1. Page 1 Meeting the Challenges of our Future Labour Market Applied Research Branch Human Resources Development Canada ONESTEP Kingston, Ontario Sept 26, 2002

2. Page 2 Purpose of presentation To present the challenges Canada will face with regard to the ageing of its population. To discuss potential scenarios to deal with these challenges.

3. Page 3 The number one challenge: the changing ratio of producers to consumers Source: Socioeconomic Studies, ARB projections Labour Force as a Proportion of the Total Population

4. Page 4 Particularly worrisome is the projected increase in the number of those aged 55 and over in the future. 20012040 Source: Census 2001 and Socioeconomic Studies, ARB projections 75+ 55-74 25-54 0-24 AGE Current and Projected Age Distribution of Canadian Population FemaleMaleFemaleMale

5. Page 5 The elderly-dependency ratio is projected to increase throughout the country. Source: Socioeconomic Studies, ARB projections

6. Page 6 People are spending a lot more of their lives in school and in retirement.

7. Page 7 How can we meet this challenge? 1. By increasing the number of producers 2. By increasing productivity

8. Page 8 1. Increasing the number of producers Fertility Rates Immigration Hours of Work Increased Participation of Disadvantaged and Low-Skilled Female Participation Rates Participation of Older Workers

9. Page 9 There has been a general downward trend in fertility rates in Canada. With the exception of the boom between 1946 and 1964, fertility has been decreasing throughout the past century. While modest increases cannot be ruled out, it is unlikely that we can rely on a substantial increase in the fertility rate as a source of future population growth. Fertility rates per woman in Canada Source: Statistics Canada

10. Page 10 Immigration is unlikely to significantly alter the producer-consumer ratio An annual level of immigration equivalent to 3% of the Canadian population (916,000 immigrants in 1999) would be required to slow the decline in labour force participation. Eventually, participation rates would decline anyway as immigrants tend to adopt Canadian fertility and retirement patterns. Source: Labour Force Survey and ARB demographic projections using the model PMEDS-D HistoricalProjected

11. Page 11 Increasing hours of work In 1995, 73% of Canadians were not interested in working more hours. Those who were, tended to be those who had low-skilled jobs or low weekly hours.* Moreover, in 1998, Canadians who worked more hours were more likely to report dissatisfaction with life and with work-family balance and were more likely to report feeling time-crunched. † † Source: J. Frederick and J. Fast. Canadian Social Trends, Statistics Canada. Summer 2001 Data: Survey of Work Arrangements, 1995 Proportion of working population desiring fewer, the same, or more hours Fewer hours Same hours More hours 6% 67% 27% * Source: Drolet, M and R. Morissette. Research Paper Series No. 104,Analytical Studies Branch, Statistics Canada

12. Page 12 Increasing hours of work: part-time workers Part-time employment represented about 18% of total employment in 2001. 74% were voluntarily working part-time. Only about half of those working part- time voluntarily stated it was because of personal preference. Expected future labour shortages may create opportunities for full- year employment for those employed part- time involuntarily. 10% 3% 27% 7% Source: Labour Force Survey Voluntary and Involuntary Part-time Employment, 2001 MalesFemales

13. Page 13 Disadvantaged and low-skill individuals have the potential to increase the number of producers. Disadvantaged groups include: Aboriginals, persons with disabilities, lone parents and low- skilled workers. Combined they may significantly contribute to increasing the overall number of producers But, they all face important barriers to employment.But, they all face important barriers to employment.

14. Page 14 human capital Increasing human capital is key to increasing labour force participation of disadvantaged and low-skilled individuals. A sharp divide exists between participation and employment rates for low and high-educated workers Improving low-skilled individuals’ education and skills will improve their opportunities. Potential future labour shortages will also increase opportunities for the low-educated. Source: Labour Force Survey 2001 High school diploma or less At least some post-secondary Participation and Employment Rates (for those aged 25-54, 2001) 78.7% 72.5% 88.7% 83.9%

15. Page 15 The female participation rate levelled off during the 1990s... After three decades of steady increases, female participation rates remained relatively constant in the 1990s (at around 60%). Recent research shows that the levelling off of the rate primarily reflects the catching up of women’s participation rates with those of men.

16. Page 16 There is limited scope for increasing general labour force participation among women. Although a gender gap continues to exist, female participation rates have converged towards those of men. Without policy changes, the gender participation gap is not projected to decline significantly in the future. Canadian Participation Rates, by sex and age group, 2001 & 1976 Source: Labour Force Survey 15-2425-3435-4445-5455+ 66 63 58 92 80 54 89 76 4834 19 18

17. Page 17 Compared with the late 1980s, early retirement in Canada is now more common. Source: Patrick Kieran. “Early Retirement Trends”. Perspectives, Winter 2001. Statistics Canada; Data from the Labour Force Survey 1987-19901997-2000 29% 43% Early Retirement as a Percentage of Recent Retirement Between 1987 and 1990, only 29% of recent retirees retired before age 60. By the 1997-2000 period, the rate had increased to 43%.

18. Page 18 Some groups are more likely to retire before age 60. Those more likely to retire early are: Public sector employees Those with higher incomes Those with higher education Those who live in provinces with higher unemployment Public Sector Bachelor Degree National Average Source: Patrick Kieran. “Early Retirement Trends”. Perspectives, Winter 2001. Statistics Canada; Data from the Labour Force Survey Graduate Degree 63% 58% 52% 43% Early Retirement as a Percentage of Recent Retirement (1997-2000)

19. Page 19 2. Increasing productivity Human Capital –children –youth –adults Physical Capital –capital/labour ratio –natural resources Economic Efficiency –innovation and technological progress –labour market efficiency –product market efficiency

20. Page 20 Human capital is likely to have a key role. Ageing will create scarcity of labour relative to capital. This will increase future wages and create greater incentives for investment in skills. Increased human capital, if realised, will help smooth the demographic transition towards an older population.

21. Page 21 This optimistic scenario hinges critically on: Continued strong demand for skilled workers Investment in the skills of children, youth and adults

22. Page 22 There already is evidence that the demand for skills will be there. The knowledge-based economy is creating a demand for a more highly skilled and adaptable workforce. Employment growth is highest for those with post-secondary education and in knowledge occupations. As a result, labour shortages are anticipated, particularly for skilled workers.

23. Page 23 Employment growth is highest for those with post-secondary education... Employment growth in jobs held by those with a high school diploma stagnated in the 1990s. Employment growth was strongest amongst those with a post-secondary diploma or degree. Less than High School High School Diploma Post-secondary Diploma or Degree 909192939495969798 70 80 90 100 110 120 130 140 Index (1990=100) Employment Growth by Highest Level of Education Attained ( Index (1990=100)) Source: Industry Canada compilations based on Statistics Canada (LFS) data

24. Page 24 … and in knowledge occupations. The part of Canada’s economy that is based on knowledge has become vital to our performance. –Employment has grown three times faster in the knowledge occupations than in the rest of the economy over the 1984- 2001 period. –For example, employment in the information technology (IT) sector doubled in 1996-2001. Source: Labour Force Survey.

25. Page 25 Demand for skills is expected to increase in the foreseeable future. In 2001, those with post-secondary qualifications accounted for 58% of employment. It is expected that 70% of the jobs to be created by 2007 will require post-secondary qualifications. Meanwhile, less than 10% will involve less than high school. The educational demands of employers are likely to continue rising past the 2007 projection period. Source: COPS Reference Case 2002, Socio-Economic Studies, ARB. Less than High School Generally Requires High School Diploma Generally Requires College/ Apprenticeship Training General Requires University Degree Management

26. Page 26 The path of lifelong learning begins in early childhood. Poor outcomes in childhood can undermine subsequent education and skills development and limit future employment success and quality of life. A significant minority of Canadian children are not developing the skills and ability to learn that will help them live and work to their full potential. More boys than girls have learning and behaviour problems. Incidence of identifiable learning and/or behavioural problems among children aged 0-11 (1998-1999) Source: National Longitudinal Survey of Children and Youth 12.3 17.2 26.8 13.5 11.1 22.0 24.4 National Average

27. Page 27 Summary of Pathways of 18-20-Year-olds, December 1999* High School GRADUATES 75.8% DROPOUTS* 11.4% CONTINUERS 12.8% Post-Secondary Education GRADUATES 6.9% LEAVERS 9.2% CONTINUERS 83.9% 70% 8.5% 10.0%51.1%63.1%11.4%58.2% Employed Full-time Employed Part-time 59.3% 18.2%34.3%53.2%22.2%22.8%53.8% No Longer in School Labour Market Not Working 36.7%22.5%14.6% 19.0%34.8% 91.5%30%100% N/A * This figure presents estimates for 18-20-year-olds, including the high school dropout rate (11.4%). This rate differs from the 20-year-old dropout rate reported in Chapter 2 (12%). The latter is preferable as it accounts for the fact that some youth complete high school at a later age. Yet, for the purpose of presenting reliable estimates of education and labour market pathways, it is necessary to present 18-20-year-old results here.

28. Page 28 Youth participation in post-secondary education is rising and is among the highest in the world Most youth will meet the educational requirements of the new economy: –High school dropout rates among 20-year-olds declined from 18% to 12% in the 1990s. –School attendance rates rose rapidly in the 1990s. –Now, more than 60% of all 25-29 year olds have post- secondary qualifications. Source: Labour Force Survey.

29. Page 29 But educational attainment varies by province. Source: Labour Force Survey Percentage of those aged 25-29 with post-secondary qualifications by province, 2001 50.3 52.0 53.1 56.5 58.0 58.2 59.5 62.3 64.0 67.3 61.5

30. Page 30 In Canada, job-related training appears to be lagging behind other countries. In Canada 31% of firms invest in training. This compares to 74% in Japan and 80% in the UK. In 1994-95, the rate of participation in job-related training (employer and non-employer sponsored) among the employed population was 36% in Canada, 48% in the UK and 42% in the US.

31. Page 31 Setting priorities Necessity to develop skills will intensify Lifelong learning needs to be encouraged and developed Increasing labour market participation will require policies that focus on: –fostering employability –removing barriers to employment; and –improving skills

32. Page 32 Setting priorities (continued) New immigrants face challenges related to language and foreign credentials Work-family life, child care, housework issues will remain important Facilitating new career-development after retirement, volunteering and active ageing will be key for increasing the contribution of older workers to the economic pie.