Social Policy in Ontario

The world’s losing its workers. How will we compete?

Posted on February 12, 2012 in Debates

Source: Globe & Mail — Authors: Doug Saunders

TheGlobeandMail.com – news/world/doug-saunders
Published Saturday, Feb. 11, 2012.   Doug Saunders

Now Canada, too, has had its senior moment. When Prime Minister Stephen Harper suggested that Canada would soon join most other Western countries in raising its pension age to 67, he triggered an angry round of debate. We were late entering this argument: Europeans have been having it for a decade.

And it is only the beginning, because pensions represent only a tiny part of a much larger global problem. At its core are a set of non-problems: People around the world are living longer and having far fewer children – a consequence of increased female education rates and declining absolute poverty. Countries such as Bangladesh, Indonesia and Iran are now having so few children that their populations are on the verge of shrinking – as would Canada’s if we didn’t take immigrants.

But the consequence of smaller families is fewer young people. And family sizes have plummeted so fast, around the world, that working-age adults are being outnumbered by seniors and children, who tend to be dependent on state funds for their health, education and livelihoods.

The world is on the threshold of what might be called “peak people.” The world’s supply of working-age people will soon be shrinking, causing a shift from surplus to scarcity. As with “peak oil” theories – which hold that declining petroleum supplies will trigger global economic instability – the claims of the doomsayers are too hyperbolic and hysterical. These are not existential threats but rather policy challenges. That said, they’re very big policy challenges.

Canada’s crisis is mild compared to most countries, but it’s still serious. There are currently almost five working-age Canadians whose income taxes pay the pension and health-care costs of each retiree; within 20 years, there will be only three. As a result, according to Ottawa, health-care costs will double and social-service costs will rise by a third. Compared to, say, Japan, where pensioners will become a majority this century, that’s nothing.

But population aging will affect us in far more profound ways, because it is global.

About 11 per cent of the world’s people are over 60 at the moment. In the next 25 years that will double, to almost a fifth, and one in six of those people will be over 80, according to a forthcoming book, Global Aging in the 21st Century, by sociologists Susan McDaniel of the University of Lethbridge and Zachary Zimmer of the University of California.

While this is affecting every country and region – even sub-Saharan Africa is now seeing a very fast rise in its proportion of seniors – some countries are being hit very hard. While 12 per cent of Chinese are now over 60, in two decades, there will be more than 28 per cent. Brazil faces a similar blow. It will be very difficult for countries that are only just emerging from poverty to suddenly face huge elder-care costs.

Peak people will be an age when jobs compete for workers rather than vice versa. The cheapest labour will vanish. We’re already seeing this: Because China is aging very fast, its dwindling working-age population is turning down the lowest-paid jobs and pushing up the minimum wage sharply, as well as the once-minimal costs of social services: Stuff from China will stop being cheap, because the Chinese aren’t young.

This can have larger consequences than we imagine. For example, the United States appeared to be escaping the worst of the aging trend because it has an unusually high fertility rate (averaging almost 2.1children per family, half a child more than Canada and Europe). Most analysts assumed that this was the result of American religion or prosperity. But an important new study by economists Moshe Hazan and Hosny Zoabihas found that the real reason for larger families is the unusually large supply of low-cost babysitters and child-care workers in the U.S. – mainly due to immigration, much of it “illegal,” from Latin America. But those Central American countries and Mexico are themselves aging fast, which will soon choke off that cheap labour supply and drive up the cost of having extra kids – which will cause the U.S. to become less fertile and more elderly.

Peak people will also be an age when countries will be competing for immigrants rather than trying to limit them. Immigration has spared Canada from the worst of aging, but immigrants adopt host-country family sizes very quickly, so they’re a temporary fix. And if their home countries are competing to keep them, then we’ll have a harder time finding young people who want to come. It will require nimble and clever policies to prevent us from becoming old and lonely.

< http://www.theglobeandmail.com/news/world/doug-saunders/the-worlds-losing-its-workers-how-will-we-compete/article2334597/ >

Tags: economy, globalization, standard of living, youth

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