Wednesday, October 10, 2001
The Chronicle Herald

Demographics point to looming labour shortage

By Brian Lee Crowley

OUR SELF-IMAGE as a region of high unemployment and social program dependency is about to be turned on its head by one of the quietest but most powerful drivers of social evolution: population change.

While there may be variations, the basic story of how our population will change is clear. The number of Atlantic Canadians will grow, but more slowly than the national average, until about 2016, at which point it will start to decline. By 2036, it will have declined by about 100,000, to roughly 2.3 million.

Of all the trends hidden in these gross numbers, what it all this means for the workforce is the most important.

In 10 years, there will be 7,800 fewer workers in Newfoundland, 12,500 more in Nova Scotia, about 3,000 fewer in New Brunswick and about 3,000 more in P.E.I. But if we compare today with 20 years down the road, there will be 32,000 fewer workers in Newfoundland, 11,000 fewer in Nova Scotia, 35,000 fewer in New Brunswick and almost no change in P.E.I.

So at first blush, we could be looking at significant labour shortages in the coming decades in the region as a whole. But before reaching a settled conclusion, consider a few things.

The number of workers, for example, is not the only determinant of the ability to get work done. For example, if people work more hours, more work gets done with the same labour force. Also, if there are fewer workers, that can drive wages up, making it more economical to invest in productivity-enhancing machinery.

The U.S. labour shortages of the 1990s had a tremendous impact on the labour participation rate (the share of the population either working or looking to work). Employers scoured every nook and cranny of the population for new workers. Employment among seniors, for example, increased substantially, as bosses found ways to entice them out of retirement.

The abundance of jobs prompted record numbers of workers to enter the workforce. Over the 1990s, participation rose significantly, even though the decade began with a participation rate that was itself high. The share of people with a job in the population as a whole reached record levels. Even high school dropouts saw their unemployment rate fall below 7 per cent.

A labour shortage is a worker’s best friend. Employers were so desperate to find people that they began to devise strategies to allow them to put, for example, illiterate workers to work. That is why the fast food industry, to take but one example, began to design cash registers using only pictograms, not words and numbers, so that workers who could not read could nevertheless operate some fairly sophisticated machinery.

For all these reasons, there is far more flexibility in labour force availability in this region than a simple head count reveals. For example, our labour force (those working and looking for work) is roughly 46.5 per cent of the region’s population. Canada’s labour force is about 51 per cent of the national population. In 1999 in the U.S., before this recent downturn, nearly two thirds of American had jobs. Clearly, even given the differing composition of our population, we have room to put a whole lot of people to work.

Perhaps most importantly of all, there are whole segments of our population, who, largely as a result of foolishly designed social programs, have been withdrawn from the labour market. As a result, we have traditionally had a far lower participation rate than nationally or than in the U.S.

This is the unambiguous message of welfare reform in both the U.S. and Canada: the labour force can be increased significantly, with huge benefits for workers and the economy as a whole, by the reform of welfare programs such as EI and social welfare.

It is five years since U.S. President Bill Clinton ended “welfare as we know it,” and a little longer since Alberta and several U.S. states introduced reforms that sharply tightened welfare eligibility rules. The results have been so striking that even many of welfare reform’s strongest critics have been won over. Wendell Primus, who resigned his Clinton administration post in 1996 to protest against welfare reform, admitted recently that he had been wrong and “welfare reform is working better than I thought it would. É The sky isn’t falling anymore. Whatever we have been doing over the last five years, we ought to keep going.”

We of course, haven’t even really started. But if the future shape of our population is any guide, now’s the time to start thinking about far-reaching social program reform. Otherwise, labour shortages are going seriously to damage our prospects for economic growth, while keeping an important share of our population needlessly trapped in dependence. The conditions in the coming decades will never be better to redress this balance.

Brian Lee Crowley is president of the Atlantic Institute for Market Studies, a public policy think tank in Halifax. E-mail: BrianLeeCrowley@aims.ca