Canada Said to Face Labour, Pension Crises by 2030

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Canada Said to Face Labour, Pension Crises by 2030

The Star.com

January 26, 2004

Canada faces a severe labour shortage by 2030 that will strain public and private pension systems, according to a global report by workforce and financial consultancy Watson Wyatt Worldwide.

The report predicts the country's labour supply will begin to grow more slowly than the overall population during the coming decade, and by the 2020s the proportion of working-age people will start to shrink.

"This increased dependency burden will lead to an enormous strain on the Canadian pension system," Ian Markham, director of pension innovation for Watson Wyatt Canada, stated Monday.

"In the coming decades, as the baby boom generation begins to retire and leave the workforce, Canada will need to determine how to support an aging population that produces fewer workers."

Watson Wyatt suggests one remedy is to "adopt programs that promote greater workforce participation at all ages" — that is, make people work longer.

Canada is not alone in facing the impact of slowing labour-force growth and accelerating population aging.

The report says Italy's retirees will outnumber active workers by 2030.

Meanwhile, the 335 million workers that India is expected to add in the next 30 years is almost equal to the current working-age populations of the European Union and the United States combined.

Watson Wyatt Worldwide says its global study "raises profound questions around labour participation and productivity, the cross-border flow of capital, the globalization of labour markets, the financial viability of social insurance programs, and how economic output is shared between working-age and retiree populations."

Assuming current demographic and economic trends continue, the European Union's share of total global output will shrink from 18 per cent now to 10 per cent 2050, the report says, while Japan's share will decline from eight per cent to four per cent.

"The demographic changes present enormous challenges for developed countries," said Sylvester Schieber, director of research at Watson Wyatt and co-author of the report.
"There will be hard choices ahead, but in the final analysis, more global integration is needed, not less."

The report notes that Germany and Mexico now each have working-age populations of about 50 million. "By 2030, Mexico will have twice as many working-age people as Germany," and other developing countries such as China will also see major workforce growth.

In addition to extending people's working lives, possible moves for currently well-off countries include increased immigration, higher capital spending to boost productivity, and enticing more people into the labour force.

"While no single solution provides a magic bullet, it's clear that the flow of capital and labour across borders can be improved," stated John Haley, president and CEO of Watson Wyatt.

"If the world's developed countries cannot find adequate labour within their own borders, they can export capital to other parts of the world where there are ample and growing supplies of workers. It will help raise standards of living in the developing world. It will provide sources of income and goods in the developed economies where worker shortages will strain the economic capacity to meet consumer needs. In the end, we all will benefit."