The aging of the baby boomers, which is largely behind the projected decline in the overall participation rate, has had a major impact on the aging of the labour force.
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2011-08-17 Ottawa, ON -- Using a range of projection scenarios, Canada's labour force is projected to grow to between 20.5 million and 22.5 million by 2031, according to a new study from Statistics Canada released in August 2011. In 2010, the labour force numbered about 18.5 million.
All scenarios suggest a slowdown in the rate of growth in the labour force, primarily because of the retirement of baby boomers. The overall participation rate, that is, the percentage of the total population aged 15 and over that is in the labour force, is also projected to decline.
This report, Projected Trends to 2031 for the Canadian Labour Force, is based on an article in the Canadian Economic Observer about new projections for Canada's labour force from 2011 to 2031, by which time the entire baby-boom generation will have reached the age of 65.
Between 1971 and 1976, when the large baby-boom cohorts were entering the labour market, the labour force increased at an average rate of just over 4% a year. This growth rate slowed to about 1.4% between 2006 and 2010. By 2016, growth is projected to be less than 1% on average in all scenarios. Projections show it could slow even further to between 0.2% and 0.7% in the period from 2021 to 2026.
In four of the five scenarios, the growth is projected to stop slowing after 2026, once most baby boomers have left the labour force.
The projections also suggest that, if recent trends continue, the labour force will become older and increasingly ethno-culturally diverse. Close to one person out of four in the labour force could be aged 55 or over by 2021. There would also be higher proportions of foreign-born people and people belonging to a visible minority group (as defined by the Employment Equity Act) in the labour force.
Projections also show that the overall participation rate would decline and the diversity of the labour force would increase in every province.
Overall participation rate declines in all scenarios
As the growth of the labour force loses momentum, the population of seniors aged 65 and over is projected to grow increasingly rapidly as a result of population aging and the entry of the baby boomers into this age range.
Consequently, according to all scenarios, the overall participation rate is projected to decline during the next two decades.
In 2010, the participation rate was 67.0%; by 2031, it is projected to range between 59.7% and 62.6%, which would be the lowest observed since the late 1970s.
The projected decline in the overall participation rate over the next two decades would be largely attributable to demographic phenomena, such as the aging of the baby-boom cohorts, increasing life expectancy and a fertility rate below the replacement level of 2.1 children per woman.
Nearly one person in four in the labour force projected to be 55 or more
The aging of the baby boomers, which is largely behind the projected decline in the overall participation rate, has had a major impact on the aging of the labour force. Between 2001 and 2009, the proportion of people in the labour force aged 55 and over rose from 10% to 17%, an increase of 7 percentage points in nine years. The first baby boomers reached the age of 55 in 2001.
This increase is projected to continue from 2010 to 2021, when the succeeding cohorts of baby boomers in turn reach 55. By 2021, according to three of the five scenarios, nearly one person in four in the labour force (roughly 24%) could be 55 years of age or over, the highest proportion on record.
Also, by 2031, the ratio of people in the labour force to seniors aged 65 and over not in the labour force, that is mostly retired people, is also projected to decline.
In 1981, there were roughly six persons in the labour force for each retiree. By 2031, or 50 years later, this ratio is projected to decline to less than three to one, according to all five scenarios. The ratio is projected to decline in every province.
About one person in three in the labour force projected to be foreign born
By 2031, roughly one in every three people in the labour force could be foreign born. Between 1991 and 2006, the percentage of foreign-born people in the labour force rose from 18.5% to 21.2%. If recent immigration levels were to continue, that proportion is projected to reach almost 33% in 2031, according to most scenarios.
For more than 20 years, Canadian immigration has come mainly from Asian countries. Consequently, between 1996 and 2006, the proportion of people in the labour force belonging to a visible minority group rose from 10% to 15%. According to most scenarios, this proportion could more than double to 32% by 2031.
Even if there were no immigration between 2010 and 2031, the proportion of people in the labour force belonging to a visible minority group would increase to about 23% in 2031.
This would be the result of two factors: first, the age structure of the visible minority population is younger than the general population, which means that fewer visible minority persons would retire by 2031. Secondly, the children of recent immigrants would gradually enter the labour force.
In addition, between 2006 and 2031, an increasing proportion of persons in the labour force belonging to a visible minority group is projected to be Canadian born. In 2006, Canadian-born visible minorities accounted for about 17% of all visible minority people in the labour force; by 2031, their proportion is projected to rise to roughly 25%.
Again, this increase is mainly a result of two factors: first, Canadian-born visible-minority people tend to have a high level of education, so more participate in the labour force. Second, the children of immigrants who have arrived since the early 1990s will gradually enter the labour market.
Note to readers
The projections were based on five scenarios that combine assumptions on future population growth with assumptions on future labour force participation rates. These scenarios suggest increases of various sizes in the labour force population depending on assumptions for rates of fertility, mortality, immigration and participation rates.
The projections were obtained using a microsimulation projection model called Demosim. This model makes it possible to project populations by simultaneously taking into account the demographic components related to population growth, the education level, the participation rates and the person's belonging to a visible minority group. The population base for this model comes from the microdata file of the 20% sample of the 2006 Census, adjusted for net undercoverage.
The labour force is defined as all individuals aged 15 years and older who work or who are looking for work. It is, therefore, the pool of individuals who are employed or available for employment in a population. The overall participation rate is the proportion of the population aged 15 years and older that is in the labour force.
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