Labour market implications of an aging population

The Canadian population, like those of the other advanced economies, is aging rapidly. One important aspect of population aging is the aging of the Canadian working-age population and workforce. The research theme developed in this issues paper is the effects of population aging on the Canadian labour market. Three areas for policy research directly linked to aging and the workforce are discussed. The first is the determinants of the labour force participation decisions of older workers. The policy questions underlying this research issue are to identify barriers to labour force participation by older workers and to examine the welfare consequences of offsetting the effects of demographic changes by maintaining or prolonging the employment of older workers. The second area for policy research is the relation between an aging population and the use of skills in the economy. In particular, this research area concerns: the effects of aging on the level and types of skills supplied by the workforce; and the effects of age differences in skills in the context of an aging population on the demand for labour by employers and on employers’ introduction of new technologies and of new forms of workplace organization. The third area for research concerns the costs of adjusting to population and workforce aging. At the level of the economy, the changes resulting from population aging will occur gradually over a period of twenty or more years. Nonetheless, an increased level of retirements and the changing age composition of the workforce may result in increased costs of workforce adjustments. Furthermore, while changes resulting from workforce aging will occur gradually for the economy as a whole, this may not be true of certain firms, industries or occupations, with implications for adjustment costs. For each of these research areas, relevant economic research is discussed and a series of research issues is presented.

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