The Great Canadian Generational Divide: How Young People are Squeezed from Two Sides
The hidden forces reshaping wealth, housing, and opportunity across generations in Canada
In this episode, Cara and Mike explore why Canada increasingly feels like a great place to be old, but a difficult one to be young. They break down the growing generational divide shaped by rising taxes, surging healthcare costs, and a housing market that has far outpaced incomes. At the centre of it all is an aging population that is fundamentally reshaping how public money is spent, and who carries the burden.
They dig into how programs like Old Age Security (OAS) and healthcare spending now dominate government budgets, why younger workers are shouldering a growing share of the load, and how housing policy has intensified pressures on Millennials and Gen Z. The result is a quiet but powerful wealth transfer across generations, one that is rarely discussed in full, but increasingly hard to ignore.
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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.
Cara Stern: It’s a great time to be old in Canada, not so great to be young. Life has gotten very expensive, especially for young people just starting out. But it’s not just housing and salaries that can’t keep up with the cost of living. It’s that even when they have good jobs, they’re being squeezed by high taxes and growing deficits to financially support older Canadians who hold a disproportionate share of both political influence and wealth, widening the gap between generations.
Today, we’re telling the story of how that happened and why policymakers have done nothing to change it.
The demographic changes that have been happening throughout the Western world are not new. 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.
Mike Moffatt: That’s right.
Our aging demographic is a massive strain on government budgets, with the health care system in particular experiencing the biggest and most immediate amount of pressure. So, for example, health care spending today makes up over 40% of Ontario’s provincial budget. Back in the early 1980s, when I was a kid, it was less than 30%.
Cara Stern: Of course, the older you are, the more health care services you use. And Canadians are now living, on average, five years longer than they did in the 80s. And this is something to celebrate. But at the same time, we’re living longer and there are fewer working-age citizens to carry the load. In the 1980s, there were about seven working age people for every one elderly person, and now they’re only three and a half. And just to be clear, that means that in the 80s, you had seven people working for every one retirement-age person. And those seven workers earned income, paid taxes that then paid for services like the health care that that one elderly person needed a lot as she grew older. And now you only have three and a half people doing what seven people did in the 80s. That’s not sustainable.
Mike Moffatt: It is sustainable and other countries are doing it. But we should be clear that sustainable is not a synonym for good. This is problematic. It means that working age people are stretched thin, having to support a large share of the population that isn’t working. And tax dollars that in the past would have gone to productive investments are shifted over to supporting those who need it.
You mentioned health care 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. And it’s the absolute largest line item in the federal budget.
Cara Stern: I don’t think people realize that. That is huge. It is larger than any other expense. It’s the single largest line item in the federal budget.
Mike Moffatt: And it’s growing over time as the Baby Boomers get older.
It’s going to reach over $100 billion in annual spending in a couple of years, and it’s going to exceed Employment Insurance, Canada child benefit, equalization payments — all three of those programs, combined. It’s absolutely massive.
Cara Stern: The size of it is why we keep talking about it. People ask me, “Why do you keep talking about old age security? Why won’t you just let old people have the money that they’ve paid into the system? They spend their lives paying into it, directly paying into it, or they’ve paid taxes for decades. And now that they’re older, they need to be able to get something back from Canada.” But first of all, it’s huge. I keep saying, it’s just going to get bigger. This is a big problem that’s coming. But also, they haven’t actually paid for it.
Mike Moffatt: No, they haven’t. OAS comes out of general revenue like most government programs. It’s not a pension you pay into with a dedicated fund like the Canada Pension Plan. It’s government spending. So they didn’t pay into OAS, they paid into the OAS of their parents. And as you mentioned earlier, you had seven workers able to do that for one person.
Now that we have three and a half people per retired person, each working person has to contribute more. So there’s no fiscal way around that unless programs like OAS were to be substantially scaled back. We can and do debt-finance some of those programs. But that’s not a get-out-of-jail free card that just basically pushes those payments down the road. It increases debt interest for both current and future generations.
Cara Stern: Although I can see how someone might get upset because if they paid for their parents to have it, then all of a sudden it’s their turn, and they’re hearing people say, “You know what? We can no longer afford it.” That’s not great.
Mike Moffatt: 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 ’80s and ’90s. So that’s not exactly an apples-to-apples comparison.
Cara Stern: That’s the fiscal picture. Growing spending on older people, which crowds out the spending priorities of young people. And all of this is falling on the shoulders of a shrinking workforce. But here’s where it gets worse, because it’s not just that young people who 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.
And so that’s what we wanted to talk about today. The idea that they’re being squeezed in both directions.
High-cost programs squeeze out the ability for governments to do things like help young people, pay for tuition supports, pay for childcare, anything else, and programs like OAS keep being made more generous over time because it’s quite politically popular. But at the same time, young people are finding their disposable income is just disappearing because the price of housing, both rent and home ownership prices — everything’s rising much faster than their incomes are.
Mike Moffatt: And that would be one thing if the high cost of housing was just an accident of nature. But it wasn’t. We can identify specific policies that make home prices and rents more expensive than they used to be.
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. We can look at zoning rules that prevent existing neighborhoods from changing from being able to add in additional housing for younger people. We could look at land use restrictions that prevent cities from building out. If you look at the suburbs that were built in the ’60s and ’70s and ’80s, that was those cities getting built out. And we decided as a society, “Hey, stop doing that.” And 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.
So while young people were getting squeezed twice, Boomers got a dual benefit because all of these policy decisions made housing more expensive. So programs were made more generous. But also, home prices went up, driving up their net worth. So if we bake all of this together, we look at OAS and health care spending, but also the policies that made homes more expensive. At the end of the day, that just translates into a wealth transfer from younger people to older people.
Cara Stern: Why do you think our economy evolved this way? Was it a conscious effort?
Mike Moffatt: I just think there’s a lot of Baby Boomers, so they have a political clout. There’s power in numbers. So naturally they are going to vote for policies that support them.
We often hear a lot that the government built a lot of housing in the 1970s. Why can’t they do that now? Okay, what’s different from the 1970s? And what’s different is that in the 1970s, the Baby Boomers needed housing. And they were the largest voting cohort. Nowadays they don’t. So it’s those kinds of changes in political clout that make a difference. And generations like mine, Gen X sometimes stuff works out for us, sometimes it doesn’t. But we’ve never had that power in numbers to be able to change the system to benefit our cohort specifically.
Cara Stern: It’s not necessarily that they think, “We’ve got what we need and we want to pull up the ladder behind us.” Nor that “We want to keep what we have and make sure our investments are getting bigger.” I don’t think that that’s what people are doing. I mean, some people are jerks, so maybe. But I think in general most people are probably just going, “Okay, this is what the bulk of the population is talking about. This is what’s going to affect most people. And so we need to focus on that right now.” And that’s what politicians will listen to because so many people are talking about it.
Mike Moffatt: Many people are voting for it. I absolutely agree that there’s not this big conspiracy here. And I don’t think that any generation is trying to actively screw the other generations. And I don’t think people think in terms of systems. They think in terms of, “Hey, the waiting time at the hospital is too long. We need to put more money into health care.”
Cara Stern: Or “Hey, we built a lot of houses, and now we are losing a lot of our green fields. Now we need to protect the city limits and make sure we don’t continue expanding it.”
Mike Moffatt: That’s another one where we look at the kind of building in the 60s and 70s and go, “Wow, okay, that used up a lot of land and that increases infrastructure. Let’s not do that anymore.” 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-size housing. It’s going to be more expensive and difficult to get.
So you’ve got all of these policy decisions that are made for very good reasons, but we tend not to look at the second order effects. Voters and the general public, we don’t think about all of these actions and systems. We make all these decisions in silos and not look at the big picture as a whole.
Cara Stern: I’m not sure how many people actually understand that because I hear from a lot of people, “Oh, why are you so resentful of Boomers? It’s not Millennials against Boomers. Stop looking at it from a generational warfare perspective.” And I know that there’s nothing intentional about this, but it’s these little things that have happened that altogether stack the system against Millennials. And I say Millennials, but I also mean Gen Z as well, because I always remind myself, as hard as it was for me in my 20s, it’s much harder now if you’re in your 20s.
And I think people don’t understand how they’re being squeezed from both ends that way. They know how expensive things are for sure. And I think that they realize that they probably won’t gain the same wealth through their homes that Boomers did. 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.
A lot of people will see it as paid into, and many Boomers do. I speak to a lot of people about this, and I hear across the board that people think people paid into it. They don’t realize how huge it is in our budgets either. Every time I tell someone it’s the biggest line item, they say, “What? Really?” Because it’s shocking. People don’t understand just how big it is.
Mike Moffatt: They don’t. They also don’t understand how 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. Health care treatments are a lot better than they were 40 or 50 years ago. And that’s a good thing that has contributed to the increases in life expectancy. But 2026 health care looks a lot different than 1976 health care. I think people tend to forget that.
And when it comes to the overall amount of money that goes into these programs, how lopsided government spending is, it’s not clear to me how Canada could ever change it. The population of people who benefit from the system being like it is, 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. 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.
And so I don’t really see how you get around that and how we can rebalance the system just because the people who benefit from the system have a disproportionate amount of political clout.
Cara Stern: If you put Millennials and Gen Z together, would they outnumber Boomers at this point?
Mike Moffatt: 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. They’re working like mad, so they don’t have time to attend community meetings and so on.
But we should also recognize that for a cohort of that population, they’re actually looking to inherit a lot of this wealth. So the interests of Millennials and Gen Z aren’t necessarily aligned within the same generation, because you have some that don’t have a lot of parental support. Maybe they’re newcomers to Canada, and they’re starting on ground zero, whereas others might say, “Housing is expensive, but my folks are going to help me out. And that gives me a leg up and if home prices were going to fall a lot that actually might make my life more difficult.”
So you also get the fact that there are differences in interests within the same generation, which makes that coalescing difficult.
Cara Stern: 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 to, then we’ll have a giant recession. We’ll have a lot of economic problems in this country, and people are going to lose their jobs. And so what I always hear is, “You won’t be able to afford that home anyways, so you shouldn’t be counting on home prices dropping and you shouldn’t be hoping for it.”
Mike Moffatt: They got the causality backwards. People look at home prices falling in the past and go, “Okay, that happens in bad economic times.” In my mind, that argument is that we shouldn’t start selling more umbrellas because that’s going to cause it to rain. It gets the causality exactly backwards. If homes are cheaper and more plentiful, we are wealthier as a society.
Cara Stern: To sum up, the Baby Boomers have done exceedingly well, and Canada is a great country to be old in right now, but not a great country to be young in right now.
Look at the unemployment rate, look at the cost of living. Millennials and Gen Z are living through a slow growth era without the benefit of home asset appreciation. And Boomers have so much political clout that this is unlikely to change.
The main thing I want people to understand is that if you’re a Millennial or Gen Z or Gen Alpha listening to this, no one is coming to save you. You have to get organized and save yourselves because the system is not working for you. And that starts with recognizing how the system is working in these two different ways for different generations.
I think it comes down to things like getting organized, maybe running for office, talking to your MP or MPP or city councillor. If you can show up to meetings, that would really help, because 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. They have time. A lot of them are retired. And so it’s important that you get organized and find a way to show up and try to make a difference.
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.
Mike Moffatt: That’s absolutely right. Until younger generations use the fact that there are a lot of you out there and until you develop the strategies to use that power in numbers, you’re going to continue to lose this fight.
Cara Stern: Thank you so much for watching and listening. Our producer is Meredith Martin and our editor is Sean Foreman.
Mike Moffatt: If you have any thoughts or questions about selling umbrellas on a sunny day, please send us an email to [email protected].
Cara Stern: And we’ll see you next time.
I'm a senior and am fortunate enough to not receive OAS. You raise many good points but not a solution. I think the problem lies with the inflation indexing. What if this stopped until the benefit was erased for anyone having an income of say 60,000 in today's dollars? Have you done any modelling to see how much the line item shrinks if OAS was 100% clawed back at a lower income level? I would like to see the GIS increased and the OAS amount reduced for wealthier seniors.