Impending labour shortages put focus on older workers

Government report offers measures to lessen the effects of an aging workforce

The federal and provincial governments should make it more difficult for employers to terminate older workers and easier for people to retire gradually. These are just two measures to minimize the impact on the labour market of an aging workforce, proposed in a government-sponsored report, released last month.

The report, Older Workers in the Labour Market: Employment Challenges, Programs and Policy Implications, produced by a special working group of the Forum of Labour Market Ministers, looks at two different, though related, issues that are emerging because of an aging workforce, explained Sonia L’Heureux, senior director of labour market policy for Human Resources Development Canada (HRDC).

The first is the protection of older workers who are viewed by some employers as less able to contribute. The other is keeping people in the workforce until the age of 65. Absent was any mention of raising the retirement age past the age of 65.

None of the governments are committed to any action because of the report, L’Heureux said. Rather it can be used as a guide to help the provincial and territorial labour ministers as they consider introducing policies and programs.

“Older workers already make a significant contribution to Canadian society, and will assume a more important role in the labour market as the population ages,” said HRDC Minister Jane Stewart.

Unlike some countries, Canada has no specific legislation to protect older workers from permanent layoffs. “The Swedish system requires a six-month advance notice of termination for workers aged 45 or over, compared to only one month for those aged 25 or under,” states the report. “In Canada, more rigorous requirements for layoffs could be based on the number of years of labour force participation rather than on age.” This would effectively eliminate age discrimination in terminations, but could cause another problem by making it less attractive to hire older workers who have added layoff protection.

Organizations have to look for ways of retraining people who are approaching retirement or reorganizing work so that they will be able and willing to contribute until later in life, L’Heureux said.

Fortunately, baby boomers are generally more highly skilled and adaptable than workers already near retirement. Therefore, 10 years from now it won’t be as difficult to move older workers into new roles as it is today.

Since 1999, 62 federally sponsored pilot projects have been underway to look at how Canadian organizations can keep people in the labour force, said L’Heureux. In British Columbia, for example, the initiative New Opportunities for Older Workers is educating employers on how to make use of older workers.

The report also suggested reviewing registered retirement plan provisions that encourage early retirement. The report states that giving workers the option of taking prorated CPP or QPP benefits starting at age 60, an option introduced in the 1980s, did not have a “strong impact” on participation rates. However it also said the introduction of “transition-to-retirement” measures could help people extend their working lives.

“Rather than suddenly leaving the labour market, many workers might opt for phased retirement if available measures were more flexible and allowed older workers to continue working part time and earn pension credits while collecting a partial pension,” reads the report.

Phased retirement programs almost always involve some form of reduced hours, but the retirement system in most provinces discourages employees from working a shorter week because it would hurt their pensions when they retire outright.

“In many cases, retirement benefits are calculated on a worker’s earning during the final years of service. This formula does not encourage workers to opt for phased retirement, since part-time work would typically lower retirement benefits,” states the report.

Again drawing on examples from other countries, the working group suggested older workers be able to reduce the number of hours they work and collect a partial pension to compensate for the decrease in wages.

Only Quebec has a program to help workers move gradually into retirement. Quebecers can reduce their working hours and, under certain conditions, continue to make contributions to their pension plans based on their wage levels prior to the phased retirement. They are also eligible to receive retirement benefits to compensate for hours not worked.

Shirley Seward, chief executive officer of the Canadian Labour and Business Centre, said there is a growing interest in phased and flexible retirement initiatives because they give organizations more time to prepare younger workers to take over.

Other recommendations in the report include:

Promote lifelong learning among workers over 45: Employers say the main obstacle to re-employing older workers is a lack of training.

Protect the health and welfare of workers over 55: By avoiding shift work, overtime and piece work, older workers stay healthier and can work longer.

Increase awareness of the benefits of retaining older workers: Research has shown that work experience and knowledge offsets the decline in cardiovascular and sensory capacities of older workers.

Governments do need to look for creative ways to offset the impact of an aging workforce, but the labour markets will also adjust naturally, said Derek Burleton, an economist with TD Bank. Wages will go up and new efficiencies will improve productivity. However, those kinds of adjustments take a long time and therefore labour shortages could be most painful in the short term. “In the next 10 years, you could have real problems before the adjustments kick in,” he said.

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