Report on the Labour Force Participation of Seniors and Near Seniors, and Intergenerational Relations

Overview of the Labour Force Participation of Seniors and Near Seniors

Older Canadians are increasingly participating in the labour force, and the share of workers aged 55 and above has risen over the past decade. Currently, 36.5% of Canadians 55 years and over are engaged in the labour force, which represents a 0.8% increase over the past year.Footnote 12 Among all employed Canadians in 2009, one out of six was an older worker, up from one out of ten in 2000. The share of those aged 55 and above in the labour force (who are working or looking for work) is expected to continue to increase. In fact, by 2036, the proportion of the labour force that will be 55 and over is projected to be 18.7%, as compared to 16% in 2009.Footnote 13 There appear to be many factors that influence this increase in participation, including higher education levels, better health, and longer life expectancies. However, inadequate retirement income, higher levels of debt, and the effects of the economic downturn may also be preventing seniors from retiring as early as they wish.

According to a 2008 survey of older workersFootnote 14, three quarters (76%) of workers aged 50 to 59 plan to retire from their current job at or past the age of 60. Of those who are planning to retire from their current job before 60, about half (56%) plan to remain in the workforce, with most (88%) planning to continue working part-time. The primary reasons cited for retiring included financial readiness; layoffs; poor health; and lack of job satisfaction. The primary reasons cited for returning to work post-retirement included social interaction and/or something to do, job satisfaction, and financial need.Footnote 15 

For many Canadians, retirement has become a gradual period of transition, with individuals planning to work in some capacity, for at least a few years, after they retire from their primary occupation. There is growing evidence suggesting that workers no longer view retirement as a fixed point in time; instead, they see it as a gradual period of transition from working full time with their existing employer to exploring other employment arrangements and options.Footnote 16 

The current unemployment rate for Canadians 55 years and older is 6.4%; lower than the current average unemployment rate of 7.4%.Footnote 17 However, seniors and near seniors who become unemployed tend to stay out of the job longer and have a harder time re-entering the work force than other age groups. One contributing factor appears to be older workers’ accumulation of firm-specific, industry-specific or occupation-specific skills.

For reasons that are not totally understood, more general skills that could be applied to other jobs also appear to deteriorate as the length of job tenure increases.Footnote 18 Other obstacles to re-employment include labour-market rigidities, possible age-related job discrimination, and the shorter remaining career, which may discourage retraining or relocation.Footnote 18 

Older unemployed workers also tend to face adjustment costs that are much higher than those their younger counterparts face in the form of long-term unemployment and wage losses. Older displaced workers who manage to find new jobs lose about 40% of their earnings relative to their earnings in their previous jobs, significantly more than do those aged under 45. Older workers rarely succeed in matching their previous earnings upon re-employment, nor do their earnings grow appreciably in subsequent years. For these reasons, many older workers choose to retire early rather than accept a lower-paying job.Footnote 18 

Impacts of Population Aging

As Canada’s population ages, an increasing number of Canadians will leave the paid labour force. Despite recent increases in the labour force participation of seniors and near seniors, an overall decline in participation will still take place as the population ages. This may result in labour shortages, particularly in high-skilledFootnote 19 occupations, such as management positions and jobs in the healthcare sector, and labour surpluses in low-skilledFootnote 19 occupations.

Since the 1960’s, strong labour force growth has supported Canada’s rising economic potential. As the share of the population aged 50 and over increases and the large baby boom age group retires, labour force growth will slow. Between 2009 and 2018, annual labour force growth is projected to be 0.8%; half the 1.7% recorded in the previous 10 years. The output of a smaller workforce may result in reduced productivity and slower growth in national Gross Domestic Product (GDP).Footnote 20 Finally, a smaller workforce will result in a smaller income tax base and, therefore, reduced tax revenue. Given the anticipated decline in workforce growth, increasing the labour force participation rate of older workers could serve to reduce the overall economic impact of demographic change by delaying workforce shrinkage and taking full advantage of existing expertise and leadership.Footnote 21 

Most employers identify the aging of their workforce as a concern. Employers appear to be aware of the possible negative consequences that would be associated with labour shortages, such as drops in revenue; greater costs in employee wages, production and benefits; lower productivity levels; and increased pressures to undertake succession planning and leadership programs.Footnote 22 However, few employers focus their human resource practices directly on the mature worker segment. Many organizations assume that the benefits, policies, and strategies they have in place for the entire workforce will also be effective for recruiting, retaining, and engaging older workers.Footnote 23 

Benefits and Barriers to Labour Force Participation

As was presented in the Council’s 2010 examination of volunteering among seniors and positive and active aging, seniors themselves, and society in general, benefit from active aging, which for many includes continued engagement in the labour force. For seniors, an active lifestyle can prolong independence, extend participation in the community and society, and help manage chronic illness and prevent poor health. Some additional associated benefits of employment include increased income; increased mentoring and knowledge transfer to younger generations in the labour force; and retention of technical skills, leadership talent, and corporate memory.

Unfortunately, many barriers exist that can prevent seniors and near seniors from participating in the labour force. These include poorly adapted physical work environments; poor health; informal caregiving responsibilities; mandatory retirement practices; misperceptions and negative attitudes towards older workers (ageism); outdated and inflexible human resource practices; lack of awareness of available job opportunities and working options; lack of appropriate skills, education and access to training needed to update skills or transition to a new job; and low job satisfaction. Seniors and near seniors may also encounter barriers and challenges based on socio-economic status, gender, culture and ethnicity that may become exacerbated as they age. Immigrant seniors may face greater barriers due to the language and limited immigrant specific supports and may face unique financial and health issues. Also, Aboriginal seniors face distinct financial, health, housing, and geographical challenges which may hinder active aging. Responding to these issues will, therefore, involve a range of different approaches that address both the barriers and the incentives for employment.

Opportunities for Policy Action

While there are significant economic challenges associated with demographic change, an aging workforce provides an opportunity to review a number of labour market, social security and tax policies with an eye to supporting flexibility of life-course work and retirement patterns based on workers’ range of choices and circumstances.Footnote 24 Population aging further presents an opportunity to harness the experience and skills of older workers and expand job opportunities for mature workers.Footnote 25 

Indeed, a number of policy changes have taken place at the federal level to support continued labour force participation and lower barriers for seniors who wish to remain in the labour market. In its 2011 Speech from the Throne, the Government of Canada committed to removing barriers for older workers who want to continue their careers. Budget 2011 announced a commitment to change the federal rules to eliminate mandatory retirement age for federally regulated employees, unless there is a bona fide occupational requirement, in order to give these older workers the option of remaining in the workforce. Changes to the Canadian Pension Plan (CPP) are also being implemented over the next 5 years that will provide contributors with more flexibility and enable Canadians to make decisions that are right for them as they transition from work to retirement. These changes include the elimination of the ‘Work Cessation Test’, which will allow individuals to receive a pension without having to temporarily stop work or reduce earnings; an increase in benefits to those who delay receipt of their pensions; and adjustments that allow beneficiaries under the age of 70 with earnings to contribute to CPP and increase their benefits.