The Agenda 2020 series asks experts to discuss what business leaders should be doing now to prepare their organizations to be healthy, efficient and growing by 2020. Read more at tgam.ca/agenda2020.
Boomers have a reputation for getting what they want. And as the first wave enters retirement age, it’s becoming clear that many of them want to keep working. This means companies will need to rethink how they deal with retirement – and figure out what to do with the surge of millennials who need jobs, too.
To discuss the implications of demographic change on tomorrow’s work force, The Globe and Mail turned to two prominent Canadian economists whose work focuses on demography: David Foot, Professor Emeritus of economics at the University of Toronto and bestselling author of Boom Bust & Echo: Profiting from the Demographic Shift in the 21st Century; and Marcel Boyer, Professor Emeritus of economics at the Université de Montréal and co-author of the C.D. Howe Institute report The Main Challenge of Our Times: A Population Growing Younger.
What do you think will be the biggest demographic challenge Canadian businesses face by 2020?
Marcel Boyer: The main challenge of our time is a population growing younger, as we said in our report, where we suggest to measure age with respect not from the date of birth, but the date of death [expectancy]. We find that today, a 65-year-old would have the 1950 age of 59. So 65 is 59, and so on. People are younger than their nominal age shows, if we base the age in 1950. On average, people are growing younger, rather than older. That means that we have all these young people somewhere between 65 and 75 who are still able to work. How do you find ways to keep these people in the labour force? This is the major challenge. Firms will have to design workplaces that adapt to this.
David Foot: Basic numbers are very important here. We’re going to have a dramatic slowing of work-force growth because there are far fewer teenagers and 20-somethings. The last decade, the children of the boomers – the echo generation – have entered the work force, and that’s now over. So we’re going to have a lot fewer younger people coming into the work force. If businesses do think there’s going to be a labour market shortage, then there’s a bigger incentive to keep people in their 60s and 70s employed – at least people in their 60s; people still have a lot of working life ahead of them. And finding them employment is going to be essential to continued vibrancy in the Canadian economy.
MB: I think that one of the challenges that firms are facing is that productivity growth in Canada has been relatively low in the last 30 years, compared with productivity growth in the U.S. and especially in Scandinavian countries, where the GDP per hour worked or GDP per job has increased over the last 30 years. There are ways to use the labour force in a more productive way. Canada has been absolutely exceptional in terms of creating jobs, but GDP per job has been increasing much faster in those countries than in Canada. So, it’s a complex issue, but shrinking or reduced rate of growth of the labour force, productivity gains, this is kind of linked.
DF: It’s very clear that if work-force growth is fast, there’s less incentive to invest in machines to raise productivity. But as work-force growth slows down, as it inevitably will over the next two decades, there will be a bigger incentive to invest in productivity. … But the record is not good. Essentially, for the last decade, at least, we’ve been cutting business taxes on the hope that business would invest. And instead, what they’ve done is generate a huge pool of cash that they use to pay out bigger bonuses to senior management. Because they get annual bonuses, businesses won’t think more than about a year down the road, so investing where you get the payback five or 10 years down the road is not happening in Canada. We need to make businesses invest, and maybe slower work-force growth will do it.
If businesses are only looking ahead one or two years, what should they be doing now to prepare for five or six years down the road, aside from investing?
DF: They certainly need a different frame of mind. I, like Professor Boyer, think we’ve got to find ways for people to continue working, but not necessarily full-time. Phased retirement is the term that’s sometimes used to describe this. I think it needs to be moulded to the individual: Some individuals might want to work six months of the year full-time and have six months to travel and play golf. That’s a half-time commitment. Some people might want every weekend with their grandchildren, because the boomers are now becoming grandparents, and so you work Tuesday, Wednesday, Thursday, pay taxes and accumulate pensions, but then you withdraw Friday and Monday. Businesses can’t wrap their heads around someone who contributes and withdraws in the same week. We’ve got to modify our pension plans and our pension policies to allow both contributions and withdrawals in the same period. If it’s complicated, my response is that’s what computers are for. But senior management, the workaholics of the world, don’t seem to understand people who might only want to work 60 per cent of the time for 60 per cent of the salary.