Canada’s Aging Population
Canada’s population is getting older. The 2016 Consensus results are in and for the first time in Canadian history, the number of seniors surpassed the number of children – albeit by a small margin (5.9 million vs. 5.8 million). However, if the current trend continues the gap will only get wider with projections for 2031 stating that 23% of Canadians could be seniors versus the 16.9% today.
To clarify, Stats Canada classifies seniors as 65 years older and the children as 14 years or younger. So, what is causing this trend? A few things:
- A large portion of the baby boomer generation, those born from 1946 and 1964, are starting to hit the retirement age
- The average life expectancy in Canada is increasing – 80 years old for men and 84 for women
- Lower fertility rates
An aging population has large implications for the economy. There will be less people in the labour market, an increase in spending on health care and large nest eggs will be left behind as an inheritance.
The Largest Wealth Transfer
The inheritance that will be transferred from the baby boomers to the next generation will be the largest intergenerational wealth transfer in Canadian history. It is estimated, $750 billion will be passed on from aging relatives over the next 10-15 years. That number could increase as assets such as real estate appreciate in the coming years.
With a large influx of wealth, the economy could see a boost in start-up activity due to a financial cushion, an increase in savings as debt gets paid down and a rise in activity in the real estate market. Discretionary spending could also increase as these inheritances can offset a family’s income to go on vacation or purchase a vehicle. The inheritance will not only be passed on the baby boomer’s children, but also their grandchildren.
What Does This Mean for the Auto Industry?
The auto industry has been busy preparing for the future of autonomous vehicles. The changing behaviours of the changing behaviours of millennials and generation Z with a sharing economy and rent-vs-own mindset are changing business models of large automakers for the long-term. However, automakers believe a surge in ownership is coming from the younger demographic groups as they come into the inheritance expected and reach an age where they will be moving out of cities and starting families.
However, before that shift happens with the next generation, the senior population is keeping the auto industry sales at record-highs. The baby boomers are a generation that defined themselves by the cars they drove – it became a rite of passage in their youth. Now, in retirement, after working hard all their lives, they are treating themselves to nice vehicles. The Canadian auto industry saw record breaking sales in 2016 driven by SUV’s, trucks and high-end vehicles – Jaguar, Porsche, and Maserati sales grew by double-digits from 2015.
Canada is about to enter an interesting decade as the average age continues to rise. All industries, especially automakers, will be watching and preparing for this shift of the largest transfer of wealth from one generation to the next.