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Expect Canada’s labour force to change quite visibly over the next 20 years

09/30/2011 by John Clinkard

It is generally recognized that the gradual aging of baby boomers born between 1947 and 1966 will have a major impact on many aspects of the economy over the next 20 years.

The most significant impact of this development will probably be on the labour force since along with productivity, sustained labour force growth underpins the future health of the Canadian economy.

In an attempt to look into the future, Statistics Canada recently published new labour force projections based on its Demosim Microsimulation Model which, in addition to the normal demographic variables which affect the labour force, also takes into account the projected effect of changes in education, of immigration and of visible minority groups.

As it has done in the past, StatsCan developed five labour force scenarios based on different sets of key assumptions.

According to all five scenarios, Canada’s labour force will range from 20.5 million to 22.5 million compared to its current level of 18.7 million.

However, according to all five of the projections, by 2031, the ratio of individuals in the labour force to seniors (65 years and older) not in the labour force will drop from its present level of 5 to 1 to less than 3 to 1.

Based on projected growth of immigration over the next twenty years, about one of every three labour force participants could be foreign born although, according to StatsCan, the proportion will be higher in Ontario and British Columbia.

Three of the five StatsCan scenarios project that by 2021 (ten years) approximately one in four persons in the labour force will be 55 years or older compared to the current ratio of one in six persons.

StatsCan qualifies its labour force projection based on a number of recent trends.

First, although the aging of the baby boomers will cause retirements to increase, the impact of this trend may be less than projected due to the increased participation of women who tend to remain longer in the workforce.

Also, given that more educated workers retire later, the steady rise in levels of education in Canada over the past several years may moderate the decline in labour force participation in the future.

However, despite these recent moderating trends, the slowdown in labour force growth caused by the aging baby boom will definitely impede Canada’s growth prospects over the medium term.

Canada’s labour force: aged 55 years and older vs. born outside Canada*
Canada’s labour force: aged 55 years and older vs. born outside Canada
*Projection based on current (1999-2008) trends.
Data Sources: Statisics Canada /Chart: Reed Construction Data, CanaData.

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