As many Canadians approach the retiring age, a new emphasis is placed on what the size and work trends of different generations means for the economy. Particularly with a large, dominant Baby Boomer population either beginning retirement or preparing for it, certain questions about the generational imbalances arise.
Because mandatory retirement has been prohibited in most provinces, except for bona fide non-discriminatory purposes, older people are postponing retirement beyond 65 years. The speculated shortage of workers may, thus, be delayed a few years, but poses challenges nevertheless.
Source: PBO
One key indicator of this oncoming phenomenon is the old age dependency ratio, which denotes the number of working age people per retiree in the population. Although there are currently about 5 persons aged 15-64 per retiree, this number is expected to fall to about 2 per retiree by 2051. This trend is attributed in part to the boomer retirement and the slowed birth rate resulting in fewer young people.
Source: Statistics Canada
When the majority of healthcare and social expenditure is directed towards the older population, the impact this would have on a significantly smaller workforce that follows them becomes obvious. The burden of taxes and contraction of benefits will be borne mostly by the two generations following the Boomers— Gen X, the members of which prepare to take over from the boomers, and Gen Y, most of which are entering the workforce or in early stages of their careers.
Source: PBO
This is made worse by projections of labour force participation rates in the future. Statistics Canada asserts that the portion of working age people in the population, as well as their participation rate in the labour force, will eventually begin to decline this decade.
Source: StatCan
Source: PBO
As the proportion of seniors to the working age population grows substantially, retirements are expected to increase at a faster pace than jobs. Therefore, slower employment growth, declining participation and a greater non-working population means that an intriguing horizon looms before us.
With such challenges ahead, economists believe that the key to overcoming these circumstances will be high productivity, as population and participation growth is not forecasted to be sufficient in handling the demands of the boomer retirement.
Source:
HRSDC
