There may yet be a silver lining to the current economic turmoil. It buys us time to deal with the increasingly critical labour shortage.
In The Developing Workforce Problem: Confronting Canadian Labour Shortages in the Coming Decades, published today by the Atlantic Institute for Market Studies (AIMS), Dalhousie University Professor Emeritus Dr. Jim McNiven says “the coming generalized shortage of available workers will present challenges to the Canadian economy quite unlike those that characterized the previous century.”
The current downturn does NOT solve the problem. McNiven says we would need a sustained recession over some 20 years to cope with the demographic crunch we have created for ourselves.
“In the 1970s and 1980s, the Canadian economy was restructured to meet the challenge of the entry of the huge baby boom generation into the employed labour force,” he explains.
“With the demographic changes that have taken place since then — a declining fertility rate and declining numbers of future labour force entrants — this design is no longer working. Indeed, continuing to adhere to it threatens Canadians’ standard of living, and could lead to unrest, outmigration, and slow-to-nonexistent economic growth coupled with high inflation.”
AIMS Executive Vice President Charles Cirtwill says McNiven’s paper comes at an opportune time because it shows that even a long-term recession will do little to delay the point in time when there will be too few workers to support our economy.
“The message here is simple,” says Cirtwill. “Pouring billions into supposedly ‘saving’ jobs might make for a good sound bite, but given what this paper tells us about the shrinking work force and the real labour shortage it begs the question: saving jobs for whom? We need different answers to these pressing questions and the coming months will demonstrate if we are up to the challenge, or not.”
In The Developing Workforce Problem, McNiven examines the case for Nova Scotia, but explains that the demographic challenge faced by that province has implications with broad relevance for the rest of the country. The baby boom generation is aging and hitting traditional retirement age; birth rates have declined across the country; immigration is not picking up the slack; and productivity is relatively stagnant.
McNiven warns that government policy, developed in the 1960’s and 70’s to handle the baby boomer impact on the labour market, needs to be overhauled. Job creation programmes, employment insurance, early retirement all helped open jobs for the boomers. Now rather than a job shortage, Canada and most of the developed world is facing a labour shortage – a time when there won’t be enough people to do the work needed to support those too young or too old to work.
McNiven says a combination of approaches is needed to alleviate the pending crisis. He suggests:
- Better immigration and child care policies to increase the population
- Encourage an increase in the productivity rate
- Increase the labour force participation rate by reaching out to segments of the population with traditional low rates and encourage people to stay working beyond “Freedom 55”
“It is clear that productivity gains alone will be insufficient to meet the challenge, and increasing immigration and labour force participation rates would require too large a measure of social and political change to be feasible in and of themselves.” He says, “A mixture of these approaches would probably be the most practical strategy, but this would entail significant changes to the way the economy operates.”
McNiven concludes, “This is a tough challenge and will involve a rethinking of a lot of government policies, not just those directly related to work and the workforce, but to education, certification, pensions, pay practices, benefits, capital investment, and on and on.”
To read the complete paper,click here.