Canada’s shrinking, aging work force poses economic problems: Statscan

Canada's labour force is becoming much older, more diverse and will grow much more slowly than in the past as the economy absorbs a wave of baby boomers entering retirement.

Statistics Canada released new data Wednesday showing the retiring baby boom generation will affect labour force growth through to 2026, when the last of the boomers retires.

The Globe and Mail reported last week that federal policy makers are currently reviewing a range of policy options – including incentives to boost fertility or encourage Canadians to work longer – as the first wave of baby boomers starts retiring this year.

Canada's dramatically changing demographics pose an added challenge to federal and provincial governments as they attempt to erase deficits created by the recession while planning for rising health costs over a period when the pool of taxpayers will grow much slower than the rise in retirees.

The number of senior citizens in the country could more than double over the next 20 years, and that means slower economic growth. Canada's "potential" growth rate – a measure of how much the economy can produce without triggering rapid inflation – is expected to hover around 2 per cent over the next several years, down from a long-term average of closer to 3 per cent. Without big gains in labour productivity, this will translate into far slower tax revenue growth for Ottawa.

Among the latest findings from Statistics Canada:

- Almost one person out of four in the labour force could be aged 55 or over by 2021.

- The overall participation rate in the labour force is projected to decline during the next two decades. In 2010, the participation rate was 67 per cent; by 2031, it is projected to range between 59.7 and 62.6 per cent, which would be the lowest observed since the late 1970s.

- Statistics Canada says this declining participation rate is due to the aging of the baby-boom cohorts, increasing life expectancy and a fertility rate below the replacement level of 2.1 children per woman.

- In 1981, there were roughly six persons in the labour force for each retiree. By 2031, it will be less than three to one. The ratio is projected to decline in every province.

- Immigration contributes to Canada's labour force growth. Statistics Canada estimates that by 2031, roughly one in every three people in the labour force could be foreign-born.