After three years of what many have dubbed the “jobless recovery” (increases in B.C.’s gross domestic product without commensurate gains in employment) the impacts of demographic change on our capacity to generate continued economic growth are again coming into focus.
It’s important first to dispel the notion that B.C.’s output has grown in spite of no growth in our labour input.
Since December of 2009, when the province’s (seasonally unadjusted) unemployment rate stood at 7.7%, employment has grown 3.6%, reaching 2.3 million jobs in December 2012. (Although it must be noted that not all regions in B.C. have shared in these gains, as my colleague Andrew Ramlo pointed out in “Charting B.C.’s rocky road to economic recovery – BIV issue 1216; February 12-18.)
While average annual growth in employment of 1.2% over three years is nothing to write home about, it is growth nonetheless.
Surprisingly, this modest growth has resulted in a tightening of our labour market, with the provincial unemployment rate falling to 5.9% by December 2012.
The decline in this headline-grabbing statistic has resulted from a very slowly growing labour force, which increased by an annual rate of 0.5% between the Decembers of 2009 and 2012.
In the absence of any significant negative economic or employment shocks in the next few years, this drop in the provincial unemployment rate is expected to continue, driven largely by the aging of the baby boomers into retirement. And so after a brief respite from concerns that our demography and rising unemployment would stall economic growth, governments and businesses are again facing a demographic reality check.
There are two broad ways in which we can address the impact of an aging workforce on our capacity to expand our economy:
- we can innovate (i.e., become more productive with the workers we have); or
- we can try to expand our labour force through external means.
Recognizing that we have been a lot better at attracting migrants to B.C. than we have at increasing productivity (as the much-maligned data and approach to measuring productivity seem to indicate), external demographics should be considered.
Since the arrival of the baby boom generation, immigration has played an increasing role in B.C.’s demography. Approximately 32,000 more people moved to the province each year from other countries than went back the other way over past 10 years.
Just as it has historically, China is expected to continue to be a significant source of migrants for Canada and B.C. That said, demographic change is also afoot in China, and not of the encouraging sort: according to the National Bureau of Statistics, the working-age (15 to 59) population in China declined by 3.45 million people last year.
In the coming years the working-age population in that country is projected to decline even further, the consequence of both its one-child policy and low immigration rates.
More specifically, projections show that over the next decade and a half, China’s working-age population will decline by a further 36.5 million people – more than the size of Canada’s total population today.
With the continued aging of our population and further tightening of provincial and national labour markets, it is paramount for government and businesses to consider how they attract and retain workers.
A multi-pronged and evolutionary approach would be the best bet, because we should not focus on any single country to supply our workers, any single commodity to generate export revenue or any single technology to make our workforce more productive.
Innovation across all of these dimensions will be the only way to ensure a sound economic future for British Columbia in both the short and long term. •
