Yahoo Finance Retiring boomers to drive drop in workforce participation until 2030: StatCan
The proportion of people in Canada working or actively seeking work will continue to decline until 2030, when the entire baby boom cohort has reached retirement age, Statistics Canada projections show.
What happens to the size of Canada’s labour force after the last boomer hits 65 will depend on immigration numbers, analysts at the federal agency wrote in a new report. But the participation rate — a measure of the proportion of people of working age who have a job or are trying to get one — will hinge more on changing demographic patterns of work, including a trend towards more older people staying in the workforce.
“The overall participation rate seems to be more sensitive to a change in participation rates than to an increase in immigration,” the analysts wrote. “Therefore, keeping older workers employed in Canada could have a non-negligible impact on the future overall participation rate.”
Because of the size of their cohort, boomers have skewed labour force numbers as they rise through different age groups. The proportion of the labour force aged 55 and older roughly doubled from 10.9 per cent in 2001 to 22.4 per cent in 2021. Over the same period, there was a corresponding drop in Canada’s labour force participation rate. “This decline was mainly the result of the large number of people born during the baby boom period who gradually retired from the labour force,” the analysts wrote.
Looking ahead, Statistics Canada’s analysts modelled a number of different scenarios, including a reference case where 500,000 permanent immigrants are admitted per year, in line with recent trends. That reference projection shows the participation rate remaining on the slight downward path it has followed since the early 2000s until around 2030, before stabilizing. Immigration scenarios with lower annual numbers show an ongoing decline in the rate.
There’s a simple reason why a declining participation rate is undesirable, says Moshe Lander, a senior lecturer in economics at Concordia University. “If you have a higher labour force participation rate, you're likely to have a higher standard of living for your economy.”
“Remember that a welfare state is paid for by working people, and so what you have is essentially a subsidization program where people who are working are subsidizing those who are not.”
The zero-immigration scenario is not desirable because of Canada’s low fertility rate, which on its own would immediately lead to a population drop, Lander says.
“If you have a declining population, you're also going to find that businesses are going to have declining profits,” he said. “If they have declining profits, they scale back their business. They don't need as much capital. And so then it really does become how fast that capital is declining because we don't need as many offices, factories, machines and equipment in relation to population.”
Statistics Canada’s analysts write that the projections show the labour force population, “like the size of the country’s total population — is directly influenced by immigration,” but is sensitive to “above all, the participation rate of the Canadian population.”
The participation rate among older Canadians has “risen significantly over the past two decades, especially among women,” the analysts write. “The continuation of these upward trends in the participation rate of older people could have a significant impact on the size, composition and demographic weight of the labour force.”
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.
