The Aging Workforce

EMBA 855

Secondary Data Research Project

September 22, 2007

The Aging Workforce

Prepared by: Mitch Minken

The Aging Workforce in Canada and its Implications

Introduction

There is a looming labour crisis on the near horizon for Canadian employers. As Canada's demographics change and the baby boomers move through their lifecycle employers may be facing major labour shortages. This paper examines some of the key points of Canada's aging workforce.

The Aging Population

Canada's population is aging due to declining birth rates and lower elderly mortality leading to increased life expectancies. According to Statistics Canada, the 2006 census data shows the population of Canadians over 65 has grown by 11.5% in the past five years while those under 15 have declined by 2.5%. The over 65 group now makes up 13.7% (Saskatchewan has the highest at 15.4%) and the under 15 is 17.7% of the total population, records in both directions. (1)

While the total population remains fairly stable the average age will be increasing in the future. The following charts show the aging of baby boomers and Canada's population in general. (2)

Source: HRDC - Challenges of an Aging Workforce

Impacts on the Workforce

These trends will have profound effects on Canada's workforce. In 1991 29% of the workforce was between the ages of 45 to 64, it is estimated that in 2011 that number will be 41% and stabilize into the future.

With a growing economy the national unemployment rate is at a 33 year low of 6%. To satisfy the demand for workers, employers are hiring older workers. In fact in August 2007 most of the employment growth for adults came from the over 55 group. (3)

The Conference Board of Canada's Industrial Relations Outlook for 2007 cites the dual problems of an aging labour force and labour shortages as heavily influencing changes in composition and structure of Canada's labour market. By 2010 retirements will increase dramatically and the labour supply will begin to decline as supply of younger workers can not keep up with demand. With these retirements companies will face shortages in skills, technical knowledge, corporate know-how, corporate knowledge, and leadership. "Economic growth will be held back because there simply will not be enough people to get the work done". (4)

The tightening labour market is already having an impact on employee compensation. 75% of employers are experiencing problems with attracting and retaining workers, in the natural resources, oil and gas, and health care sectors the number is 100%. This trend is forcing employers to increase wages to attract and retain workers. Even in the unionized setting there is a trend toward incentive programs, bonuses, or other variable pay to keep employees.(4)

How does Canada and its employers counter act this trend? Increasing fertility rates is not seen as a realistic possibility, previous programs to increase birth rates have been unsuccessful and it is too late for this strategy to have a serious impact. Immigration will help but it is likely to be only part of the story. Even if 400,000 immigrants were added per year Canada's population would still decline. Competition for immigrants will be fierce since all of the G7 countries are facing the same crisis. Part of the solution will have to be keeping older employees actively engaged in the workforce.

Reversing a Trend of Early Retirement

In the time from 1976 to 2000 the trend toward earlier retirement was growing. By 1999 the average age for retirement had dropped to 61 years. Retirement before the age of 60 was 29% between 1987 and 1990 which increased to 43% between 1997 and 2000. (2)

This trend is contrasted by a recent increase in the participation of older workers. 2.1 million workers aged 55 to 64 were employed in 2006 representing 12% of the total work force. This is 60% of the people in the age category! In particular the participation of women has increased with 62% of the 55 to 59 and 37% of 60 to 64 year olds in the workforce. (5) This report cites three reasons for the increase; a strong attachment to work, rising levels of education, and genuine desire to continue working.

Source: Statistics Canada Study - Participation of Older Workers

What are Employers Doing About the Looming Labour Shortage Crisis?

In Too Few People, Too Little Time, Parker suggested that Canadian employers are aware of the labour crisis but are doing little to react. The survey results show employers have not consistently instituted programs targeted at older workers. These employers have listed barriers such as organizational apathy to the issue and lack of knowledge of how to develop age friendly policies. Government legislation and regulation also inhibit the ability of employers to deal with older workers. Pension regulations, income tax rules, immigration regulations, regulatory body intervention, human rights legislation, and mandatory retirement all pose impediments to recruiting and retaining older workers. (6)

An Ontario study focused on the human resource practices used to recruit and retain managerial and professional workers over 50. The study considered both public and private companies and looked at present and future use of the following strategies for older workers; recruitment, alternative work arrangements, training and development, training of managers, postponement of retirement, and job reassignment. The results indicate that public sector and larger private firms are the most concerned with the issue of the aging workforce. It also indicates that they are not actively engaged currently nor do they