For an economy dogged by widespread labour shortages, one possible solution is under-employed older workers, suggests Scotia Economics.
In a new report, the bank’s economists argue that increasing labour force participation by workers in their 50s and 60s could help to quickly address the glut of job vacancies.
As it stands, it has never been tougher to attract and retain workers in Canada, which represents a significant barrier to economic growth, the report said.
“If we could find a way to fill the million vacancies that currently exist, we could raise our GDP by over $100 billion, or roughly 5% assuming average productivity remains the same,” it said.
To address these shortages, governments are seeking to boost immigration and female workforce participation, it noted — these initiatives should be bolstered by efforts to boost older workers too, it suggested.
“We believe bold and ambitious policy initiatives are also required to ensure that Canada benefits more from the immense human capital in older Canadians,” the report said. “Finding ways to retain older workers in the Canadian job market could go a long way to reducing the critical labour shortages we have faced in the last few years.”
For most age cohorts, participation rates are around their pre-pandemic level, but workforce exits for those aged 60 and over has the overall rate slightly below its starting point, the report noted.
“Even though the participation rates of older Canadians have generally increased over time, that trend was interrupted in the pandemic, and the participation rate for workers in their 50s and 60s remains well below those of younger Canadians,” it said.
The report argues that government policymakers should be pulling levers to get more older Canadians working as they near, or surpass, the ordinary retirement age by creating financial incentives to delay retirement.
For instance, it suggests that the federal government could offer a refundable tax credit for workers that extend their careers. The government could also adjust the rules around the Old Age Security (OAS) program to encourage more older workers to keep working, Scotia Economics said.
Policymakers could also consider initiatives to keep workers who are under age 65 in the labour market, it said.
“… targeted tax cuts for individuals within a certain age bracket, or lump sum payments to individuals within a certain age/income bracket might incent greater labour market participation,” it suggested.
At the same time, businesses have a role in retaining older workers too, the report said.
“In house re-training and upskilling programs, along with working arrangements that are adapted to older Canadians and financial incentives to retain talent, are key to businesses’ success and productivity gains,” it said.
“Designed properly, measures that meaningfully increase the participation of older Canadians in the labour market could go a long way to addressing labour shortages,” the report concluded. “Moreover, such measures could have the added advantage of having near instantaneous impacts on the supply of labour at a time when workers are critically needed.”