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As of today, Ontario joins the growing list of jurisdictions that have banned mandatory retirement. Not without controversy, mind you. Supporters tended to talk of ending unjustified discrimination on the basis of age. Opponents tended to point to the dangers of governments overriding voluntary labour contracts. Despite the disagreements, however, the ban is proceeding with broad popular support -- one more sign of the extent to which demographic changes are remaking Canada's economic and political environment.
That we are aging is hardly news. Yet the stunning scale of the demographic change now unfolding is still largely under-appreciated. Canada had a huge baby boom. As a result, most adults grew up in a world where the population we usually see as working age -- those 18 to 64 -- was expanding very rapidly. Unemployment was a problem, and young people were fighting for jobs. In those years, the number of people 65 and older was relatively small. Providing pensions and health care was no great strain on workers, and few worried as labour-force participation among the older population steadily declined.
But after the large baby boom came an abrupt baby bust. That means the world our children and grandchildren are growing up in will be markedly different. The traditional working-age group of 18-to-64s will grow ever more slowly over the next decade, flat-line around 2020, then start to shrink. Unemployment has already fallen to lows not seen since the 1960s. And with Canadians living longer, the population 65 and up will keep growing robustly. With these people out of the work force, the task of funding their pensions and health care will be daunting indeed.
In this context, the larger message behind the abolition of mandatory retirement is a happy one. Increasing numbers of Canadians -- including leading-edge boomers well into their 50s -- do not think 65, or any arbitrary age, should mark the end of working life. Tomorrow's seniors will, on average, be healthier and have more formal education than their predecessors. Both attributes are associated with longer working life. And a larger share of tomorrow's older population will be immigrants -- also associated with longer working life. In other words, the outlook for Canada's economy and society will be much better if more of tomorrow's seniors stay active through their 60s, or even beyond.
What of the employers who would have preferred to keep mandatory retirement? True, knowing that everyone will be gone by a certain age relieves managers of the need to make individual assessments of merit. But, surely, good management is all about astutely matching people with positions. And, yes, fixed termination dates do make some defined-benefit pension plans easier to run. But most of those plans are deep in the red, suggesting the whole model needs a fresh look.
The better response might be that the end of mandatory retirement provides those employers -- indeed, all employers -- with a much-needed wake-up call. Every business or government institution built on the basis of a work force with lots of young, hungry people at the bottom and a few old, satisfied people at the top needs to reinvent itself because that model will not work in the Canada of the next quarter-century.
Not only is Canada's traditional working-age population on the verge of much slower growth, but nearly all of what little growth will occur will be among those 55 or older. The typical employer looking to expand will be adding people who, by today's standards, are a decade or less from retirement age. Hiring and retaining these people will be a challenge. We need smarter management and new pension arrangements. Just as we need flexible hours and phased retirement. And just as we need new compensation and work duties that engage a physically less robust, but wiser and more experienced work force.
If businesses have been given a wake-up call, so have governments. Banning mandatory retirement is relatively popular and easy. But making continued work rewarding requires many further steps: accommodative pension regulations, less punishing taxes and clawbacks affecting seniors, and an end to tax provisions that prevent continued retirement saving at age 69. Governments as employers face a particularly tough challenge: The earliest retirement ages and the biggest pension liabilities are in the public sector, where chronically bad labour-management relations make retaining older workers especially hard.
Perhaps the most striking thing about the new world heralded by the end of mandatory retirement, however, is how far we have already come. Five years ago, people 55 and older made up barely more than one tenth of Canada's work force. Yet since late 2001, jobs held by the people 55 and older account for more than half of employment growth. Older workers are already transforming the workplace. Employers who are on the leading edge of that transformation are tapping into the work force of the future. The more each province -- and Canada as a whole -- fosters that transformation, the more secure our future living standards will be.
Any demographic transformation as dramatic as that under way in Canada is a challenge. One key route to dealing with it is to make it easier and more rewarding for people to continue working in later life. The good news is that more people are now seeking to stay on the job, and we know that even more of tomorrow's older population will be ready, willing and able to work. The end of mandatory retirement in Ontario is one small change, but it heralds a larger, and much needed, transformation.
William Robson is president and CEO of the C.D. Howe Institute.
