Executive summary
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In recent months, the well-being of Canadian retirees became a policy issue of significant importance. Although the recent financial meltdown played a part in this increased attention, additional problems also contributed to a renewed debate about the financial adequacy of the position of Canadian retirees. These problems include the extent to which younger Canadians are sufficiently prepared for retirement, the sustainability of private and public pension regimes, the ongoing decline of the workers-retirees ratio, as well as an array of issues related to population aging. These concerns were recently highlighted by Mintz (2009) and have been accompanied by a series of reports focusing on the Canadian income security system.
This paper examines the evolution of expenditures and consumption patterns over time for a cohort of households whose head was in his or her late 40s at the beginning of the 1980s. Synthetic groups of individuals deemed 'representative' of that group were constructed by using later cross-section versions of the Survey of Family Expenditures (FAMEX) and of the Survey of Household Spending (SHS). Consumption and expenditures were then examined over five key points of the life cycle of a cohort of aging Canadians.
When examined on a total, unadjusted, basis, both household expenditure and consumption declined over the period, although they did not fall as much as total income. However, this drop might be due to households having lower needs as the number of household members declined from 3.4 to 1.7 on average over that period for the cohort followed in this study.
To take the effect of declining household size into account, results were also expressed on a "per-adult equivalent" basis. On the basis of that approach, expenditure also fell, but by much smaller amounts. Consumption, on the other hand, remained relatively stable as households headed by individuals in their early 70s in the late 2000s consumed 95% of the amount consumed by those in their late 40s exactly 26 years earlier. This compared to an 85% replacement rate in total income "per adult" in a definition of income that includes flows derived from housing services.
Although consumption varied little over time-at least on a per-adult basis-the composition of consumption did change. For older households in their 70s, a larger share of consumption was devoted to housing and a smaller share was spent on food, clothing, and care (primarily because of lower expenditure on food and clothing). Although the consumption of health-related goods and services increased, it was still very modest on average.
Finally, in contrast to income dispersion, consumption dispersion did not vary by substantial amounts over the period among households (consumption dispersion consistently averaged around 30% from the mean, compared to between 40% and 55% for income dispersion). However, the source of the variance did change over time as the source of total variance became characterized mostly by variations in the consumption of housing across households, and characterized much less by variations in the consumption of food, clothing, and care.
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