Aging workforce affecting Canada’s labour market: RBC

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The Canadian Press
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No need to wait any longer for the baby boom retirement shock to hit the economy — it’s already here, according to a new report on trends in Canada’s labour force.

A boomer walks through the financial district in Toronto. — File photo by The Canadian Press

In a fresh analysis on employment, Royal Bank economist Nathan Janzen notes that the steady decline in the so-called participation rate continues even as the unemployment rate drops.

The participation rate, a little reported number that tracks Canadians with jobs and those looking for jobs as a percentage of the working-age population, dipped to 66.1 per cent in the latest employment data for April, down from 66.5 per cent from a year ago and from 67.8 in February 2008. The working age population is considered anyone older than 15 years, with no upper limit.

It would be easy to jump to the conclusion that the steady decline means tens of thousands of Canadians are becoming too discouraged to look for work and are just dropping out of the work force altogether, says Janzen.

But that would be wrong.

The most likely explanation is that many Canadians are dropping out of the workforce because they are retiring. And the trend is likely to become more noticeable going forward, Janzen said.

“This has long been expected,” he said, noting that in 2007 Statistics Canada predicted the participation rate could drop to the 58 per cent range by 2013.

“If you are waiting for the participation rate to turn as a sign of labour market strength you are going to be waiting for a long time.”

The best evidence that aging is the critical factor at play is the data on those Canadians who tell Statistics Canada each month that they are “not in the workforce” voluntarily.

From October 2008 to April 2014, that category has risen by more than a million, but most of those — 682,000 — were in the 65 years and older cohort.

As well, factoring out aging finds the participation rate has held relatively steady since the recession’s end.

“This suggests that all of the decline in the Canadian participation rate since the 2008-09 recession can be explained by the aging of the population and a resulting increase in retirements,” the report concludes.

The RBC analysis is good news in the sense that it suggests Canada’s official unemployment rate of 6.9 per cent is accurately reflecting the health of the labour market — slightly under the 10-year average, but still about one percentage point above the pre-recession level.

But it also has potentially negative implications for governments. Several studies, including from the Parliamentary Budget Officer (PBO), have found that immigration won’t be sufficient to fully compensate for the aging workforce, meaning governments will have fewer workers paying taxes and more costs associated with an aging population.

The squeeze will be particularly tight on provincial governments that are responsible for health-care spending, especially since Ottawa has moved to protect its flank by tying health transfers to the growth in the nominal economy.

The PBO has projected slower labour force will limit economic growth to about 1.8 per cent in the next several decades, compared with 2.6 per cent for the 1977 to 2011 period.

The aging issue has also been a prime justification used by the Harper government for changes to job training programs, as well as keeping the controversial temporary foreign workers program, so as to meet what is feared to be a future skills shortage crisis.

Janzen is careful to caution that his report does not mean Canada’s labour market is fully recovered from the recession. The unemployment rate is still higher today than in 2008, more people are officially classified as unemployed and the number who have been out of work 27 weeks or longer remains higher than before the slump.

But the data does show 95 per cent of the increase in the number of Canadians not in the workforce today is because they self-report not wanting a job, mostly because the’ve retired.

Organizations: RBC, Statistics Canada

Geographic location: Canada, Ottawa

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Recent comments

  • Eliza
    May 22, 2014 - 10:15

    Something must be wrong about this data. The reality in the field of job search is different. At the last interview I was told there were 100 applications for the position. I have been looking for a job since October and got only 2 interviews. I am registered with 5 work placement agencies and they haven't given me not even 1 assignment yet. I am under 40, well educated and I applied to a big variety of positions, many under my education level. The data in this report must be wrong, just an excuse to bring more foreign temporary workers. They should hire the immigrants which are already here, permanent residents or Canadian citizens.

  • jose
    May 22, 2014 - 09:48

    My wife is an international educated doctor. Due to our needs at home she's been looking for work since November. I mean, work in insurance companies as a medical advisor and other positions, hospitals clerk...etc. Ultimately, she has even applied for walmart and other jobs that don't need education. However, alter all these time no luck. And, you come and say that aging work force is affecting canada's labor market! There are hundreds of thousands of people like my wife looking for work being unable to find any because the work in Canada is being outsource. In addition, all the the foreign workers your bank rbc is bringing to Canada is affecting all Canadians that are looking for work. There are many companies like yours doing the same. This is the real problem. I would not be surprised that your article is intended for the government so they can let your bank continue bringing people from outside and continue outsourcing the jobs. Three years ago, I had an issue with my internet and I call my service provider. The technician helping me to fix my problem was located exactly in my country of origin. This was one job less for a Canadian. Here in Canada we have many technicians looking for work. It is your ambition driving this country down. All the people you bring to Canada as temporary workers, come to work and send their income to their country of origin. So at the end of the day, they just buy enough to survive no more. We Canadians work here and spend all our many here. Business are collapsing because a high percentage Canadians don't have a job and therefore can not spend. Think about what you and others are doing to this beautiful country.

  • tree
    May 22, 2014 - 09:09

    ....and the retiring baby boomers will very quickly be replaced by temporary foreign workers. Why train our own people. Let them starve. TFW are so convenient to import.

  • Blair James
    May 22, 2014 - 09:05

    Janzen: Do you really think Canada is made up of a bunch of old people too stupid to see through your disingenuous argument for having foreign workers displace their trainers at your own institution? We know. We see. We understand. Time for change.