Parisa Mahboubi is a Senior Policy Analyst at the C.D. Howe Institute.
The aging of the population has accelerated in Canada during the past decade, but not all provinces evenly bear the brunt of an aging labour force and growing share of seniors. The four Atlantic provinces are facing significant challenges while Alberta is less vulnerable and more prepared.
Lower fertility rates and improvements in life expectancy have contributed to Canada’s aging population. This demographic shift causes the labour force to shrink as a percentage of the population and slows economic growth. Further, the aging population has some implications for government finances since it dampens revenue growth and puts pressure on government spending that is sensitive to aging, such as health care and public pensions.
Across the provinces, the number of people 65 and older relative to population 15 to 64 – known as the Old-Age-Dependency (OAD) ratio – has sharply increased in recent years as more baby boomers pass the age of 64.
The population in Atlantic Canada had the highest OAD ratio in 2017, reaching 30 per cent or just over three potential workers for every senior. Alberta, in contrast, has experienced by far the most modest ratio – nearly six potential workers support each senior.
Although immigration has been the major source of population and labour-force growth, only 1.3 per cent of total newcomers collectively settled in the four easternmost provinces in 2017. Therefore, these provinces would benefit the most from policies that attract – and more importantly, retain – young skilled immigrants.
However, even Ontario and Quebec with the largest share of new immigrants face fast-growing senior populations. In a report for the C.D. Howe Institute, William Robson and I show the limited capability of higher immigration to prevent the aging of Canada’s population overall, and highlight the need for complementary policies. In particular, governments can further tackle the economic and demographic impacts of aging population through later retirement policies.
Seniors are healthier and living longer than preceding generations. Further, delaying retirement may itself contribute to seniors staying healthier. Older workers can remain active in the labour market for a longer period of time by participating in a bridge job such as part-time employment or self-employment.
Because of the aging population, most provinces have experienced a declining trend in the labour-force participation of their residents 15 and older. Alberta stands out with having the highest labour-force participation rate. And although Alberta faces the least demographic pressure, it has the largest share of seniors participating in the labour market, similar to that of Saskatchewan (20 per cent).
In the Atlantic provinces, in contrast, the aging population has intensified the labour-force challenges. Participation rates have been systemically low in Newfoundland and Labrador, Nova Scotia and New Brunswick. Consequently, they have the lowest labour-market participation among their seniors, their fastest-growing age group. The exception is Prince Edward Island with relatively a high labour-force participation of its seniors (19 per cent), which helps to mitigate some of the impact of aging.
Factors that discourage the working-age population from joining the labour market include lack of employment opportunities due to weak economic conditions and absence of adequate skills to fulfill job opportunities.
To alleviate the impacts of an aging population on the economy and government finances, particularly in the Atlantic region, complementary policies that seek to address these issues and encourage greater labour force participation among all segments of population are required.