Does an ageing population matter?

The immigration lobby and others constantly refer to the age structure of a nation’s population as being a problem. They point to a growing percentage of the Canadian population like myself which is old, leaving fewer younger people as part of the active labour force. Below I look at alternative ways to address this problem other than promoting increased immigration.

Canada is not alone. Some other countries which have managed to remain small is illustrative of alternatives. The 2013 Federal Budget proposes ways of retraining the unemployed to alleviate the skills shortage.

For illustrative purposes and not a random sample, consider three countries, all of which have experienced an ageing population over the past seven years. Between 2005 and 2012, the share of the population over 65 years old increased approximately 8 percentage points (23.9-15.4) for Switzerland, 6 for Sweden and 10 for Canada.

                                    Population mil.

                                      1990     2011

Switzerland                        6.7        7.6

Sweden                              8.6        9.0

Canada                             28.0       34.0

                         

Switzerland and Sweden have kept their populations reasonably small with increases of 13% and 5% between 1990 and 2011, while Canada has increased its population 21% over the same period. There are ways to prosper economically without large increases in overall population, even if the population is ageing. What are these alternatives?

  1. First, it is useful to have a population policy, which Canada does not have. The private Population Institute of Canada is one place which studies these issues. Canadian governments and political parties have shown little interest in discussing the overall size, rather than the age structure of the population, where most assume an ageing population is a problem.
  2. Consider WW2 when men were conscripted into the forces and their places in the workforce (factories etc) were filled by women and even youths helped out on the farms – as illustrated by the British TV program Wartime Farm. Today a larger percentage of women are already working, but this could be increased if the wage/salary incentives were there. Increased wages and salaries would attract more labour of both sexes to the work force.
  3. The customary retirement age, say 65, is not fixed in stone. It can be altered in a number of ways. When I retired, my contract with the university required me to retire from the university at 65. It no longer does so for existing faculty. It did not require that I stop working at 65, and I carried on in related areas, as many do who retire from government, business and elsewhere. There is life after 65 and with it an increased supply of labour. Living longer and inadequate pensions are an incentive to continue working.
  4. Ages for receiving pensions and other benefits can be altered so that people have incentives to work longer.
  5. With communications technology, many types of work can be outsourced, not just abroad, but to people in their homes, so that both the size and flexibility of the workforce are enhanced. Some people will be prepared to work longer if the convenience of working is increased. A 40 hour work week may exist for certain service sector jobs, but as a result of people texting and talking on various devices at all hours of the day (and night), many office workers and professionals are already working far more than 40 hours a week, thus increasing the input and output of the existing workforce.
  6. Outsourcing abroad is another way of expanding a country’s workforce. An alternative is to permit the entry of temporary foreign workers which Canada already does. The number of temporary workers, especially live-in caregivers and seasonal farm workers, entering Canada each year has doubled from 100,000 a year in 2003 to almost 200,000 per year in 2011. In 2011 there were about 300,000 such workers in Canada, consisting of those who entered in 2011, and those who entered in previous years and have not departed (CIC figures as reported in the Ottawa Citizen, Nov. 6, 2012, p.5).
  7. Adjustments can be made as to whether these workers can then apply to become permanent residents. Note, Singapore has a closely monitored policy of bringing in foreign workers and requiring them to leave if they are no longer working. I suspect Switzerland may do the same.
  8. Substituting capital for labour is a way of making better use of an existing labour force. It has already occurred in many industries, agriculture being a prime example. Today, the share of the labour force in agriculture is around 2% down from 25% in 1941. The loss of manufacturing jobs in Ontario and elsewhere, such as in the automobile industry, is less due to the shrinkage of the industry and more to the introduction of automation.
  9. In the service sector, communications technology has introduced labour saving methods of production in industries such as banking and related financial services, publishing (books, newspapers and magazines), television, movies, music, online shopping, defense and security activities. More can be done with the existing number or with less people, although retraining will often be required, but this has had to happen before.

Conclusion

Increased immigration is one but not the only way to deal with an ageing population. It ignores the alternatives that exist, how this is dealt with in different countries, and what other measures can be taken in Canada. It also requires addressing what size of population Canada is attempting to achieve and the alternatives for achieving it. One possibility is tax incentives for increasing Canadian birth rates. At the same time, there is a need to examine the other consequences (costs and benefits) of an enlarged population.

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