Economy

Longer lifespans and falling fertility rates are “aging” the population of many countries at an accelerating rate. By 2050, an estimated one-quarter of the population in industrialized countries will be over the age of 65. Canada is also experiencing a rise in the relative size of its older cohort. By 2030, 22 per cent of Canada’s population will be aged 65 and over. This will place significant pressure on its labour market. Notwithstanding the current slowdown, employment growth has been relatively steady in Canada over time. Because employment growth is directly linked to a country’s economic prosperity, governments must continue to invest heavily in human capital today to ensure sustainable employment growth tomorrow.

The global economic recession has taken its toll on Canada’s economy. Employment growth in Canada fell from 2.3 per cent in 2007 to 1.4 per cent in 2008. By the last two months of the year, Canada was actually shedding jobs, especially in manufacturing and financial services.

Most peer countries experienced lower employment growth in 2008. Some countries were harder hit than Canada—notably, Japan, the United States, and Ireland. Overall, however, Canada’s employment growth rate trailed several additional countries, pulling Canada’s relative ranking to 8th position.

Ireland was the top achiever in employment growth for most of the 1990s and the current decade. In last year’s report card, it was the only country to receive an “A” grade on this indicator. Ireland’s employment grew by a mammoth 3.4 per cent on average per year between 1990 and 2007—a full 2 percentage points above most peer countries. Most of Ireland’s employment gains then were a direct result of foreign direct investment (FDI). Ireland lowered corporate tax rates and integrated into European markets, thus becoming a choice destination for FDI.

But Ireland has been hit hard by the financial crisis and the bursting of the housing market bubble. Ireland sank into recession in the first half of 2008—the first European Union country to do so. Employment dropped in Ireland in 2008.

Norway weathered the economic crisis better than most of its peers in 2008. It is the only country to receive an “A” grade for employment growth—employment grew by 3.2 per cent in 2008, much higher than Canada’s 1.4 per cent growth. Norway’s growth in 2008 was mainly due to increased employment in local government, wholesaling, and manufacturing. The number of employed people grew in the first three quarters of the year, but fell by 0.4 per cent in the last quarter of 2008. We expect rankings to change further in 2009.

In the 1970s, Canada was at the top of the class. Despite the mid-decade recession, Canada’s employment growth averaged 3.1 per cent annually. Canada maintained its “A” grade for two decades. In the 1980s, it came in second to Australia, and ahead of Norway and the United States.

Canada’s grade fell to a “C” in the 1990s, reflective of the Canadian labour market’s poor performance. A severe recession in the early 1990s constrained employment growth to an average annual growth rate of just above 1 per cent. Despite growth in gross domestic product (GDP) from 1992 onward, employment was slow to rebound. Canada saw modest improvements at the turn of the century, however, with employment growth averaging 2.5 per cent annually in the 2000s.

And then there is the Celtic Tiger: At the same time Canada was experiencing its “jobless recovery,” in the mid-1990s, Ireland’s economy was ignited by soaring inward foreign investment in high-tech industries. Forfás, the Irish government’s business development agency, notes that nearly 70 per cent of employment gains in the 1990s were in foreign-owned companies.¹

In the 1970s and 1980s, Canada earned an “A” for employment growth, yet simultaneously received a “C” and a “D” for unemployment. The paradox of high employment growth and poor unemployment performance can be explained by the increase in Canada’s labour force participation rate in those decades. This was driven by increased immigration, increased participation by women, and a shift in the demographic as baby boomers entered the labour force.

The Conference Board of Canada has made several recommendations to ensure strong employment growth for the future, most of which revolve around investments in people: 

• Keep older workers in the labour force by reducing incentives for early retirement, ending age discrimination by eliminating legislative and structural barriers for those who choose to work beyond age 65, adopting more flexible working arrangements, and modernizing attitudes toward older workers. 
• Establish education funding as a much higher national priority and ensure that universities and colleges have the financial resources they need to meet their respective mandates. 
• Focus on lifelong education and training. 
• Implement a new deal for immigrants by improving immigrant selection and processing, reforming credentials recognition, and strengthening intergovernmental and public–private sector coordination

To understand how Canada can cope with the looming demographic crunch read:

Mission Possible: Stellar Canadian Performance in the Global Economy, Chapter 6, Ottawa: The Conference Board of Canada, 2007. 

¹ Forfás, Annual Employment Survey 2006 (Dublin: Author, 2006), p. 7.

See discussions on other indicators
Income Per Capita	Unemployment Rate
GDP Growth	Employment Growth
Labour Productivity Growth	Inward FDI Performance Index
Inflation	Outward FDI Performance Index