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February 2001     Vol. 2, no. 2

Demography and the labour market

Deborah Sunter

  • Over the next half century, growth in the ratio of retirees to workers will put unprecedented stress on social security programs.
  • The ratio is constrained largely by the current shape of the population pyramid. If current age-sex participation rates hold, the overall participation rate could drop from about 65% in 2000 to about 63% in 2010. By 2020, the rate could be below 60% and may fall even more quickly, to about 57% by 2025.
  • Of course, age-sex participation rates have changed a great deal in the last 50 years, and will probably continue to change, in response to institutional change and economic conditions.
  • The recent decline in the participation of young people appears to have been the result of a combination of factors: increased school attendance, depressed job opportunities and a downward shift in the age composition of the youth group. As skilled workers will be increasingly in demand, youths will tend to remain in school longer. Hence, it is unlikely that youth participation rates will rise significantly in the future.
  • The most important influence on the total participation rate over the last 50 years was the dramatic increase among adult women. In the 1970s and 1980s, each successive cohort of women spent more time in the labour force. This, coupled with the size of these baby boom cohorts, pushed up the overall rate dramatically.
  • The continued growth in women's investment in education will likely put upward pressure on their age-specific participation rates after age 25, but not enough to offset the downward effect on their overall participation rate as baby boom cohorts leave the labour market.
  • Trends in the overall participation rate have also been greatly influenced by the downward trend in the age of retirement. Although it varies greatly, the median age of retirement among men has been falling for several decades. It was close to 65 in the late 1970s and early 1980s, and declined fairly steadily from the mid-1980s to the late-1990s, reaching a low of 61.3 in 1997.
  • Just as with retirement age, over the longer term the participation rates of older men have trended down, with a slight upturn in 1999 and 2000.
  • Factors that may influence the retirement age in the future are the extent of self-employment (the self-employed tend to retire later), the availability of flexible transitions into retirement (for example, part-time work) and the extent to which older workers are covered by pension plans.

Author

Based on a paper prepared for the Seminar on Demographic and Economic Perspectives from 2000 to 2050. Deborah Sunter is Director of the Labour Statistics Division. She can be reached at (613) 951-4740 or deborah.sunter@statcan.gc.ca.

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