We must prepare for the aging of our workforce

Treat it as a red flag — something we must pay attention to, or else. In its report on the future growth of Canada’s labour force over the next 20 years, Statistics Canada underlines the fact that by 2031 there will be fewer than three people in the labour force for each retiree, compared to six people in 1981 and just under five today.

  • Aug. 29, 2011 6:02 p.m.

Treat it as a red flag — something we must pay attention to, or else.

In its report on the future growth of Canada’s labour force over the next 20 years, Statistics Canada underlines the fact that by 2031 there will be fewer than three people in the labour force for each retiree, compared to six people in 1981 and just under five today.

This number is important because it shows that the Canadian population will be dependent on a shrinking proportion of workers to generate the wealth to support our way of life, including health care, education, social assistance, the environment, public safety and security and all the other needs of a just and well-functioning society.

To be sure, there will be a relative decline in the student population but we will expect each young person to be better educated.

There’s only one way we can sustain our high quality of life, and that is by becoming a much more innovative and productive society.

More older people will work beyond age 60 or 65 — and in fact in defining the size of the labour force, Statistics Canada includes everyone working or looking for work up to the age of 80.

But the numbers of Canadians working beyond the age of 60 or 65, while increasing, will still be relatively small.

As Statistics Canada points out, “along with productivity, the labour force is a major determinant of gross domestic product.” So “how the labour force evolves in the coming years is important.”

In fact, we may be aging faster than we realize, with the aging of the population, in the words of Statistics Canada, accelerating this year, with a steady increase in retirements coming up.

Currently, about 16.9 per cent of Canadians in the labour force are 55 or over. But in just 10 years, this could rise to about 25 per cent.

This is something we must start preparing for now, because with a large number of experienced workers facing retirement, it will be crucial to ensure we have a supply of new talent. Some will come through immigration, which has always been part of the Canadian story.

But we also face a huge challenge in ensuring that our own young people get the best possible education even though by 2031 about one-third of people in the labour force could be foreign-born.

We will need a more innovative education system for a much more challenging world that lies ahead. This is also a good time to get serious about early childhood development, so that youngsters, when they enter the school system, are much better prepared to become good learners , thinkers and analysts, with a high level of self-confidence.

We also need to become much better at creating and building innovative companies that can grow good jobs, achieve high productivity and generate the wealth we need to offset a rapid growth in the non-working adult population.

This is not just a question of encouraging start-ups — just over half fail after five years — but of building more Canadian-based medium and big companies that can compete profitably in the global marketplace.

In the past, we have counted heavily on the public sector — public administration, education and health — along with retail trade, restaurants and hotels, and home construction to provide more than half our jobs.

But looking ahead, we have to pay much more attention to industries that trade, especially manufacturing, business services and upgraded resources.

Instead of exporting lumber, we should export houses, kitchen cabinets, doors and windows, and furniture.

Instead of exporting crude oil, we should refine it first or produce chemicals.

Instead of exporting grains, pulses and soybeans, we should export food products.

We need to develop our knowledge-based business services, from engineering, environmental services, management consulting, marketing and design to finance and insurance, training, architecture and urban design, as well as systems for the digital world.

And we should be focused on advanced manufacturing, so that Canadian companies are producing high-value products for the world.

All of this implies a much more aggressive set of economic policies.

It requires much bigger thinking than just maintaining a low tax regime. It requires new institutions, new ways of government, business and academia working together. So it also requires vision and leadership.

But as Statistics Canada points out, the clock is ticking away and there is no way we can wind it back.

Instead, it’s time to heed the message.

Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.