Economist suggests higher participation by aboriginals, women could provide growth
By 2031, the last of the baby boomers will have reached the age of 65 and the workplace will look markedly different than it does today, according to a recent report by Statistics Canada.
The report looks at current trends and made predictions about the workforce 20 years from now. While the findings are not surprising — that the labour force growth rate will slow, fewer workers will be supporting more retirees, and there will be more immigrants in the workforce — economists suggest government, employers and trade unions should be giving careful thought to the implications of these projections and how they could be altered.
After expanding at an average rate of just over four per cent a year in the past, the labour force growth rate is expected to slow to less than one per cent a year by 2031.
Rose Olfert, a business and economics professor at the University of Saskatchewan in Saskatoon, says that decline could be offset by higher productivity.
“In the 1970s we imagined a labour force that would be more productive through skilled knowledge workers and technology,” she says. “That hasn’t happened. Canada is still behind the U.S. in terms of productivity growth.”
Olfert added that other factors could also affect the growth of the labour force in Canada, such as better training and integration of aboriginal workers. In Saskatchewan, for example, the aboriginal unemployment rate is almost four times higher than the general population.
Another factor could be more women re-entering the workforce. Olfert predicts many would be lured back if the scarcity of labour led to higher wages and improved childcare.
“If childcare was accessible, easy and affordable, women would respond in greater percentages,” she says.
Another major theme of the report is the aging workforce. In 2001, only one in 10 Canadian workers was 55 and older. In 20 years, that ratio is expected to increase to almost one in four.
Olfert questions whether that’s an accurate prediction given that most jurisdictions no longer have mandatory retirement and the recent financial crisis has altered many people’s retirement plans.
“Are people really going to retire at 65, or at the ‘usual’ retirement age?” she says. “What we’re really at risk of losing is those over 55 and all of their work experience and knowledge. Perhaps more consideration should be given to internships and on-the-job training.”
James MacKinnon, an economist at Queen’s University in Kingston, says it’s also “bad social policy” to encourage people to exit the workforce early.
There are currently about six people in the labour force for every retiree. By 2031, that number will drop to three workers for every retiree.
“Between 55 and 65 they’re still capable of contributing substantially to the workforce,” he says. “If we remove them from the workplace when they’re still capable of working, and then their pension plan runs out of money when they’re 80, we can’t really ask them to go back to work, can we?”
MacKinnon predicts pensions will become a socially divisive issue with fewer workers supporting more retirees by 2031 — many of whom worked in the public sector and have defined-benefit pensions.
“Many private sector companies have stopped defined-benefit programs so all of the risk is now on the worker. And there are many in the private sector who don’t have pensions themselves,” he says.
The risk to them could be compounded, says MacKinnon, if the labour shortage drives up wages and pushes down capital returns.
“If they’re living on their own money, they’ll suffer. If they’re living on public pensions, the taxpayer suffers.”
