Retirement age participation in the workforce appears only temporary with the pace of retirements set to increase in the next few years
Talk about Canada’s aging population is not new, and it’s not just Canada where this is a challenge.
But retirement of workers, many of them with skills that businesses need, is a risk to the economy if it is not addressed.
A new report from TD Economics’ director and senior economist James Orlando, CFA, highlights the problem and opportunity posed by ‘the greying’ of Canada’s population.
Key to this is that many Canadians who would have been eying retirement have chosen (or perhaps been forced) to work longer than expected. But older workers will not stay in the labour market en masse for ever.
Delaying retirement for those in their late 50s and early 60s has provided an important buffer for those businesses that would otherwise be struggling to fill skills gaps.
Orlando highlights that the greying effect is set to intensify in the years ahead, but there has been an increase in the number of people in all age groups 55+ who are remaining in work since 2020.
TD’s calculations show that, if the retirement rate of the early 2000s had endured into the 2020s then there would have been more than 1 million fewer retirement age people in the workforce.
Lower asset values and rising housing and energy costs may necessitate staying in work rather than drawing on a pension pot that may prove inadequate.
However, the figures show a 17% increase in the number of retirements in 2022 compared to the prior two years with 266,000 people retiring through to the end of last year.
TD expects this trend to continue and with a projected 1 million over 65s by 2025, that could mean 900,000 retiring based on current participation rates.
That would mean a 50% increase in retirement compared to the 10-year average.
Orlando says that businesses cannot ignore the likelihood of losing both the headcount and the knowledge that is in those heads.
His report calls on policymakers and business leaders to address an impending skills gap, by ensuring training of young Canadians but also in how foreign credentials and experience are treated and effective job-to-skills matching.
“The aging of Canada's existing population is opening the door to make the structural changes necessary to bring in, integrate, and support all current and future Canadians. Therein lies a huge opportunity for Canada,” Orlando states.