Canada's latest national census has confirmed something that a lot of us, anecdotally, already knew: More Canadians are working longer than ever before. There might actually be more reasons to cheer this development than bemoan it – although it certainly raises some important policy questions.
In 2016 census data released this week, Statistics Canada highlighted that nearly 20 per cent of Canadians 65 and older worked at least part of the time in 2015. That's up from 13 per cent a decade earlier. In the past 20 years, the proportion of seniors who have remained at least partly active in the work force has doubled.
Individually, many Canadians won't be thrilled with this trend, especially if you were still clinging to the dream of early retirement that so many of us had when we first entered the working world. (Remember those TV ads that told us we could retire to a tropical beach at 55?). But from the perspective of the country's future economic and fiscal security, it's actually pretty encouraging.
When the federal government created Canada's current retirement-benefit framework in the mid-1960s, and decided to set eligibility at 65, the average life expectancy for a 40-year-old Canadian was about 75. Today, it's about 83. Whereas Ottawa was originally looking at carrying the costs of old-age security (OAS) benefits for roughly a decade on average, it's now closing in on being on the hook for double that.
Couple that with the country's aging population – this year, 17 per cent of Canadians are 65 and older, compared with less than 8 per cent in the mid-1960s – and it's pretty clear that the costs of the government's promised retirement benefits are magnitudes higher than they were when the retirement age of 65 was established. With both life expectancy and the over-65 share of the population destined to continue to increase, those fiscal pressures look bound to grow further – at a time when, with an increasing share of Canadians in retirement, the tax base looks destined to shrink.
These trends are not just problematic from a government-finance standpoint, but from a broader economic one. The country faces the prospect of a dramatic slowdown in the growth of its labour force, as more people retire and fewer young Canadians enter the job market to take their place. Even with Canada's plans to increase immigration, designed to help counter this, the country still looks headed for a slow-growth labour force punctuated by shortages in key skills – a recipe for a sluggish economy.
Given that, it would certainly ease the mounting demographic pressures if more 65-plus Canadians remain in the work force for longer. With that in mind, the federal government under Stephen Harper had proposed to raise the eligibility for OAS to age 67; but the current government of Justin Trudeau rescinded the plan.
The Fraser Institute, an economic and policy think tank, published a paper this week noting that Canada is the only country among the G7 advanced economic powers – all of which face a similar demographic crunch – that hasn't raised its eligibility age for government retirement programs. It said 18 of the 22 high-income countries in the Organization for Economic Co-operation and Development have raised their retirement age.
A reversal of Mr. Trudeau's position on the OAS eligibility age would break an election promise and alienate a segment of voters, but the census statistics are evidence that other forces are already leading growing numbers of seniors to delay retirement, even without a policy change.
As this trend continues, the government may want to consider whether the numbers of 65-plus workers have grown to the point where an increase in the eligibility age would merely reflect the reality of the changing age when people are choosing to retire. Alternatively, a change in the eligibility age sooner rather than later would create a further incentive to remain in the work force, and accelerate a trend that stands to provide long-term economic dividends.
But the rising prevalence of people working past the age of 65 may also play a role in other policy challenges – these across other parts of the labour force spectrum.
It may not be entirely coincidental that at the same time as a growing share of Canada's seniors are working, the proportion of the prime-working-age population (ages 25-54) that is employed has been shrinking. It's plausible that the continued work-force participation of people beyond the age 65 is reducing the pool of jobs available for prime-age workers – who are, historically, the most productive component of the labour force. Insofar as that may be a constraint to Canada's productivity growth – a key element to economic prosperity – it's something governments must better understand.
Similarly, the proportion of the youth population (15-24) that is working has also declined as the senior work force has grown. Seniors who have eased into semi-retirement may be filling lower-level part-time and seasonal positions that previously would have been fertile grounds for young people to enter the work force and build vital experience.
This may, as a happy consequence, be steering more young workers toward extending their education – which, in the long run, will enhance the skills of the labour force and thus be beneficial to productivity.
Nevertheless, it may be a growing complication in the increasingly pressing national challenge of how we can create a better environment for youth workers to succeed in an increasingly competitive labour market.