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Aging Workforce Culture and Market Solutions
Aging Workforce Culture and
the Uncertainty
of
Market Solutions
James F. Follwell
Economist
PEI Dept. Development & Technology
Labour Market Development Division
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
The views expressed in this
presentation are those of its author
and do not necessarily reflect the
policies or views of the Government
of Prince Edward Island
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Components of Presentation
• Review of demographic and labour
characteristics of older workers and an
aging work force
• Some scenarios emerging from the
evolution of an aging population
• Thinking about nature of policies in
response to an aging work force –
efficient adjustment
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Questions
• Is there a rationale for developing proactive policies and programs to adjust to
an aging workforce? (Or leave to the
market?)
• Can we foster an efficient transition?
• Is there a special role for Labour Market
information?
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Aging Workforce and Older Workers
• Of course, when we talk about an aging
workforce we mean one in which the average
age of is advancing, or the larger age classes
are getting older
• Older workers are a feature of any workforce,
whether it is aging or not
• While subsuming the relative growth of the
older age classes in our population and
workforce, older workers are a subject of
interest for workforce development in any case
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
The Now Familiar Demographic
Projections
• The outlook, based on the base
population, parameters for life
expectancy, health trends, fertility,
immigration, and some other factors, is
portrayed by the familiar progression
dominated by the ascent of the baby
boom cohort
• A relatively older population would seem
to include a relatively older workforce
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Canada Population and Projections
Canada Population 2005
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
1,500
Female
Canada Population Projected 2021
Canada Population Projected 2011
1,000
Male
500
0
Persons x 1,000
500
1,000
1,500
1,500
Female
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
1,000
Male
500
0
Persons x 1,000
500
1,000
1,500
1,500
Female
1,000
Male
500
0
500
1,000
1,500
Persons x 1,000
Source: Statistics Canada, Population Projections for Canada, Provinces and Territories 2005-2031 Cat. #91-520-XIE;
Scenario 3 (medium)
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Early Intermediate Term
Canada Population Projected 2011
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
1,500
Female
8
1,000
Male
500
0
500
1,000
1,500
Persons x 1,000
FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
PEI Population and Projections
PEI Population 2005
PEI Population 2021 Projected
PEI Population 2011 Projected
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
6
Female
4
2
Male
0
Persons x 1,000
2
4
6
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
6
Female
4
2
Male
0
Persons x 1,000
2
4
6
6
4
Female
Male
2
0
2
4
6
Persons x 1,000
Source: Statistics Canada, Population Projections for Canada, Provinces and Territories 2005-2031 Cat. #91-520-XIE;
Scenario 3 (medium)
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Early Intermediate Term
PEI Population 2011 Projected
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
6
Female
10
4
2
Male
0
2
4
6
Persons x 1,000
FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
PEI and Canada Age Class Distribution
Canada Population Projected 2011
PEI Population 2011 Projected
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
90+
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
-10.0%
Female
-5.0%
Male
0.0%
Percent of Total
5.0%
10.0%
-10%
Female
-5%
Male
0%
5%
10%
Percent of Total
PEI population will have a somewhat higher proportion of preretirement age folks, but as well, relatively more workforce
entering age
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Are These Demographic Trends
Inevitable?
• Sure looks like it!
• Fertility rates are not rising significantly
and if they were, it wouldn’t matter for
the planning horizon
• Immigration into Canada is managed and
is unlikely to be ramped up very much
• Are there any unknown factors which
could make a difference in the
demographic trend?
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
The PEI Labour Force – Older Workers Profile
• Age classes 55 to 64 during the period 1996 to 2005
• The proportion of the population (15+) rose from
11.0% to nearly 15%
• Proportion of labour force increased from about
8% to over 13%
• Proportion employed increased from 8% to over
13%
• Proportion of unemployed increased from about
9% to 14.5%
• Unemployment rate among 55 to 59 declined but
among 60 to 64 varied and ended unchanged
(15%)
Source: Statcan LFHR
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
PEI Labour Force
– Perspective on EI Beneficiaries
• Analysis of EI data on beneficiaries suggests that older
workers are almost twice as likely to receive EI benefits
as they are represented in the labour force
• At about 16% of the annual average number of
beneficiaries, this level is similar in both urban and
rural areas of PEI
• We do not have a time series sufficient to show a trend
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Older Workers
– Do we really Know Them?
Views about older workers include, they…
•
•
•
•
•
•
•
•
•
bring valuable experience, knowledge and know-how to the workplace
have diminishing productivity
lean more slowly
learn more efficiently
have diminished productivity because of declining health
are more reliable
are loyal
perform dependably
can pass along experience and act as mentors for younger and core age
workers
• should retire so that core age and younger workers can move up the
organizational ladder
• are less innovative and creative
• bring practical ideas to the workplace …
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Aging Workforce Culture
• An amalgam of attitudes from all age classes
• Reflects dominant groups’ attitudes created in post WWII era
• Expectations for continuing economic growth
• Older workers lived through the “great inflation”
• Have experienced periods of transition, such as unemployment,
downsizing, globalization
• Likelihood of good pensions, assets, or at least a social safety net
pension
• Possibility of early retirement
• Increasingly risk averse
• Relatively less mobile – want to stay settled or move to retirement
destination, often breaking ties with community in which
employed
• Increasing awareness of need for skills and education demanded in
tech/globally competitive economy (attitudes of younger and early
core age groups)
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Selected Scenarios of the Potential
Effects of Workforce Aging
• Demographics is useful because of its
deterministic nature, but the economic
outcomes of demographic trends and factors
may be emergent properties or events, and
thus less amenable to forecasting
• So, let us look at some “scenarios” for macro
effects of an aging population and workforce,
which may determine the macro and micro
characteristics of our workforce and how those
characteristics play out in the economy in the
next 5 to 15 years.
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 1: Inflationary Environment
• Critical factors:
 More slowly growing workforce
 The workforce is aging and by 2012 the baby boom cohorts
will be well into retirement mode (assuming no significant
changes in attitudes, expectations, labour practices…)
 The economy is now and will continue to be increasingly
based in technology and knowledge sectors, such that
labour market will be tight for sought after, qualified,
productivity-capable workers
 Immigration will grow as it has been, highly managed
 Labour productivity will grow only a bit faster than is has in
the past decade
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 1: Implications
• These conditions set up inflationary expectations or
inflation, as the demand for workers is chronically
ahead of the supply of skilled, knowledge workers;
workers (all of us) have pricing power, offset by price
effects and/or decline in real output
• Globalization only partly offsets the upward pressure
on wages and salaries
• Central Bank reacts by increasing interest rates but
cannot ex post do anything meaningful about the age
class structure and “worker capability”
• Inflationary and higher interest rates reduce value of
real estate and securities assets – i.e. pensions
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 1: How workers (esp. Older
Workers) react
• Workers of all age classes seek higher wages, but this
may include through productivity, by acquiring skills
and knowledge, if workers internalize this option and
there is adequate training and educational capacity
• Older workers, especially baby boomers who remember
the inflationary 1970’s and 80’s, react quickly to
incipient inflation by becoming more risk averse and a
significant number may:
• Return to the active workforce if retired, or
• If not already retired, continue working
indefinitely
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 2: Constrained Economy
• The same critical factors apply as in Scenario 1
• But the potential or actual outcome is one of a
constrained or, WCS, prolonged slowed growth,
even recession
• The rate of economic growth is constrained
because there are chronic shortages of skilled
and knowledge workers! (Sound familiar
already) needed even for (or because of) a
highly technological, service economy; capital
can only go so far as a substitute
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 2: Implications
• These conditions set up recessionary expectations, as
firms hold off on expansion investments because they
can’t get enough capable workers
• Globalization makes it worse because Canadians have
vacated the “low wage” industries, that production
having long gone to other nations
• Central Bank reacts by lowering interest rates but
cannot ex post do anything meaningful about the age
class structure and “worker capability”
• Slow or no growth reduces value of real estate and
securities assets – i.e. pensions
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario 2: How workers (esp. Older
Workers) react
• Workers of all age classes have moderate wage demands but
those in the know – mostly younger workers, compete
aggressively for training and education to gain advantage,
(again assuming workers internalize this option – role for
LMI)
• Workers without the sought-after skills and knowledge form
a new cohort of chronically unemployed
• Older workers, especially baby boomers who have no
experience with prolonged slow and no growth (the GD)
react slowly; they would like to:
• Return to the active workforce if retired, or
• If not already retired, continue working indefinitely
• But many don’t have the appropriate skills and education
• They also don’t know how to adjust to lower expectations
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Labour Productivity Canada and Provinces
Real 1997 $s GDP / Hour Worked
Labour Productivity (Real $1997)
1996
1997
1997
1999
2000
2001
2002
2003
2004
2005
Source: Centre for Studies in Living Standards
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Scenario “X” - Synthesis
• Is there an intermediate path of economic response to
the aging workforce? Would such a path occur
spontaneously?
• Well, many of us, as individuals and as a society
generally like to think we have some degree of control
over our future and people who attend meetings like
the LMI Forum would seem to be “positists” – we work
to find ways to solve problems or guide development
• So, Scenario “X” is the synthetic process, to which we
make inputs of public policy and private endeavors
• Are there some workforce development management
priorities to achieve the synthetic outcomes?
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Managing the Workforce for Economic
Growth, Price Stability, and Productivity
• Nyce and Schieber, in their book The Economic
Implications of Aging Societies (2005), discuss the
challenges for developed economies of not having
enough workers to satisfy consumer demand for goods
and services over the next couple of decades. They say
that there are two solutions (with which we are well
familiar):
Rising productivity
Higher participation rates of workers, including
older workers
• Others have also suggested increased “work intensity”
(a reversal of a long term trend to shorter work weeks)
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Education, Education, Education
– and Other Stuff
• We accept that education and skills translate
into productivity and higher incomes over time
• A more productive Canadian workforce needs
education at many levels, from literacy to
trades skills to management techniques to post
Doc research
• An aging workforce in the context of an
increasingly technological economy is likely to
be more needful of education, broadly defined
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
The Potential of Older Workers
• Attitudes about older workers, including those held by
some older workers and some older people, are shaped
by socio-economic beliefs and experiences; these
attitudes concern:
• Performance ability in the workplace
(intellectual, physical (incl. health), and socioeconomic)
• The “normal” life cycle of work toward
retirement
• Expectations for retirement income
• Attitudes can create self-fulfilling
outcomes
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Older Workers:
They’re Getting More Important
Older Worker Age Classes in Labour Market Population Canada
X 1,000
Projections
Age Classes
2005
2011
2021
Total 15-64
22,367.3
23,604.9
24,181.1
Older 55-64
3,526.2
4,355.3
5,220.6
Older % of Total
15.8%
18.5%
21.6%
Total 15-69
23,560.8
25,118.0
26,365.8
Older 55-69
4,719.7
5,868.4
7,405.3
20.5%
23.4%
28.1%
Older % of Total
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
The Potential of Older Workers
• Older workers can be one solution to our workforce
development challenges, if society, our economy, and
of course older workers themselves want to make it so
• There are a number of approaches to enticing older
workers to remain in the workforce or return to the
workforce, but the conditions which would bring this
about are likely to include a change in attitudes
• That change in attitudes includes engendering a more
widely held belief that workers including older people
can efficiently upgrade their knowledge and education,
and transition to a longer work life or more intensive
work life.
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Challenge : Achieving Worker Capability
Levels in an Efficient Way for the Economy
• A challenge for governments, firms and individuals is to achieve
workforce development efficiently
• This might be measured in terms of achieving “worker capability”,
a mix of skills, education, and socio-economic characteristics
• Efficiency criteria may include:
• Minimizing the externalities of inadequate worker capability
• Equalizing the marginal cost of achieving worker capability
across age classes and within age classes
• Enabling workers to participate at their optimum
productivity - such as by facilitating skills and knowledge
acquisition
• In the case of older workers, finding ways for employers and
employees to reach accommodations reflecting the
characteristics and preferences of older workers
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Central Role for Labour Market
Information
• Throughout my talk I have alluded to the role of LMI:
• LMI is essential to the efficient operation of
markets – perfect knowledge of market
participants often assumed – but in reality there
are costs, so we must allocate
• LMI can function to increase awareness of the
nature of the aging workforce – the implications
for workers in all age classes, and for the
evolution of the economy
• LMI has a central role in building worker
capability, particularly among older workers
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
Revisiting Questions
• Is there a rationale for developing proactive policies and programs to adjust to
an aging workforce? (Or leave to the
market?)
• Can we foster an efficient transition?
• Is there a special role for Labour Market
information?
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FLMM Labour Market Information Forum 2007
Aging Workforce Culture and Market Solutions
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FLMM Labour Market Information Forum 2007