By Tavia Grant

Atlantic Canada’s economy stands to suffer most if Canada’s pool of available workers shrinks over the next quarter century as Statistics Canada forecasts.

Newfoundland and Labrador, Nova Scotia and New Brunswick could lose tens of thousands of workers each in the coming decades, despite their smaller populations, according to a Statscan report yesterday that examined the consequences of baby boomer retirement and Canadians having fewer kids.

The report, giving projections of labour force changes between 2006 and 2031, wasn’t the only recent alarm bell on the topic. This week, Bank of Canada Governor David Dodge warned that the aging population will challenge economic growth in the coming years.

“This could be reasonably dire,” said Ian Munro, director of research at the Atlantic Institute for Market Studies in Halifax. “More people will be consuming services, and fewer people will be providing the tax base to support them.”

The participation rate in all of Canada – or the proportion of the adult population actively in the labour force – will plunge over the next quarter century, Statscan said. That suggests a dwindling supply of labour available to produce goods and services, causing severe consequences for the economy, government revenues and social programs.

Immigration and any pickup in birth rates won’t be enough to offset the drop in the working population – so greater productivity will be needed from those who are at work. Mr. Munro said policy changes – such as lower taxes, improving infrastructure and education and reducing regulatory burdens – will be needed to do more with less.

“We’re going to be in trouble if this doesn’t get on the radar [of policy makers] fairly quickly,” he said. The problem is hardly unique to Canada. Most industrialized countries, such as Germany and the U.S., are seeing similar trends.

Across Canada, it means companies will have to invest in more equipment and machinery to boost productivity. Not all industries face the same challenges, however, with the public sector – health care, teachers and public servants – facing the most dramatic retirement rates, said one forecaster.

“We see the overall participation rate maybe increasing up until 2011 – and then dropping very, very sharply afterwards,” said Pedro Antunes, director of the national forecast for the Conference Board of Canada. “The big picture tells us there’s going to be tightness.”

The actual size of the labour force will likely continue to grow, yesterday’s report said. It explored four scenarios that could happen in the coming decades; in three, the overall labour force grew, but all four showed a marked decline in the participation rate.

All four scenarios showed only three provinces – Ontario, Alberta and British Columbia – with a larger labour force in 2031 than in 2005. In contrast, three of the Atlantic provinces – Newfoundland and Labrador, Nova Scotia and New Brunswick, would have a smaller labour force in 2031 than now.

As for the participation rate, about 67 per cent of people aged 15 and over are currently working. The study found that sliding to between 58 per cent and, in its most optimistic scenario, 62 per cent in the next quarter century.

The drop is most startling for Newfoundland, which shows that more than one adult in two would not be in the province’s labour force.