Image via WikipediaIn a report released by Schroder Investment Management North America Inc on Thursday, July 21, two authors revealed that Canada will be facing a “baby bust” as its aging population goes into retirement.
In the report, co-authored by Virginie Maisonneuve and Katherine Davidson, the two authors describe how the future GDP of Canada will not be able to support the aging population unless significant changes take place in the labor market.
Specifically, the authors point out that the only way Canada will be able to survive the lower GDP growth and surge in retiring baby boomers will be “to increase immigration or raise participation rates, especially of older workers.”
The authors point out that an increase in immigration will not solve all of the Country’s financial problems caused by the effects of an aging population.
In addition to immigration changes, the country will still need to increase productivity in order to support the high costs of having an aging population. The situation threatens Canada’s reputation for “superior health status”.
Canada and the Aging Population
The report also points out that:
–> From 2020 onward, the country’s population growth is going to exclusively come from immigration. The report states that there will be entire segments of the Canadian economy that will be completely dependent upon foreign workers.
–> With such an older population, the financial and healthcare sectors of the economy will encompass a larger share of the country’s GDP. The report predicts that education, manufacturing, construction and retail will all decrease.
Why would an investment firm care about Canada’s aging population? Well, the report was released as a way to gauge what the future will look like in the Canadian marketplace, and where investment opportunities will exist.
Virginie Maisonneuve explains:
Demographic analysis is part of a coherent macroeconomic and thematic road map that serves as a framework to our stock analysis and selection. Many of our current holdings listed in Canada are resource companies. They will need to adapt to the demographic challenges that we have highlighted in this report in order to ensure success and shareholder value.”
Demographic analysis is part of a coherent macroeconomic and thematic road map that serves as a framework to our stock analysis and selection. Many of our current holdings listed in Canada are resource companies. They will need to adapt to the demographic challenges that we have highlighted in this report in order to ensure success and shareholder value.”
The authors also seem to take pleasure in pointing out a comparison between Canada’s elderly pension system vs. that of the United States. The report points out that Canada is fiscally responsible enough to have already started strategically positioning resources and making the necessary changes to meet this future financial challenge.
It also points out that Canada’s pension plan is expected to be solvent by 2050…in direct contrast to the United States Social Security system, which many experts believe will start experiencing financial shortfalls in 2016, and complete insolvency by 2039.
Of the report out of Schroder Investment is at all accurate, then elderly Canadian citizens are likely going to be dependent upon foreign workers to serve their needs. And, if the U.S. social security crisis does really come to fruition, then many of those immigrant workers will probably consist of elderly Americans, trying to survive the collapse of the U.S. Social Security system.
