerning public health expenditures (Evans et al., 2001), thanks to a dynamic labour
market (Fougère et al., 2009; McDaniel et al., 2015), and a high immigration rate (Fougère et al.,
2004). However, Statistics Canada projects a divergent degree and pace of population aging
across Canadian regions. In the eastern parts of the country, for example in Quebec and the
Atlantic provinces, population aging is a more compelling and aggressive process than for central
and western areas such as Ontario, the Prairies and British Columbia. In 2013, the percentage of
the population aged 65+ totalled 16.8%ii in the east, versus 14.7% in central and western regions.
However, this gap between the east and other regions is projected to significantly widen in the
coming years, with the percentage of the population aged 65+ rising to 26.4% in eastern Canada
and 22.9% in central and western Canada by 2038. In the Canadian federation, in which each
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province is responsible for its own major public programs like health care and education, and in
which the federal government reallocates resources from richer to poorer provinces through the
Federal Support to Provinces and Territories transfers program, such divergent demographic
projections across Canadian regions may put the sustainability of the inter-regional public transfer
system at risk.
This article addresses the issue of population aging and age allocation of resources by building a
National Transfer Accounts methodology at the subnational level. It provides also the first release
of these accounts for five Canadian regions, covering the period 1997-2013. This is the first time,
to our knowledge, that a full set of subnational accounts has been created.
The empirical analyzes on this unique database on Canada and Canadian regions reveals 1Β°) how
per capita consumption has changed for various ages between 1997 and 2013; 2Β°) how
consumption at dependent age groups is funded by the State, the Family, and by individual
resources; 3Β°) how middle-aged groups use their individual resources to consume, to make
transfers to dependant age groups through the Family and through the State.
This article is organized as follows. The first section introduces the National Transfer Accounts
methodology by focusing on its theoretical foundations at the subnational level. The second
section describes the evolution of consumption by age group in Canada and in the five Canadian
regions investigated. The third section quantifies the extent to which the consumption of
Canadian youth (0-24) and seniors (65+) is funded by the Individual, the State and the Family. The
fourth section quantifies the degree to which middle-aged groups use their individual resources
to consume and make transfers through the State and the Family. The last section provides
concluding remarks.
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1. Measuring NTA
The NTA method
National Transfer Accounts, which were developed from the original works of Lee (1980) and
Mason (1988), are now a well-established methodology that quantifies the production and use of
economic resources at all ages. The methodology is described in a reference manual published by
the United Nations (2013). The NTA method recognizes that at all ages, individuals generate
income, receive and make transfers through public and private systems, and use the remaining
resources to consume and save. Consequently, by appreciating the heterogeneity of economic
agents across various ages, NTA can enrich National Accounts with a complete and relevant set
of economic flow variables across age groups.
As proposed by dβAlbis et al. (2018), the NTA equation (see equation (1) below) can be structured
by categorizing the three different sources through which individuals fund their consumption
πΆ(π): their own resources, governments, and the family. Within this framework, these three
sources of funding are designated the Individual, the State, and the Family. Resources from the
Individual include labour income and private asset returns net of private savings. This is expressed
in the first term of the right-hand side of equation (1) below, (ππΏ(π) + ππΎπΉ(π) β ππΉ(π)) . At all
ages, individuals receive resources from and make transfers to the State, as well as benefiting
from public asset-based reallocation (public asset income net of public saving). This corresponds
to the second term of the right-hand side of equation (1), ππΊ(π) + ππΎπΊ(π) β ππΊ(π). Lastly,
individuals receive resources from and make transfers to their Familyiii (United Nations 2013), as
expressed in the third term of the right-hand side of equation (1), ππΉ(π).
πΆ(π) = [ππΏ(π) + ππΎπΉ(π) β ππΉ(π)] + [ππΊ(π) + ππΎπΊ(π) β ππΊ(π)] + ππΉ(π) (1)
Equation (1) permits the appraisal of the role of the Individual, the State, and the Family in
financing consumption of youth (0-24) and seniors (65+). This article also clearly identify the
allocation of the middle-aged groupsβ individual resources to consumption (π), public transfers
or the State ( β [ππΊ+(π) β ππΊβ(π)] ), and private transfers or the Family (β[ππΉ+(π) β ππΉβ(π)]).
In order to accomplish this goal, equation (1) is rewritten as follows:
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ππΏ(π) + ππΎπΉ(π) β ππΉ(π) = πΆ(π) β [ππΊ(π) + ππΎπΊ(π) β ππΊ(π)] β ππΉ(π) (2)
Measuring NTA at the subnational level
The economic flows accounts of equation (1) and (2) have been extended to address several
dimensions, including gender and domestic production (Zagheni & Zannella, 2013; dβAlbis et al.,
2016), rural and urban residents (National Transfer Accounts, 2017), and future projections on
public and private transfers (SΓ‘nchez-Romero et al., 2013; Lee et al., 2017). However, these
extensions are systematically conducted only on a by-country basis. This paper innovates by
expanding the NTA methodology at the subnational level and providing an application for Canada
and its regions.
To our knowledge, only Vogt and Kluge (2015) have developed NTA at the subnational level, in
their case for labour income and public pensions in eastern Germany for 1988, 1993, 2003 and
2008. This article goes a step further by establishing the theoretical basis of NTA at the
subnational level in order to produce a complete set of economic NTA flows for five regions of
Canada and for every year between 1997 and 2013.
The NTA methodology at the subnational level is summarized by equation (3), which decomposes
equation (1) at the regional level. At each age π, individuals of region R finance their consumption
using Individual resources and transfers from the State and Family. In the case of the present
article, each region represents the geographic basis of the NTA at the subnational level and
generates net transfers with the rest of the country (ROC) and with the rest of the world (ROW).
The sum of the net transfers (public ππ πππΊ and private ππ ππ
πΉ ) with the rest of the world for all
regions must be equal to the net transfers of the entire country (ππΊ and ππΉ). The sum of the
regional net transfers (public ππ ππΆπΊ and private ππ ππΆ
πΉ ) with the rest of the country must be equal
to zero (β Tπ ππΆπΊ
π = π
π=1 0 ; β Tπ ππΆπΉ
π = π
π=1 0).
Transfers with the rest of the country (ROC) are transfers to and from other regions. In Canada,
public transfers, taxes, and social contributions are intermediated by local and federal
governments. Net transfers of a particular region with the rest of the country (ROC) refer to the
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difference between public transfers received from the federal government and taxes and social
contributions paid to the federal government. Consequently, Tπ πππΊ
π is positive (negative) if a
region receives more (less) public transfers than its tax and social contribution payments to the
federal government. The same argument applies for private transfers within the country Tπ ππΆπΉ
π
and with the rest of the world Tπ πππΉ
π . Note that private transfers between regions and with the
rest of the world do not involve the intermediation of the State.
πΆπ (π) = [ππ πΏ(π) + ππ
πΎπΉ(π) β ππ πΉ(π)] + [Tπ ππ
πΊπ
(π) + Tπ ππΆπΊ
π (π) + ππ
πΎπΊ(π) β ππ πΊ(π)] +
[Tπ πππΉ
π (π) + Tπ ππΆ
πΉπ
(π)] (3)
This paper applies NTA at the subnational level to Canadian regions on a yearly basis from 1997
to 2013. These accounts are quantified for five regions: Atlantic (provinces of New Brunswick,
Prince Edward Island, Nova Scotia, and Newfoundland and Labrador), Quebec, Ontario, the
Prairies (provinces of Alberta, Saskatchewan, and Manitoba), and British Columbia. The
population of these five regions represents 99.7% of the Canadian population in 2016.
Unfortunately, age profiles are not available for the Territories of Canada (The Northwest
Territories, Nunavut, and the Yukon) which accounted for 0.3% of the Canadian population in
2016.
Aggregates of NTA accounts at the subnational level
The most difficult data issue for NTA at the subnational level is the construction of aggregates for
each subdivision of the country. In Canada, aggregates are calculated with a set of tables from
Statistics Canada, which has produced National Accounts at the provincial and territorial levels
dating from 1981 (Appendix A online provides numbers of and comments on the aggregates).
Table 1 introduces the aggregates for equation (1) in Canada and its regions and territories for
2013. For each aggregate (πΆ, ππΏβ¦), the sum across all provinces, territories and the rest of the
world (ROW) must equal to the aggregate for Canada. In other words, for each column of Table
1, the amount in the last row (Canada) equals the sum of the other rows of the same column. The
economic flows reported for the rest of the world (ROW) refer to economic activities generated
by Canadian residents outside Canada. For instance, labour income earned outside Canada by
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Canadian residents equals $646 million. This amount added to labour income earned inside the
Canadian borders ($1,173,834 million) is equal to total labour income at the national level
($1,174,480 million).
As demonstrated above, NTA at the subnational level differ from country-based accounts. The
public transfers of an individual are composed of net public transfers with the rest of Canada
(ROC) and the rest of the world (ROW). Net transfers equal the difference between transfers
received and made. At the national level, the net public transfers of provinces and territories with
the rest of Canada must sum to zero. This is why for Canada, net public transfers with ROC equals
zero in the last row of Table 1. Notice, however, that at the provincial and territorial levels, the
value of net public transfers with ROC does not necessary sum to zero. For instance, the Atlantic
region receives a net amount of $13,670 million from the federal government, whereas the
Prairies paid a net amount of $21,640 million to the federal government. In Canada, the federal
government levies taxes and contributions, then redistributes the revenues in the form of public
transfers to provinces and territories. When the inflows are different from the outflows, the
federal government generates a surplus or deficit that is included in public asset-based
reallocation. For Canada, public asset income net of public saving equals a positive $2,968 million.
Hence, tax and social contributions paid to the federal, provincial and local governments
exceeded the public transfers received by individuals, by this amount.
Net public transfers of Canada with the rest of the world equals $1,542 million in 2013. This means
that Canada received more public transfers from the rest of the world than the country made to
the rest of the world. This net amount is equivalent to the aggregate ππΊ from equation (1) at the
NTA country basis. Net public transfers ππΊ at the national level are split between the five regions
studied according to the allocation key of the provincial GDP, published by Statistics Canada.
As illustrated in equation (3), net private transfers of Table 1 are composed by net transfers with
the rest of the world ππ πππΉ
π and the rest of Canada ππ ππΆ
πΉπ
. However, the aggregates ππ πππΉ
π and
ππ ππΆπΉ
π are merged, since at the regional level, National Accounts do not distinguish net private
transfers with the rest of the world from the rest of Canada. Consequently, at the national level,
the negative amount of $8,843 million corresponds to the net transfers from Canada to the rest
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of the world. For each region of the table, the aggregate amount corresponds to the total net
transfers with both the rest of the world and the rest of Canada. For instance, the table indicates
that the residents of the Atlantic region received $1,911 million more than they contributed to
the rest of the world and to the rest of Canada.
Table 1. Aggregates for Canada, its provinces and territories (C$ million, 2013)
Consumption
Individual resources The State The Family
Labour income
Private asset income
Private saving
Net public transfers with ROC
Net public transfers
with ROW
Public asset income-public saving
Net private transfers
with ROW and ROC
Atlantic 92 871 65 191 17 235 5 325 13 670 90 98 1 911
Quebec 278 457 236 686 43 188 16 925 12 516 296 -90 2 785
Ontario 506 835 458 224 85 156 18 303 -4 236 565 2 102 -16 673
Prairies 269 150 259 628 104 023 56 835 -21 640 397 21 -16 442
British Columbia
177 572 148397 24 989 12 905 -4 120 186 1 055 19 971
Territories 8 363 5708 404 104 3 810 8 -199 -1 265
ROW 1 514 646 -16 -19 871
Canada 1 334 762 1 174 480 274 996 110 380 0 1 542 2 968 -8 843
Note: In Canada, The Atlantic Provinces, Quebec, and Territories receive together C$29,996 million more public transfers from other provinces
than they actually give to other provinces. Symmetrically, Ontario, the Prairies and British Columbia make together C$29,996 million of net
public transfers to the Atlantic Provinces, Quebec, and Territories.
Sources: National Accounts and calculations by the authors.
Even if Table 1 reports amounts at the macro level, it is already possible to distinguish some
features of the various regions studied. Table 1 demonstrates that net public transfers from the
other regions finance the consumption of the Atlantic provinces, Quebec and the Territories by a
significant amount (respectively 14.7%, 4.5% and 45.6% of consumption). The other three regions
under study (Ontario, the Prairies, and British Columbia) are net contributors to the transfers
across regions (respectively 0.8%, 8% and 2.3% of consumption). Moreover, the highly positive
contribution of net public transfers to other regions from the Prairies is partly due to capital
income (πππππππππ πΎπΉ ) that accounts for a much more significant amount than that of other regions.
In the Prairies, the share of capital income in consumption equals 38.6%, while this share for the
entire country equals 20.6%. The greater amount of private capital income in the Prairies is
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explained by the capital-intensive structure of its economy, in which oil resources play a
significant role. Abundant oil resources imply also larger tax revenue from labour income. In the
Prairies, average labour income between age 19 and 64 equals $61,416 in 2013 compared to
$48,144 in other provinces.
Age profiles of NTA at the subnational level
The NTA methodology allocates aggregate amounts of Table 1 across ages using individual age
profiles from surveys and public statistical data (Appendix B online provides the different data
sources used to construct the individual age profiles). Hence, NTA accounts at the subnational
level require the calculation of individual age profiles for each geographical area. The Survey of
Household Spending (1997-2013), the Survey of Labour and Income Dynamics (1993-2011), and
its successor, the Canadian Income Survey (2012-2014) provide a large proportion of the
individual age profiles (except public consumption profiles calculated from administrative data).
Figure A of Appendix B online reports details on the variables calculated from these surveys and
other sources.
2. The regional and national evolution of consumption in Canada by age group
Figure 1 introduces the per capita age profiles of consumption for 1997 and 2013. The shape of
the per capita age profiles of consumption is quite similar across regions and in both years: a
sharp increase from age 0 to 20, then a U-shaped pattern from age 20 to 60 and an exponential
increase of consumption after age 60. The rapid growth of total consumption after age 60 results
from a high consumption level of public health care services (MΓ©rette & Navaux, 2019). The high
level of health care consumption by seniors seems to be a feature of the health care system in
North America. Indeed, Donehower et al. (2011) report the same exponential trend of health care
consumption for seniors in the United States although the rise results mostly from private health
care consumption. While the consumption profile across ages is similar in Canada in both years,
levels differ significantly across regions in both years. In the Prairies for instance, the level was in
the middle of the pack in 1997. In 2013, however, that level is much higher than the Canadian
average since each resident of the Prairies spent 11.3% more on consumption than the Canadian
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average ($42,271 vs $37,967). Consumption in the Atlantic also significantly improves with
respect to the Canadian average between 1997 and 2013. Per capita consumption in Ontario and
British Columbia remain close to the Canadian average in both years. In Quebec, the consumption
level declines substantially with respect to the Canadian average: In 1993, consumption was at
$34,143 in Quebec, which is as much as 10.1% lower than the Canadian average. One clear feature
of Figure 1 is the increase in the differences across regions in the per capita level of consumption
between 1997 and 2013. Indeed, the gap between the highest and the lowest consumption levels
widens substantially between 1997 and 2013. If this trend continues, one can expect a mounting
demand for interregional transfers and hence more pressure on the Canadian federation.
Figure 1. Per capita age profiles of Consumption in 1997 and 2013 (constant 2013 Canadian dollars, thousands)
Sources: Survey of Household Spending, National Health Expenditure Trends (Canadian Institute for Health Information), number of students in public elementary and secondary schools, postsecondary enrolments (Statistics Canada), National Accounts and calculations by the authors.
Figure 2 reports (real) per capita consumption trends between 1997 and 2013 in Canada and its
five regions for three different age groups: youth (aged 0-24), middle-aged (aged 25-64), and
seniors (aged 65+). The age limits of these three age groups correspond to the ages when
individual resources begin or cease to be greater than total consumptioniv.
In Canada, per capita consumption increases by over 30% between 1997 and 2013. That increase
is slightly more beneficial for youth than for the other two age groups, with respective percentage
increases of 34.1%, 30.3%, and 31.3% for the youth, middle-aged and senior groups. Note that
the small distortion in the trend is caused by the 2008 economic crisis. In fact, the pace of the
increase was similar across the three age groups from 1997 to 2007, but slightly faster for youth
and the middle-aged at 25.4% and 23.4 % respectively, whereas the rise of consumption for
0
20
40
60
0
10 20 30 40 50 60 70 80 90
+
1997
0
20
40
60
80
0
10 20 30 40 50 60 70 80 90+
2013
Canada Atlantic provinces Quebec Ontario Prairies British Columbia
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seniors was only 22.2%.v The per capita consumption across age groups in Canada differs from
observations in other countries. In France for instance, between 1997 and 2007, per capita
consumption at age 65+ increases by 27.6%, while at age 0-24 and age 25-64 it increases by only
16% and 20.5%, respectively.vi The slight distortion of consumption between age groups in
Canada, therefore, has nothing to do with the greater imbalance observed in France. In Canada
after 2010, the increase of per capita consumption relative to 1997 converges again across age
groups. Note again the sharp contrast with France, where consumption increases vigorously
between 1997 and 2011 for seniors (+29.7% for age 65+, but only +15.8% for youth), as reported
by data from dβAlbis et al. (2017).
The evolution of per capita consumption across the three age groups differs across Canadian
regions, as reported in Figure 2. In the Atlantic, the Prairies, and British Columbia, the trend of
per capita consumption over the period of 1997-2013 increases at a comparable pace for the
three age groups, even though the 2008 crisis introduced a bias in favor of youth in the Atlantic
region and in favor of seniors in the Prairies. In Quebec and Ontario, the story is quite different.
In Quebec, per capita consumption increased more rapidly for youth, and this gap between the
youth group and the middle-aged and senior groups continuously widened over the 17-year
period. From 1997 to 2013, consumption increases by 30.8% for youth while it increases only by
23.5% for the middle-aged, and by 20.5% for seniors.vii In Ontario, after a similar increase of
consumption for each age group between 1997 and 2000, consumption increases more rapidly
between 2001 and 2009 for seniors than for the middle-aged and youth groups. Thereafter,
consumption of youth and seniors remains greater than for the middle-aged group. Overall in
Ontario, from 1997 to 2013, consumption increases by 31.8% for youth and by 31.1% for seniors,
while it increases only by 24.9% for the middle-aged group.
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Figure 2. Real per capita level of consumption by age group (base 1 in 1997)
Sources: Survey of Household Spending, National Health Expenditure Trends (Canadian Institute for Health Information), number of students in public elementary and secondary schools, postsecondary enrolments (Statistics Canada), National Accounts and calculations by the authors.
3. The financial sources of consumption for youth and seniors
Figures 3 and 4 introduce the relative weight of Individual, State, and Family funding sources of
consumption for dependent age groups (youth (0-24) and seniors (65+)). Before investigating
results for Canada, notice that a similar exercise had been conducted for France. The greater
increase in consumption evidenced in seniors between 1979 and 2011 by dβAlbis et al. (2017) was
funded by Individual resources, due to an increase in asset income (dβAlbis et al., 2018). This
section examines the case of Canada and further investigate the rapid growth of consumption for
youth in Quebec and for youth and seniors in Ontario.
In Canada, the percentage of consumption at age 65+ financed by the Individual, the State, and
the Family remains remarkably stable between 1997 and 2013 at 46%, 55%, and -1% respectively.
The β1% signals a net transfer from seniors to youth. For youth, the percentage from the State
increases from 31% in 1997 to 34% in 2013, while the share from Family decreases from 38% to
31% and the share from Individuals increases from 32% to 35%. The results reported in Figure 3
0,91,01,11,21,31,41,51,6
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Canada
0,91,01,11,21,31,41,51,6
19
97
19
99
200
12
00
32
00
52
00
72
00
92
01
12
01
3
Atlantic provinces
0,91,01,11,21,31,41,51,6
19
97
19
99
20
01
20
03
20
05
20
07
200
92
01
12
01
3
Quebec
0,91,01,11,21,31,41,51,6
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Ontario
0,91,01,11,21,31,41,51,6
19
97
19
99
200
12
00
32
00
52
00
72
00
92
01
12
01
3
Prairies
0,91,01,11,21,31,41,51,6
19
97
19
99
20
01
20
03
20
05
20
07
200
92
01
12
01
3
British Columbia
0-24 yo 25-64 yo 65+ yo
13
show a shift in the funding of consumption for the youth groups. While the main provider was
the Family in 1997, the State and the Individual were sharing that burden in 2013 at 34% and 35%
respectively. The balance between the Individual, the State, and the Family in Canada is very
different from other countries investigated by dβAlbis et al. (2018). None of the seven countries
analyzed by the latter authors (China, France, Germany, Japan, Sweden, the United Kingdom, and
the United States) show a prevalence of Individual resources to finance the consumption of the
0-24 age group: The State is the most important source of funding in France, and in other
countries, funding from Family dominates State and Individual sources. The uniqueness of Canada
seems to be a blend of the French, British and American systems. Family funding in Canada is
comparable to the French system (36% in France versus 31% in Canada). State funding is similar
to that of the United States (35% in the US versus 34% in Canada). Individual resources in Canada
are slightly higher than the United Kingdomβs share in total consumption (29% in UK versus 35%
in Canada).
For seniors in Ontario, the funding from the State increases regularly from 1997 to 2013 and
coincides perfectly with the increasing trend of per capita consumption at age 65+ (Figure 3). The
State share increases from 35% in 1997 to 38% in 2005, and then increases further to 41% in 2013.
No such trend are observed in other regions where funding from the State remains either
relatively stable between 1997 and 2013 (+1 point of percentage in Quebec) or decreases during
the same period (- 7 points in the Atlantic provinces, -3 points in the Prairies and -8 points in
British Columbia).
The dynamics observed in Figure 3 also shed a light on the quicker increase of consumption for
youth in Quebec and Ontario. First, in all regions there exists a decrease of Family-sourced funding
in contrast to an increase of Individual-sourced funding. The size of the decline of Family-sourced
funding is similar across regions as the share of private transfers in consumption decreased by 6
percentage points in Ontario and by 7 percentage points in all other regions. The increase in
Individual-sourced funding is quite different across Canadian regions. In the Atlantic, the Prairies
and British Columbia, the percentage of consumption financed by the Individual increased
significantly: by +8 points in the Atlantic and British Columbia and by +6 points in the Prairies. In
Quebec and Ontario, a much smaller increase is observed: respectively +2 points and +1 point.
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This weak increase in the percentage of funding for youth from Individual sources in Quebec and
in Ontario is the result of a substantial increase in State-sourced funding. Between 1997 and 2004
in Quebec, the percentage of consumption funded by the State remains stable at around 32%.
From 2004 to 2009, the percentage of consumption funded by the State increases from 32% to
42%, likely due to the substantial increase in the number of places available in subsidized daycare
facilities (Couturier & Hurteau, 2016). As evidenced in appendix B online, public cash transfer
inflows include child benefits that NTA methodology attributes to the children. In Quebec, the
percentage of public cash transfers in total consumption is equal to 9% in 2004, but increases to
12.9% in 2005, and then rises at a slower pace to reach 14.1% in 2009. Thereafter, the share of
public cash transfers in consumption slowly decreases to 11.2% in 2012 and 11.6% in 2013, which
leads to a decrease of the total share of the State in consumption from 42% in 2009 to 40% in
2013. The decrease of State-sourced funding of consumption coincides with an increase in the
number of places available in private non-subsidized daycare facilities (garderies privΓ©es non
subventionnΓ©es) in Quebec (Couturier & Hurteau, 2016), as well as coinciding with the 2008 crisis.
For youth in Ontario, the funding sourced from the State follows four distinct periods over fifteen
years. From 1997 to 2004, the State share fell slowly from 28% in 1997 to 27% in 2004. From 2005
to 2008, the State share increased to 31% and then rose abruptly to 36% in 2009, a year after the
2008 crisis. This sudden rise results from an increase in cash transfers (6.7% of consumption in
2008 and 7.8% of consumption in 2009), an increase in public education expenditures (23.8% in
2008 and 25.4% in 2009) and a decrease in public savings from 0.5% in 2008 to -1.2% in 2009.
After 2009, the State-sourced percentage of consumption fell slowly, down to 32% in 2012 and
33% in 2013. Over a period of nine years, consumption funding by the State increased by 6
percentage points from 2004 (27%) to 2013 (33%), which coincides precisely with the greater
increase in per capita consumption by youth (0-24) in comparison with the middle-aged (25-64).
15
Figure 3. Sources of public funding for consumption before 25 years old, Canada and Canadian provinces between 1997 and 2013
Sources: Survey of Household Spending, Survey of Labour and Income Dynamics, Canadian Income Survey, National Health Expenditure Trends (Canadian Institute for Health Information), number of students in public elementary and secondary schools, postsecondary enrolments (Statistics Canada), National Accounts and calculations by the authors.
Figure 4. Sources of public funding for consumption after 64 years old, Canada and Canadian provinces between 1997 and 2013
0%
20%
40%
60%
80%
100%
19
97
199
92
00
12
00
32
00
52
00
72
00
920
11
20
13
Canada
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Atlantic provinces
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Quebec
0%
20%
40%
60%
80%
100%
19
97
199
92
00
12
00
32
00
52
00
72
00
920
11
20
13
Ontario
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Prairies
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
British Columbia
The Family Individual resources The State
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
2005
2007
2009
2011
2013
Canada
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
2005
2007
2009
2011
201
3
Atlantic provinces
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
200
520
0720
0920
1120
13
Quebec
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
2005
2007
2009
2011
2013
Ontario
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
2005
2007
2009
2011
2013
Prairies
-30%
0%
30%
60%
90%
120%
1997
1999
2001
2003
2005
2007
2009
2011
2013
British Columbia
The Family Individual resources The State
16
Sources: Survey of Household Spending, Survey of Labour and Income Dynamics, Canadian Income Survey, National Health Expenditure Trends (Canadian Institute for Health Information), number of students in public elementary and secondary schools, postsecondary enrolments (Statistics Canada), National Accounts and calculations by the authors.
4. Consumption and transfers to and from middle-aged groups
Section 3 demonstrates the significant role of the State in the rapid increase of per capita
consumption by dependent age groups (youth (0-24) and seniors (65+)) in Ontario and in Quebec.
Consumption exceeding Individual resources for youth and seniors likely put pressure on transfers
funded by the middle-aged (25-64).
Figure 5 reports the use of funding from Individual sources (labour income and asset income net
of private saving) of the middle-aged group between 1997 and 2013. The funding from Individual
sources serves to finance consumption, but also contributes to the transfers of the State and
Family. Figure 5 evidences that in most of the regions of Canada studied, the share of Individual
resources dedicated to consumption equals at least 60%. This share even increased in most of the
regions between 1997 and 2013. Consequently, the share of transfers to youth and seniors
sourced through the State and through the Family decreased in most of the regions of Canada
during the same period.viii In Canada, on average, the share of Individual resources dedicated to
Family transfers decreases from 13% in 1997 to 10% in 2013, while the share of Individual
resources dedicated to transfers through the State decreases from 24% in 1997 to 21% in 2013.
In Quebec, it decreases from 23% in 1997 to 20% in 2013. Ontario converges to Quebecβs position
given that the share of Individual resources dedicated to transfers through the State decreased
from 26% in 1997 to 20% in 2013. The middle-aged groups in Ontario and Quebec also contribute
less through the family transfer system (decreasing from 16% to 14% in Ontario and from 12% to
8% in Quebec).
In other words, dependent age groups receive larger public transfers in Quebec and in Ontario.
At the same time, the middle-aged groups make fewer and fewer public transfers to youth and
seniors in Quebec and in Ontario, but also in the Atlantic region where the share of Individual
resources dedicated to transfers through the State decreased from 13% in 1997 to 11% in 2013,
and in British Columbia where this share decreased from 28% to 22%. The Prairies are unique in
Canada as the only region where the share of individual resources transferred to other age groups
through the state increased between 1997 (23%) and 2013 (25%).ix
17
On an aggregate basis, in Ontario, the ratio of public transfer outflows over public transfer inflows
decline due to the increased allocation of public transfers to youth and seniors and the decrease
in public transfers made by the middle-aged. In 1997, aggregate public transfer outflows were
10% higher than public transfer inflows, which means than Ontarian taxpayers transferred a
significant part of their tax payments and social contributions to other provinces. In 2013, the
same ratio was equal to only 2%. Still, this means that Ontarians transfer a net positive value to
other provinces, although their capacity to transfer substantial resources to other provinces has
been reduced significantly.
In Quebec, despite the increasing role of the State for ages 0-24 and the regression of the net
transfers generated by middle-aged individuals, the ratio between public transfer outflows and
inflows remains stable between 1997 and 2013. In 1997, the public transfer outflows were 8%
lower than inflows. This ratio decreases only slightly in 2013 since public transfer outflows were
9% lower than inflows. In fact, the State share increases for youth in Quebec, but the ratio
between the number of youth and the number of middle-aged people decreases significantly
from 1997 to 2013, due to a low fertility rate and a high level of immigration in the middle-aged
group.x In 1997, the ratio between the numbers of youth and middle-aged individuals was equal
to 0.58. The ratio declines to 0.52 in 2005 and 0.50 in 2013. In Quebec, it appears that the choice
was made to use the low fertility rate as an opportunity to invest more in childcare.
18
Figure 5. Use of individual resources between 25 and 64 years old, Canada and Canadian provinces between 1997 and 2013
Sources: Survey of Household Spending, Survey of Labour and Income Dynamics, Canadian Income Survey, National Health Expenditure Trends (Canadian Institute for Health Information), number of students in public elementary and secondary schools, postsecondary enrolments (Statistics Canada), National Accounts and calculations by the authors.
Conclusion
This article provides the theoretical framework for NTA on a subnational basis. This new
methodology is applied to the five Canadian regions studied for every year between 1997 and
2013. Using the new dataset and NTA subnational methodology, the article evidences which age
groups benefited the most from the general increase in consumption. Then, the role of the
Individual, the State, and the Family for funding the imbalance of consumption across regions and
age groups is investigated.
The four most important results are the following. First, despite a rise in the levels of consumption
in all regions, differences in per capita consumption across regions are increasing in Canada.
Second, per capita consumption of dependent-aged individuals increased markedly in Quebec
(youth only) and in Ontario (youth and seniors) compared to the middle-aged populations. Third,
the funding of that consumption has been covered by more public transfers from the federal and
provincial governments. Fourth, in most regions studied, middle-aged individuals decreased the
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Canada
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
201
3
Atlantic provinces
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
200
52
00
72
00
92
01
12
01
3
Quebec
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Ontario
0%
20%
40%
60%
80%
100%
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
201
3
Prairies
0%
20%
40%
60%
80%
100%
120%
19
97
19
99
20
01
20
03
200
52
00
72
00
92
01
12
01
3
British Columbia
The Family The State Consumption
19
share of their individual resources that they transfer through the public system to youth and
seniors on a per capita basis.
It might be puzzling to see increased public transfers alongside declining middle-age tax and social
contributions to the State. The main explanation for this apparent incompatibility is the structure
of the population by age in Canada and in the Canadian provinces. In Canada, the inverted
demographic support ratio that is defined as the sum of people aged 0-24 and 65+ divided by the
sum of people aged 25-64 decreased continuously to arrive at 0.79 in 2010 (Statistics Canada).
This ratio was equal to 0.84 in 1997 and 0.81 in 2003. After the reversal point of 2010, the ratio
grew to 0.8 in 2012, 0.83 in 2018 and should reach a perfect equality between working (middle-
aged) and non-working (youth and senior) age groups in 2029. The ratio should continue
thereafter to rise up to 1.09 in 2063.
In view of the inverted demographic support ratio, Canada benefited from a demographic
dividend, thanks to the large size of its middle-aged group. This first demographic dividend ended
around 2010. After 2010, the percentage of people aged 65+ rises sharply. From 14% of the
Canadian population in 2013, it is projected to reach 24% by 2038 (Statistics Canada). The
population aging process is significant enough everywhere in Canada to exert pressure on the
local public transfer system. Moreover, the difference in pace and intensity of population aging
across regions will also exert pressure on the inter-regional resource transfer system within the
federation.
20
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22
Notes i Note that NTA became part of the official statistics of South Korea in January 2019. ii Authorsβ calculations from Statistics Canada. iii Excluding bequests as prescribed by the NTA methodology. iv The first age at which individual resources are greater than total consumption is 25 years in 1997 and 2013. The last age with individual resources > total consumption is 63 years in 1997 and 2013. v This is in stark contrast with the case of France, where between 1997 and 2007, per capita consumption increases strongly between 1997 and 2011 for seniors (+29.7% for age 65+, but only +15.8% for youth), as reported by dβAlbis et al. (2017). vi Indicators for France are calculated from the database of dβAlbis et al. (2017) published online at ctn.site.ined.fr/en. vii Interestingly, the trends in Quebec and France went in opposite directions: Quebec favoured youth whereas seniors benefited more from the rise in consumption in France (+15.8% for youth and +29.7% for seniors). viii One notable exception are the Prairies where the share of transfers generated by people aged 25-64 through the State increased from 23% in 1997 to 25% in 2013. ix Note that the results are similar when looking at the use of gross individual resources, i.e. labour and private asset income, without deducting private savings. In Canada, the share of labour and asset income dedicated to the State decreased by 4% in Canada, by 2% in the Atlantic provinces, by 4% in Quebec, by 5% in Ontario, by 7% in British Columbia and remained stable in the Prairies. x In 2013, the total fertility rate was equal to 1.65 in Quebec (Statistics Canada, table 13-10-0418-01). In 2013-2014, from a total of 51,697 new immigrants in Quebec, 26,855 were aged 25-39, which represents more than the half of immigration flows. The same year, the middle-aged group, aged 25-64, accounted for two-thirds of immigration flows (34,140 individuals). The same year, individuals aged 0-24 accounted only for 32.1% of the total number of immigrants in Quebec (Statistics Canada, table 17-10-0014-01).