Toward an older worker strategy:

Ensuring economic growth for the 21

st

Century Human Resources and Social Development

DRAFT

Toward an older worker strategy: Ensuring economic growth for the 21st Century

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Diagnostique

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Older workers: challenges

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OECD suggested path forward

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International experience

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The age structure of Canada’s population is changing…

Dependency Ratio (Population 65+/Population 15-64)

% 70 60 50 40 30 20 10 0 OECD Canada Nfld PEI N.S.

N.B.

Qué.

Ont.

2001 Man.

2041 Sask Alta B.C.

Source: Statistics Canada and OECD

Population aging is accelerating in varying degrees across the country

2

… and Canadians are living longer, healthier lives…

16 14 12 10 22 20 18

Life expectancy, expected years in retirement and effective retirement 1970 and 2005 Males Women

Expected years in retirement Effective Retirement Age Life Expectancy at age 65 67 66 65 64 63 62 16 14 12 10 26 24 22 20 18 Expected years in retirement Effective Retirement Age Life Expectancy at age 65 1970 2005 1970

Source

: OECD 2005

Aging combined with more years in retirement brings forth many challenges

63 62 61 60 67 66 65 64 3

Labour force growth will slow considerably…

Labour force growth 1956-2006 Canada

198%

United States

128%

OECD

82%

Japan France United Kingdom EU-15 Germany Italy Expected Labour force growth 2006-2056* United States

34%

Canada

11%

OECD

6%

United Kingdom France EU-15 Germany Italy Japan 0 45 90 135 180

Note*

: Other OECD countries’ forecasts refer to 2000-2050

(Source:

OECD and HRSDC).

-40 -25 -10 5 20 35

Source: OECD

Labour supply growth has been the greatest contributor to economic growth

4

Participation of older workers will be a key economic driver…

Labour Force Projections (millions) Illustrative scenarios

21 20 Raising participation rates among workers aged 55-64 to national average Raising immigration to 1% of population 19 Status quo 18 17 2006 2010 2014 2018

Source: Statistics Canada and HRSDC

2022 2026 2030

Optimising older worker participation is the best means to offset labour force declines

5

Canadian older workers are well positioned……

Participation rates for workers aged 55-64 in selected OECD countries, 2006

ISL SWE NZL NOR CHE JPN USA DNK KOR GBR CAN FIN AUS MEX OECD DEU IRL PRT CZE ESP GRC FRA AUT SVK HUN ITA BEL TUR POL 0% 10% 20% 30% 40% 50% 58.7% 60% 70% 80%

Source: OECD

90% 100%

While older workers are performing well, there is still room for improvement

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But many older workers continue to face challenges

1. Employment supports are limited

 Job-related training declines significantly with age  25-34 Employed older workers less skilled than other workers

Employer supported job-related training by age, 2002 Share of all employed workers with less than a high school education, by age group, 2006

29.0

55-64 18.3% 35-44 25.9

45-54 12.3% 45-54 24.5

35-44 8.9% 55-64 15.6

25-34 6.7% 5 10 15 20 25 30 0 5 10 15 20 Sources: Statistics Canada and HRSDC Source: Labour Force Survey

Training efforts need to be targeted towards older workers

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But many older workers continue to face challenges

2. Employer practices matter

 Evidence of employer attitudes vis à-vis older workers is outdated – Negative perceptions about the capacities of older workers to adapt – Wages and non-wage labour costs that rise more steeply with age than productivity.

 Workplace practices continue to adjust, for example: – – Measures aimed at physical accommodation Flexible working arrangement

Employer attitudes and practices should reflect the potential value of older workers.

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But many older workers continue to face challenges

3. Structural and financial disincentives to continue working

   Public and private pension systems Interactions between various pension programs Flexibility of existing arrangements

Reasons to continue working (% of retirees), 2003

Part-time work 27% Better Health 21% Salary Increase 12% No mandatory retirement Suitable caregiving 6% 11% 0% 5% 10% 15% 20% 25% 30% Source: Statistics Canada

Some older workers wish to continue working longer, but institutional barriers to work persist

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But many older workers continue to face challenges

4. Unemployed older workers are at a disadvantage

 Older workers are disproportionately employed in traditional sectors  Displaced older workers in declining sectors have lower levels of education Fishg, Huntg & Tr.

Agriculture Clothing Textiles Forestry Paper Mfg.

Prim. Mtls Mfg.

Elctrcl Equip Mfg.

Local, Mcpl & Reg. Pub. Adm. and Abor.

Petro. and Coal Prod. Manf.

Employment shares of workers aged 55-64, 2006

17.4% 16.9% 16.6% 15.9% 14.8% 14.7% 13.9% 12.2% 12.1% National average (all industries) 12.2% 6.5% 6 10 14 18

Less mobile older workers could be disproportionately affected

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But many older workers continue to face challenges

4. Unemployed older workers are at a disadvantage

 Older job seekers are under-represented in employment assistance programs 5 4 1 0 3 2

Participants in EBSM Skills Development Programs (06/07), as a share of workers experiencing unemployment in 2006

4.0% 4.3% 3.3% 1.3% 25-34 35-44 45-54 55+ Sources: Statistics Canada and HRSDC

Unemployed older workers receive less employment support

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The OECD has set the stage: “Giving (older) Canadians more opportunity to remain in the workforce longer will benefit both the economy and the workers themselves”

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The OECD set out a three-pillared approach for an older worker strategy:

1.

2.

3.

Strengthen the employability of older workers Set in motion workplace-based initiatives Provide more flexible work to retirement transitions and remove disincentives to continue working

Another component could be:

4.

Address vulnerable older worker challenges, industry towns

e.g.

high risk of layoff in single 12

1.

Strengthen the employability of older workers.

►

Ensuring older workers have up-to-date skills and good access to employment services will significantly enhance employment prospects International examples

►

New Deal 50 + (UK)

– Targeted approach to employability, but poor evaluation mechanism and low take-up of training grant

►

Return to Work Supplement (Austria)

– Explicit (transparent) example of return to work supplement, but occurs late in the unemployment stage (i.e. after 12 months) ►

Competency Reform (Norway)

– Good example of ‘right to study’ leave for adults (time and loans) 13

2.

Set in motion workplace-based initiatives

►

Employer practices that recognize the demographic changes underway International examples

Reduced social security contributions (various OECD countries)

► ► ►

Spain

– employer contributions reduced for workers aged 60+ who have five years of seniority and for newly hired workers aged 45+

Norway

– employer contributions reduced by 4 percentage points (i.e. from 12.8% to 8.8%) for all older workers aged 62+

Italy

– employers exempt from contributions for one year after hiring older workers

Allocating time to train

►

Right to train (France)

hours per year worked.

– for employees with over 12 months’ service, credit of 20

►

Employer Training Pilots (UK)

– wage compensation (up to 150%) to employers offering paid time off for low-skilled employees to train.

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3.

Provide more flexible work to retirement transitions and remove disincentives to continue working

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Create an environment that gives workers a real choice in making their labour market decisions

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Normally part of a broader strategy to address population ageing pressures International examples

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Finland: the part-time pension entitles workers aged 56 and over to 50% of the income loss due to a reduction in working time, paid through the pension system. to improve employment opportunities.

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Sweden: workers are permitted to draw a portion of their pension early while still working

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4.

Address vulnerable older worker challenges, e.g. high risk of layoff in single-industry towns.

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Needs of older workers in adjusting industries must be placed in the context of broader labour market and economic adjustment/regional development strategy International examples

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Trade Adjustment Assistance, Target Group Benefits for Older Workers (US)

– Reemployment benefits, income support benefits for trade displaced workers. Earnings supplement available to workers age 50+, for whom retraining may not be suitable

►

European Globalisation Adjustment Fund (EGF) :The European Union recently introduced a targeted initiative for workers (not targetted to older workers) who have been made redundant as a result of trade liberalization

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Coherence

“… range of measures are likely to be more effective if taken as part of a coordinated or complementary federal/provincial/territorial wide strategies..” (OECD Aging and Employment: Canada)

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Finland National Program on Ageing Workers (45+) – Three phased program to improve employment opportunities.

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National Strategy for an Ageing Australia – to promote awareness of ageing, advise on short-and long-term policy.

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