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Economists ponder end of boomer era: One says standard of
living will fall; another says aging society will cope
The Ottawa Citizen
Sun 01 Jun 2003
Page: A4

Section: News
Byline: Bruce Ward
Source: The Ottawa Citizen

With millions of baby boomers shuffling towards
retirement, Canada faces the prospect of "dramatically lower" living standards
over the next two decades, an economist warned yesterday.

Yvan Guillemette, a policy analyst at the C.D. Howe Institute, set
out what he sees as the "ominous implications" of Canada's aging workforce in
a research paper he presented at the annual conference of the Canadian
Economics Association, held at Carleton University.

His paper, titled "Slowing Down With Age," says that the aging workforce
will have negative effects on "productivity, labour and capital growth," which
are the three broad historical forces of economic expansion.

Mr. Guillemette projects that output will have to grow at a much faster
rate in the coming decades "if we are to maintain past rates of growth in our
living standards. "More precisely, annual labour productivity gains have to
increase by a third to maintain the historical rate of growth in our standard
of living."

But he argues that an aging workforce will have the opposite effect,
slowing the growth in both productivity and labour supplied. As well, he adds,
older people save less, making "fewer resources available to finance capital
accumulation."

In an interview, Mr. Guillemette said he did not have a full explanation
for the ways in which older workers hinder robust economic growth.

"People who are older tend to work a little bit less, maybe put in less
hours, or they retire, and that decreases labour input. Maybe older workers
tend to be more resistant to change and less flexible in adapting to workplace
practices. That may be what's going on when we look at an aging workforce and
productivity."

Mr. Guillemette did find a silver lining of sorts.

"We have a good decade ahead because baby boomers right now are in their
forties and fifties so they are at their peak productive years. As they move
through their forties and fifties we're going to have very high level of
productivity growth, maybe until 2010-2015," he said.

"But then, as they move into their sixties and they stay in the workforce,
then they start being affected by lower levels of productivity. When they
start to retire and the workforce becomes younger again, then the level of
productivity picks up again in 2030-2035."

However, Byron Spencer of McMaster University took a sunnier view of the
long-term outlook for economic growth, given Canada's aging population.

"We are not ones to engage in what has been called 'apocalyptic
demography'," he said in a paper co-written with Frank Denton, also an
economist at McMaster.

Despite all the hype about population aging, Mr. Spencer says in the paper,
"ratios such as dependent population (elderly plus children) to working age
population are unlikely to rise in the next several decades above the levels
seen in the 1950s and 1960s when there were such large numbers of baby boom
children in the population."

In his remarks during the presentation, Mr. Spencer added, "We coped with
the baby boom when it was young, we can cope when it's old."

He also said that demographic forecasting is "an uncertain business" at
best.

"Nobody forecast the arrival of the baby boom, or that it was coming to an
end."

The Canadian Economics Association has a membership of about 1,400 academic
economists in Canada.

Edition: Final
Story Type: Business
Length:
546 words