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By dint of want or necessity, Canadians are retiring later now than in the past. 

But the increase isn’t enough to offset the proportionally fewer number of younger Canadians entering the workforce. This has important implications for Canada’s economy, from labour shortages to the high fiscal costs required to pay for the retirement income programs of an aging population. 

Convincing more of the record high 21.8 per cent of working-age Canadians who are close to retirement to keep working could offset some of the pressure. 

This will require making workplaces more attuned to their needs. Fixing Canada’s long-term care system could be one key because reducing the burden of caring for aging partners and parents could allow some older workers to keep working or re-enter the workforce. 

‘Overlooked and underutilized’ 

The growth in the number of older workers began to accelerate in 2001, the year the first wave of baby boomers turned 55. The labour force participation rate of workers aged 55 and older was 36.4 per cent in April 2024, up from 25.7 per cent in the same month in 2001. The average age of retirees rose to 65.1 in 2023, its highest level since the late 1970s. 

It’s perhaps easier for older adults to remain employed nowadays. They have a higher educational attainment than previous generations and higher levels of computer literacy. They are staying healthier for longer and have a longer life expectancy. 

A decline in overall pension coverage and a shift from defined-benefit pension plans to less advantageous defined-contribution pension plans are also influencing retirement decisions. 

The nature of jobs has changed too, with many requiring less strenuous physical activity. 

Still, as baby boomers continue to retire and proportionally fewer younger people join the workforce, the overall labour force participation rate has fallen. 

In April 2024, it stood at 65.4 per cent, down from 66 per cent in 2001 and 67.1 per cent in 2011, the year the first wave of baby boomers turned 65. Statistics Canada projections show it is expected to continue to fall until at least 2036. 

Older Canadians could help fill pending labour shortages but remain an “overlooked and underutilized source of labour,” according to a Scotiabank report, which argues that hundreds of thousands of older Canadians could remain in the workforce longer or rejoin it with the right policies. 

Canada lags several Organisation for Economic Co-operation and Development (OECD) countries, including Sweden, Japan and New Zealand, where three-quarters of people between 55 and 64 were employed in 2022, compared to 63.5 per cent in Canada. In Iceland, it was more than 80 per cent. 

Extending the working lives of Canadians isn’t just good for the labour market. Research by the OECD found that it benefits company performance. 

The study found the productivity of older workers is similar to that of their mid-career counterparts and is higher than that of younger workers. Older workers have a lower turnover rate, as well as more management and general experience. 

The same study found there are benefits to having workers of different ages working together because the complementarity between the skills of employees from different generations enhances team performance and raises the overall productivity of firms. 

Yet, employers have few policies to encourage multigenerational collaboration, the report adds. 

The challenge of providing elder care 

Older workers can face challenges to remaining in the workplace, though, including ageist attitudes that don’t receive the same level of attention as other workplace equity, diversity and inclusion initiatives, and fewer opportunities for education and training. 

Many older workers also deal with the pressure of providing care for other older family members. More than 33 per cent of 55- to 64-year-olds and 23.5 per cent of those 65 and older provided care to a care-dependent adult in 2022, according to a study published by the Institute for Research of Public Policy. 

Women are more likely than men to provide unpaid care for adults, put in more hours and are more likely to report feeling tired and anxious as a result. 

Providing care can lead to financial strain. According to one estimate, the foregone wages of Canadian caregivers of older adults due to missing work, cutting back on work or leaving paid employment entirely totaled $221 million annually for women between 2003 and 2008 and $116 million annually for men. 

Respondents to a recent survey of 3,000 unpaid caregivers and paid care providers called for more supportive workplace policies such as days off, flexible work arrangements and paid leaves of absence to help them balance work and care responsibilities. 

Reducing disincentives to working  

The federal government has introduced several changes to Canada’s retirement income system to reduce disincentives to continue working. 

Canadians can defer receiving the old age security (OAS) benefit after 65 for up to five years to receive a higher monthly benefit. 

The 2024 federal budget increased the earnings exemption for calculating the guaranteed income supplement (GIS), a monthly benefit available to low-income OAS recipients. This means GIS recipients can now earn up to $15,000 a year without having their benefit reduced, compared to $3,500 previously. 

Canadians can also opt to start receiving their Canada Pension Plan benefit before 65 while continuing to work and can keep making contributions toward a post-retirement benefit that tops up CPP payments in later years. 

Some experts have called on the federal government to do more, including adjusting the clawback rate on OAS payments, introducing a career-extension tax credit similar to Quebec’s, and reversing its decision to roll back OAS eligibility to 65 from 67. 

Others have called on businesses to update their management practices by introducing flexible work arrangements and expanding leave policy, among other things. 

Enhancing long-term care and financing it properly would go a long way to reducing the burden on older workers who provide care. 

The 2024 budget points out that the labour force participation rate of working-age women reached a record high of 85.7 per cent in September 2023, in part because of the $10-a-day child care program, calling it “good social policy and good economic policy.” 

Yet, enhancing long-term care is seldom seen as a way to allow older Canadians to remain in the workforce. Soon, governments may have little option. 

Spending on retirement income is expected to balloon in the coming decades. The 2024 budget projects that spending on the OAS program (including OAS, GIS and the related allowances) is projected to grow to nearly $100 billion by 2027-28 and to $234 billion by 2055-56 from $80.6 billion currently. 

Encouraging older Canadians to work longer could benefit fiscal finances, enhance firm performance, provide more financially secure retirements and improve the well-being of workers themselves. But it’s going to require changes. It should start with better funding of long-term care.