Anyone taking a first glance down the street or around a mall will notice that Canadian society is becoming more diverse.  A second look will also confirm that we are clearly getting older as a nation.  Although we are not aging as fast as countries such as Japan or Italy (where the population has already reached a plateau), Conference Board analysis of long-term demographics indicates that Canadian deaths and births will equalize in 20 years – resulting in zero growth in the natural population.

An aging population has a direct impact on economic growth.  Three factors are at the core of any country’s long-term growth potential:

• the growth rate of the labor force
• the pace of new capital investment
• productivity growth

As Canada’s population ages, we project that potential annual growth will decline from about 2.8 percent today to 2.2 percent by 2025.

Without some combination of higher rates of immigration, longer labor force participation by existing workers, higher savings and investment rates, or faster productivity growth, Canada’s growth potential will decline.  In turn, this will place added pressure on our ability to deliver the social goods – such as health care and education – that we have come to expect.  The Conference Board did significant work in Performance and Potential 2004-05 on the thorny issue of boosting Canadian productivity and on maximizing the benefits of immigration.  However, structural changes in our labor force can also contribute to sustaining the potential rate of economic growth.

On that score, there has been a quiet but steady increase in the labor force participation rate (or “part rate”) for older Canadian workers over the past decade,  the part rate for men aged 55 to 64 increased from 60 percent in 1995 to 66 percent today, although it has leveled off recently. 

Over the same period, the participation rate for women in the same age bracket has climbed by nearly a third, from 36 percent to nearly 50 percent at the end of 2004.  Women aged 55 to 64 were the fastest growing part of the Canadian labor force over the past decade.  The growth rate has slowed slightly in the past two years, but there is no sign yet of a plateau – which is good news for the economy’s growth potential.  Comparable rates of growth in participation have also been registered for women aged 65 and older, although the actual participation rate – at 5 percent – is much lower.

What accounts for this stronger labor force attachment among older workers, and particularly older women?  There are both positive and negative factors.  On the positive side, many of us gain personal satisfaction through paid work.  Older Canadians are healthier today than past generations and want to stay engaged in work and society.  And many women have more lifestyle and career choices, particularly when their children get older.

On the downside, financial need is undoubtedly also a factor.  Even with a financially sustainable Canada Pension Plan, financial security at 65 – let alone freedom at 55 – remains elusive for many.  The stock-market drop in 2000, together with record-low interest rates, delayed many retirement plans.  Not everyone has a pension plan, and even for those who do, pressure is building on the financial sustainability of plans in many organizations.

Regardless of the factors that are influencing individual decisions, we do not believe this to be a temporary phenomenon.  While that’s good for the Canadian economy, older workers will also be seeking greater flexibility in the workplace as they pursue second, third or fourth careers.  We need to rethink related legislation such as mandatory retirement, which four provinces and three territories outlaw as discriminatory, and Ontario has committed to ending.  And with grandma and grandpa back at work, we should expect growing pressure for changes in the nature of employment, compensation and benefits to satisfy their particular needs.

The Conference Board of Canada -- Copyright policy
You may print and download copies of portions of the content solely for the non-commercial use by you or your organization.  You shall not delete any copyright notices from the download materials.  Any redistribution outside of your organization is prohitibed.