"Summary of the Nova Scotia Demographic Research Report A"
Summary of the Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 Table of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Where We Are . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Profile: Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Profile: Labour Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.3 Profile: Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.4 Profile: Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.5 Profile: Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2 Where Are We Going? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.1 Base Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.2 Alternative scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3 Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3 What Should We Do? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.1 Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.2 Increasing Participation Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.3 Migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.4 Fiscal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.5 Regional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Charts Chart 1: Nova Scotia, Births, Deaths and Natural Increase, 1971-2005 . . . . . . . . . . . . . . . . . . . 2 Chart 2: Nova Scotia, Net Interprovincial Flows, 1971-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chart 3: Nova Scotia, Age/Sex Population Pyramid, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Chart 4: Nova Scotia Labour Force (15-65) Age Population Projections, Base Reference Case and Statistics Canada Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Chart 5: Graphic Illustration, Nova Scotia Labour Force (15-65) Age Population Projections, Base Reference Case and Statistics Canada Scenarios . . . . . . . . . . . . . . . . 10 Introduction D emographics, defined as the physical characteristics of a population such as age, gender, education, family size and location, has an important impact on society, and by extension, have an important impact on government policy which seeks to achieve broad societal goals. For planning purposes, it is necessary to understand both the demographic characteristics of today as well as characteristics of the future population. It is well established that Nova Scotia has a decreasing rate of population growth and that its population is “older” than the Canadian average. The question is how do those and other demographic factors impact Nova Scotia. A project was undertaken within the context of the Skills Nova Scotia framework and supported by the Deputy Ministers Committee on Workforce Skills to identify the demographic changes that will take place over the next 20 years. The project was to assess the impact of demographic change on Nova Scotia society, economy and the labour market, and identify policy options to deal with these challenges and opportunities. As a reflection of the widespread interest in the impact of demographics on the “business of government”, the Steering Committee for this project consisted of members from several different provincial government departments and agencies as well as Service Canada. The outcome of this project was The Nova Scotia Demographics Research Report: A Demographics Analysis of Nova Scotia into 2026 produced by Canmac Economics Ltd and associated subcontractors. This paper seeks to condense the Report in an effort to make it more accessible. It will follow the basic framework of the Report: “Where We Are”; “Where Are We Going;” and “What Should We Do?” The section “Where We Are” has been updated from the original document to reflect the latest Statistics Canada releases. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 1 1 Where We Are In order to properly understand what the future demographic changes might be, it is necessary to understand where we are now and key trends that got us here. 1.1 Profile: Population According to Statistics Canada, the July 1, 2006 population estimate of Nova Scotia’s population was 934,405 (a 0.2 per cent decline from the previous July). Nova Scotia’s population growth has been slowing, and in four of the last ten years, population was lower than the previous July 1 estimate. Population estimates are based on census information adjusted by data collected in the time period between each census: recorded births (+); deaths (-); immigration (+); emigration (-); non permanent residents (+/-); and net interprovincial migration (+/-). Some data sources are more complete than others. Often it is necessary for Statistics Canada to adjust past population estimates (residual deviation1) after each census. Births minus deaths are known as “natural increase”. As illustrated by Chart 1, natural increase has declined sharply since the beginning of the 1990s to 171 people in 2005-06. Much of the decrease stems from the decline in the number of births since the group of women Chart 1: Nova Scotia, Births, Deaths and Natural Increase, 1971-2005 of childbearing age (15-49) is no longer large enough to mask the ■ Natural Increase ■ Deaths ■ Births decrease in total fertility rate 15,000 (TFR), the number of children per women aged 15-49. Nova Scotia’s 12,000 TFR decreased from 1.85 in 1976 to 1.36 in 2001 and has since 9,000 increased to 1.4 in 2004. It is persons uncertain if this increase will be maintained or if the census 6,000 information will readjust the number. Replacement rate for 3,000 a population is 2.1. Despite the increase in life expectancy, the 0 number of deaths has increased 1971-1972 1973-1974 1975-1976 1977-1978 1979-1980 1981-1982 1983-1984 1985-1986 1987-1988 1989-1990 1991-1992 1993-1994 1995-1996 1997-1998 1999-2000 2001-2002 2003-2004 2005-2006 as Nova Scotia’s population ages. year Source: Statistics Canada, Annual Population Estimates 1 Residual deviation is an adjustment made to past population estimates between censuses to reflect the population estimate of the latest census including adjustment for net undercoverage. 2 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 Immigration outpaces emigration so that the net international migration flows have remained positive. In the last 15 years, net international migration has ranged from a low of 553 in 1993-94 to a high of 1,098 in 2000-01. Contribution to population growth by the non-permanent residents (NPRs) varies, influenced in large part by economic conditions. In the last 15 years, the contribution of NPRs to population growth has ranged from -414 in 1999-2000 to 1,525 in 2001-02. The most volatile element of population growth is net Chart 2: Nova Scotia, Net Interprovincial Flows, 1971-2005 interprovincial migration. ■ Net Interprovincial Migration ■ Linear Trend Interprovincial flows in and out of the province which range from 5,000 15,000-20,000 each way over the 4,000 past five years far outpace other 3,000 population flows. Chart 2 illustrates 2,000 this volatility while showing that net persons flows have generally been negative 1,000 since the early 1990s. These flows 0 are both difficult to predict and to -1,000 estimate. Statistics Canada uses -2,000 child tax benefit information updated by taxfiler data for its -3,000 estimates. -4,000 1971-1972 1973-1974 1975-1976 1977-1978 1979-1980 1981-1982 1983-1984 1985-1986 1987-1988 1989-1990 1991-1992 1993-1994 1995-1996 1997-1998 1999-2000 2001-2002 2003-2004 2005-2006 In terms of net interprovincial population flows, the population year losses are found in the younger Source: Statistics Canada, Annual Population Estimates population. For 11 of the last 15 years when net interprovincial migration has been negative, it has been negative for 12 years for the 0-14 age group; 14 years for the 15-19 age group; and it always been negative for the 20-29 age group. Results were mixed for the 30-44 age group (8 years of net losses), becoming more positive for the 45-54 (13 years of net gains) and there have always been net gains for the 55 and older population. Population flows have been strongly influenced by Alberta’s demand for labour over the last several of years and this has resulted in the negative flows in the 30-54 age group. These population movements along with intraprovincial migration have meant that there have been population shifts within Nova Scotia. Nova Scotia has followed the worldwide trend towards increased urbanization with the Halifax Regional Municipality having the strongest growth (8.3 per cent between 1996-2005). Counties within a 90-minute commute to downtown Halifax have shown stable or slight population growth. Eleven counties have experienced declines ranging from 1.7 per cent in Yarmouth County, to 17.2 per cent in Guysborough County. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 3 An important component of Chart 3: Nova Scotia, Age/Sex Population Pyramid, 2006 demographics is the age structure ■ Female ■ Male of the population. Chart 3 provides an illustration of the age 90+ structure of the population by year 85 until age 90 when the remainder is 80 grouped together. The chart 75 highlights the most influential event in demographics of the past 70 century, the baby boom. The baby 65 boom marked an increase in 60 fertility following World War II. Statistics Canada has defined it as 55 the population born between 50 1946 and 1965, the 41-60 age group on this chart. age 45 40 The effect of the ageing of the 35 baby boom, the lower fertility 30 rates and the net out-migration 25 of the young has exacerbated the ageing of Nova Scotia’s 20 population. The median age 15 (exactly half the population is 10 younger and half is older) for Nova Scotia’s July 1, 2006 5 population increased 2.5 years 0 from 2001 to 41.0 years, the 10,000 8,000 6,000 4,000 2,000 0 2,000 4,000 6,000 8,000 10,000 persons second-highest in Canada. Among the provinces, Alberta has the Source: Statistics Canada, Annual Population Estimates lowest median age at 35.5 years but Nunavut is lower still at 23.2 years. For Nova Scotia in 2006, 22.5 per cent of the population is aged 0-19; 62.9 per cent is aged 20-64; and 14.6 per cent is aged 65 and older. The 2001 Census provides a further profile of the population. Females comprised 51.6 per cent of the population while males comprised 48.4 per cent. As an indication of migration, approximately 4.6 per cent of our population in 2001 were immigrants while another 16.6 per cent of our population were Canadians born in another province or territory. In the 2001 Census, 34,524 individuals identified themselves as a visible minority (Aboriginal population not included), which is just under four per cent of Nova Scotia’s population. At approximately 57 per cent, the largest visible minority group is African Nova Scotians (identified as Black in the Census). They form 2.2 per cent of the provincial population. The population growth of African Nova Scotians between the 1996 and 2002 censuses (8.6 per cent) helps explain the younger population profile. 4 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 In the 2001 Census, 17,010 or approximately two per cent of Nova Scotians identified themselves as Aboriginal, identifying with at least one Aboriginal group (North American Indian, Metis or Inuit) and/or reported being a Treaty Indian or a Registered Indian as defined by the Indian Act of Canada and/or reported they were members of an Indian Band or First Nation. There was 37 per cent growth in this population from the previous census but some of this increase reflects an increase in the number of people choosing to identify themselves as Aboriginal. The Aboriginal population is much younger than the general population. In 2001 approximately 50 per cent were under 25 years of age as compared to 31 per cent for the general population in 2001. In 2001, 152,210 persons (approximately 17 per cent of Nova Scotians) lived with some form of disability according to the Participation and Activity Limitation Survey (PALS). This is the highest per cent of any province and is higher than the national average of 12.4 per cent. This higher rate is related to age of the population because so many disabilities are age-related and occur among seniors. 1.2 Profile: Labour Market Demographics has a significant impact on the labour market. Before examining the labour market it would be useful to have an understanding of some of the key terms. The source population for the labour force is defined as population 15 and older. The labour force is defined as the population 15 and older who are either employed (employed) or actively seeking employment (unemployed). More limiting definitions of labour force are also used such as working age labour force, people 15 to 64 who are either working or looking for work. Statistics Canada’s Labour Force Survey, from which most labour force statistics are drawn, eliminates people in the territories, full-time members of the Canadian Armed Forces, residents of institutions (i.e., prison, long-term care) and people living on reserves. There are three commonly-used ratios which are expressed in percentage terms: participation rate is the ratio of labour force to source population; unemployment rate is the ratio of those who are unemployed to labour force; and employment rate is the ratio of employed to labour force. Participation rates in Nova Scotia are below Canadian rates (63.6 per cent versus 67.2 per cent). There is a gender difference in the rates, with participation rates for females (58.9 per cent in 2005) being below male participation rates (68.6 per cent). In the past, overall participation rates have grown with the increasing participation of women. In the future, the participation rate will be increasingly affected by the ageing of the population as the people leaving the labour force through retirement will not be replaced in the same numbers by new entrants, but the retirees remain in the source population until death, putting downward pressure on the participation rate. There is a considerable gap in 2005 participation rates across the Province ranging from 55.1 per cent in Cape Breton to 69.2 per cent in Halifax Regional Municipality. Data indicate that regions with higher employment rates have higher participation rates. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 5 1.3 Profile: Other In 2003, an International Adult Literacy and Skills Survey was done in Nova Scotia testing Nova Scotians 16 and older in prose literacy, document literacy, numeracy and problem-solving. The population was categorized into five levels, with one being the lowest. The Organisation for Economic Co-operation and Development (OECD) has indicated that level three is the minimum threshold for working in a knowledge-based economy. That threshold was met by approximately 55 per cent of Nova Scotians for prose literacy, 53 per cent for document literacy, 44 per cent for numerical literacy and 26 per cent in problem solving. 1.4 Profile: Economy In terms of future projections, a solid understanding of the economy is crucial. Nova Scotia is a small open economy. In non-technical terms there are not enough of us to provide a large enough market for efficient production. We need to export our goods and services to achieve economies of scale and to bring wealth into our province. Despite the goods-producing sector providing the larger share of exports, Nova Scotia is a service-based economy. In terms of Gross Domestic Product (GDP), services comprise approximately 77 per cent of the Nova Scotia economy in terms of output. The largest sectors are: Finance & Insurance, Real Estate & Renting & Leasing & Management of Companies2; Public Administration; Manufacturing; and Health Care & Social Assistance. The service sector accounts for 79.4 per cent of Nova Scotia employment (military not counted). The largest sectors by employment are: retail trade; health care & social assistance; manufacturing; and educational services. 1.5 Profile: Government Government has recognized and is beginning to respond to demographic factors. Demographics form parts of overarching government policy in Opportunities to Sustainable Prosperity, Community Development Policy and The Skills Nova Scotia Framework. It is highlighted in The Strategy for Positive Aging released by the Senior Citizens Secretariat and in the creation of the Office of Immigration. Individual departments such as Health, Health Promotion and Protection and Education are aware of the challenges it presents for their departments and have been working to deal with them. Beyond the societal implications affecting the business of government, government also realizes that it will face an ageing workforce and a tightening labour market. 2 This include a substantial component of inputed rent - a monetary value placed on the “rental value” of owner-occupied dwelling. 6 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 Demographic changes will also affect fiscal policy. Over time, Nova Scotia has become more reliant on its “own source” revenues. In 1981-1982 federal transfer payments provided 46.7 per cent of Nova Scotia revenues. In 2005-06 according to Public Accounts, federal transfer payments were 36.2 per cent. Of the 63.8 per cent of provincial own source revenue in 2005-06, the largest component was personal income tax at 39.2 per cent, followed by Harmonized Sales Tax (HST) at 26.4 per cent and corporate income tax at 9.0 per cent. On the expenditure side, the three largest expenditures by function are: health; education; and debt serving but there have been some share changes. Comparing the finalized 1989-1990 numbers with the forecast 2005-06 functional expenditures show that health has grown from 27.7 per cent of expenditures to 39.8 per cent, while education has dropped from 23.2 per cent to 19.4 per cent and debt servicing charges declined from 16.3 per cent to 14.2 per cent. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 7 2 Where Are We Going? 2.1 Base Case Canmac developed a base case with alternative scenarios using its demographic-econometric model. For the base case the following assumptions were used: • Zero net migration (international and interprovincial); • Age-specific fertility and births rates for 2003-2004 would remain constant throughout the period; • Nova Scotia productivity growth will average 1.0 per cent annually; • the Canadian and American economies will grow an average of 2.5 per cent annually; and • Government and business will not take a strong policy response that would affect this base case. The assumption of zero net migration was deemed reasonable by the Steering Committee. During the 1990s when Statistics Canada’s residual deviations were applied to net migration, they helped to wipe out any gain from net migration. The implication of this assumption is that Nova Scotia is dependent on natural increase for population growth. Canmac makes the point that even if the fertility rates increase, the effect on the labour force will be minimal as most of the people in the labour force of 2026 have already been born. The continuation of the historical trends for productivity and economic growth does not mean that the economy will not have challenges or undergo structural change. The rise of the Indian and Chinese economies will provide both challenges and opportunities to Nova Scotia. It is assumed that Nova Scotia will continue its transformation to a knowledge-based economy, recognizing that the reliance on natural resources industries will not provide sustainable growth in the future. The results from the base case are: • Population decline. Between 2001 and 2026 total population will decrease 4.0 per cent, to 894,777 in 2026. • Population ageing. The senior population will grow by 70.8 per cent between 2001 and 2026 to 217,877 forming 24.3 per cent share of the population. The primary and secondary school age (ages 5-18) population will decline 31.4 per cent to comprise 12.9 per cent of the 2026 population. The post-secondary age (ages 19-24) population will decline 29.8 per cent to 51,207 or 5.7 per cent of the population. 8 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 • Labour force shrinkage. The Canmac model projects that the labour force would reach its peak in 2008 and then continue to decline throughout the period. This decline is a function of the 12.6 per cent decrease in the population of working age (15-64) from 2001 to 2006. Its 2026 population share is projected to be 62.3 per cent. Although participation rates of certain gender and age groups are projected to increase, the overall participation rate estimated by the model begins to decline in 2006, largely a function of age structure and the decline in working age population. • Transitional period ending in 2016. The model results of a 1.8 per cent compounded annual growth in GDP from 2003 to 2016 increase employment, resulting in an unemployment rate of 2.2 per cent (below the natural rate of unemployment).3 According to economic theory, unemployment below this rate puts an upward pressure on wages. The model would suggest that Nova Scotia runs completely out of available labour supply in 2018. Realistically, it means that the “business as usual” way of doing things is not an option. The long established policy of finding jobs for people will need to become finding people for jobs. 2.2 Alternative scenarios Statistics Canada’s projections The Canmac paper presented Scenarios One to Six of Statistics Canada population projection scenarios. In 2026, the Statistics Canada’s population projections ranged from 944,700 to 1,010,800, all above the 894,780 of Canmac’s base case. This was largely a function of migration assumptions except Scenario Six’s higher assumed fertility rate also swelled growth. However, the migration assumption served to increase the 65 and older population, meaning that all population projections show a similar pattern of decline in the working age population (15-65) after 2011. Chart 4: Nova Scotia Working (15-64) Age Population Projections Base Reference Case and Statistics Canada Scenarios Canmac Statistics Statistics Statistics Statistics Statistics Statistics Economics Canada Canada Canada Canada Canada Canada Year Reference Case Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 2006 654.06 655.3 654.4 655.4 655.8 654.8 655.4 2011 651.18 658.2 654.7 659.5 663.3 657.1 660.5 2016 627.49 641.8 636.3 645.4 652.5 640.4 648.7 2021 595.60 619.1 611.7 625.5 636.4 617.6 631.7 2026 558.06 589.2 583.5 601.4 615.9 590.5 613.1 Source: Canmac Economics Ltd., Statistics Canada (2005c) 3 The natural rate of unemployment is unemployment related to frictional (people moving between jobs) and structural causes (e.g., people not living in an areas where there are jobs available or not having the right skills for available jobs). Conversely, it can be referred to as full-employment. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 9 Economic adaption scenarios Chart 5: Graphic Illustration, Nova Scotia Working (15-64) Age Population Canmac developed three Projections, Base Reference Case and Statistics Canada Scenarios alternative scenarios on how the 700 economy adjusts to the tightening labour market as a situation where 650 labour demand exceeds labour supply is not feasible. 600 Scenario 1 - Low Growth Scenario. persons The assumptions of 1.0 per cent 550 productivity growth and no policy reactions by stakeholders are 500 maintained. As labour supply 2006 2001 2016 2021 2026 tightens, wages will increase as year employers compete for labour. Canmac Economics Reference Case Statistics Canada Scenario 1 This will result in the Province Statistics Canada Scenario 2 Statistics Canada Scenario 3 Statistics Canada Scenario 4 Statistics Canada Scenario 5 becoming less price competitive Statistics Canada Scenario 6 in its products. With an open economy like Nova Scotia’s, Source: Canmac Economics Ltd., Statistics Canada (2005c) market share will be lost in both its domestic and export markets. The economy will contract, labour demand will shrink and the real wage rates will move to their original levels. According to Canmac, under this scenario, average annual GDP growth from 2011to 2026 is 0.5 percent, less than the historical rate of 2.0 per cent. Unemployment rates will continue to fall as employment shrinkage is outpaced by labour force decline. Scenario 2 - Modest Policy Success Scenario. Policy changes result in productivity increases rising to 1.25 per cent, a positive net migration of 2,500 annually and by 2016, the participation rate is approximately four percentage points above Scenario One's 2016 rate and this gap is maintained. However, none of these policy changes begin to happen until after 2011. Employment growth continues throughout the period. Labour force which had been shrinking starts to grow after 2011 then begins to shrink sometimes after 2016. The Canmac model indicates that the economy grows on average 1.6 per cent annually in the 2011 to 2026 period but with unemployment rates staying above 3.0 per cent until 2024. Canmac suggests that the Alberta experience would indicate that 3 per cent is the natural rate of unemployment.4 Scenario 3 - Highly successful policy scenario. Policy changes result in productivity growth increasing to 1.5 per cent annually, annual net migration of 3,500 and by 2016, the participation rate is 6.1 percentage points above Scenario One's 2016 rate, and this gap is maintained. Again, policy results are not seen until after 2011. Employment growth continues throughout the period. Labour force does show some growth after 2011 but begins to shrink sometime after 2016. Nova Scotia can achieve 2.0 per cent annual growth in the 2011 to 2026 period determined by export demand. Unemployment rates remain above 5.0 per cent until 2025. 4 It could be argued that given structural factors in the Nova Scotia economy, that the natural rate of unemployment in Nova Scotia is higher than 3 per cent. 10 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 2.3 Implications The baby boom group, now aged 41- 60, will continue to have a significant impact on the economic, social and cultural fabric of society. Over the coming decade, the older members of that group will be entering retirement with lower incomes, while the younger members will be entering their most productive and high income period. As mortgages are retired, children leave home, and retirement begins, the boomers will face choices about different housing options and different spending patterns (both for money and time). The ageing of this large group also has implications for health care. An analysis of data on major diseases indicates a marked increase after age of 60. As well, the use of physicians’ services increases above the average at age 55 and continues to increase. Demands of this group will continue to offer both challenges and opportunities for the private sector, the government and the not-for-profit sector. Before accounting for demographic effects, the Canmac model projected a modest surplus in the provincial fiscal position. Demographics will impact the provincial fiscal situation in a number of ways5. Revenues from personal income taxes are related to the level of individual earned (employment) and unearned (e.g., interest, dividends, pensions, transfers, etc.) income. If post-retirement income is less than pre-retirement income, people will pay less income tax which has fiscal implications. Expenditure areas dominated by a younger population, such as education, offer an opportunity for expenditure reduction. However, greater expenditure pressures will be on services oriented toward an older population such as primary health care and pharmacare as well as a reorientation of other services to serve an ageing population. It must be recognized that age is not the only factor in health care costs, technological changes (e.g., use of drugs for treatment, new diagnostic equipment, etc.) are a significant cost driver. Canmac had estimated that under present growth trends of health expenditures, its share of the budget will be well above half of the budget by 2026. Canmac notes the demographic impact on the Province’s fiscal position will be the result of management decisions. With the increase in the portion of the senior population, it is important to examine attitudes about older people that limit their full participation into “mainstream” society. Pressure to have seniors remain in the active labour force will come both through labour tightness and from seniors themselves as they seek to save sufficient funds to maintain a standard of living for retirement that in many cases is longer than their parents’ generation. Research has shown that despite some perceptions to the contrary, there is no significant difference between the job performance of older and younger workers; that is, the variations of job performance within each group were larger than the variations between them. 5 Canmac did not mention that declining population as well as relative share of Canadian population will have a negative impact on federal transfer payments. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 11 International comparisons would suggest that there is room to increase involvement in the labour force of older workers even before the age of 65. In 2005, the participation rate for Nova Scotians aged 50-64 was 61.8 per cent. For the same age group in 2004, USA, Japan, Denmark, Norway, New Zealand, Sweden, Switzerland and Iceland had participation rates that ranged from a low of 70 per cent in USA to a high of 90 per cent in New Zealand. The participation rate for Nova Scotians aged 65-69 was 14.1 per cent in 2005. Taxation, hiring and human resource management policies would need to adapt to encourage older workers to remain in the work force. Volunteering is crucial for the not-for-profit sector. Seniors makes a substantial contribution to volunteer hours. Canmac, by applying existing rates of volunteers by age groups to population projections by age groups, were able to project an increase in volunteer hours of 6.6 per cent in the base case to 19.1 per cent in the Statistics Canada’s Scenario Six for the 2006-2026 time period.6 However, it must be recognized that the pressure to increase hours and/or remain in the workplace for the population 50 and older could reduce the volunteering rates among the groups traditionally most inclined to volunteer. The cautious conclusion Camac reached was that Nova Scotia cannot assume that the ageing population structure will produce the level of volunteer hours that past trends suggest. Migration, the trend towards smaller families and the raising ratio of seniors to prime working age population7 could mean that the historical model of families as the primary care-provider for elder family members may not be sustainable, placing pressure on public and private institutions. The move toward family-friendly workplaces not only needs to recognize the amount of two parent families in the labour force with young children, but also needs of individuals to provide elder care.8 Delayed or postponed adulthood contributes to the pressure of the middle aged as there has been a doubling of young adults in their 20s still living at home in the last three decades. Implications of delayed adulthood included delayed entry into full-time employment (wealth implications) and lower fertility rates. In a tight labour market, the participation of females is desirable but it has implications for family and society. Research has indicated that higher female labour participation need not reduce fertility with the right policy mix. The results of policies undertaken by the Quebec government since the 1988 seem inconclusive as the fertility rate stabilized at about 1.6 in the 1991-1998 period and then drifted toward 1.5 by 2003. The key may be a multi-faceted policy to address the needs of families. 6 The 2006 figures are based on the Canmac population projection. 7 In 2001 there were 3.7 persons age 25-59 for every senior (65 and older). In 2006, there is projected to be 1.9 persons age 25-59 for every senior. 8 Research conducted by the Healthy Balance Research Program indicated Nova Scotians, primarily women do unpaid caregiving than anywhere else in the county. 12 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 Despite their increased participation in the paid workforce, females continue to be primary caregivers for children and seniors. Without additional support, the demands on women for unpaid care giving will reduce their personal quality of life and their ability to contribute meaningfully to the market economy. In economic terms, the current employment profile of women shows continuation of economic disadvantage. Women are more likely to be working part-time, have interrupted work lives, and to be clustered in a relatively few occupational categories. The results are women are less likely to be eligible for or will earn less pension benefits than men, they are likely to make smaller RRSP contributions, and they earn less. This means that unattached senior women, often widows, will continue to have high poverty rates and will need more government assistance. Population projections indicate that women over 65 will increase significantly. The policy challenge will be on two fronts: to provide income and other supports for the older women; and to ensure the situation does not repeat itself for women just entering the workforce or are early in their careers. With a tightening labour market, social inclusion of marginalized groups is no longer an equity or moral initiative, it becomes a economic imperative, part of the response to a tightening labour market. It was previously discussed that the African Nova Scotian and Aboriginal populations have both grown more quickly and are younger than the population as a whole. Both groups have lower levels of education, lower labour force participation rates and lower incomes than the population as a whole. Persons with disabilities also represent a marginalized group. Disability rates increase with age but 9.9 per cent of Nova Scotia adults age 25-44 and 24.1 per cent of 45-64 olds in 2001 reported a disability. Levels of education, labour force participation and incomes tend to be lower that those of the general population. The range and type of disability varies. Demographic impacts also have a regional dimension. As a general theme, the more rural areas will be more negatively impacted by demographic change than their urban counterparts, and rural areas adjacent to urban centres. Intraprovincial population flows will continue. By 2026 according to the base case, Halifax Regional Municipality will represent nearly half of Nova Scotia population and when the four other counties (Lunenburg, Kings, Hants, Colchester) within a 90-minute commute of downtown Halifax are added with it, they represent almost 70 per cent of the population. International migration appears to be more difficult to attract to non-urban areas. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 13 These population flows, especially youth migration, result in the rural areas tending to have a higher percentage of seniors. Productivity improvements, particularly in government services, could include centralization of service functions, furthering impacting on the quality of life in rural areas. In summary, the base case indicates a shrinking population. For all scenarios, the working age population declines after 2011. If the Nova Scotia economy adapts to changing economic conditions and maintains its historical growth pattern fueled by export demand from the growing Canadian and American economies, the labour market will get increasingly tight. By 2016, the unemployment rate will be below the natural rate of unemployment and wage pressures will be felt. If businesses and government do not make policy changes to deal with the pressures, increased wages will result in products being uncompetitive. The economy will contract - employment will decline and real wages will decrease. Should this happen, it will put the fiscal situation of the Province on the revenue side under pressure. Meanwhile the growing senior population, fueled by the ageing baby boom generation, will add to fiscal pressure in terms of health-related expenses and other services related to seniors. The traditional patterns of having families provide elder care may not be sustainable because of the increasing ratio of seniors to prime working age population along with other demographic factors (smaller family size, mobility). Support will be needed from the public and private sector, including accommodation in the workplace. The growing seniors population also represents opportunity, a non-traditional supply of labour, the possibility of increased volunteer hours and new business opportunities. The demographic changes will be significantly felt by women who despite their increased participation in the labour force still are the primary caregivers for child and elders. Decisions made to accommodate these pressures (part-time jobs, interrupted labour force participation, etc.) and occupational clustering have resulted in women having less income, less pension benefits, and smaller RRSP contributions than men. This has huge implications for women in their elder years and also for government as it seeks to provide income and other supports. With an increase in the 65 and older female population, these pressures will continue to grow. Tightening labour markets will force social inclusion in a way that moral arguments seemingly could not. Disadvantaged groups such as Aboriginals, African Nova Scotians and persons with disabilities represent a valuable source of labour and there will be more pressure to fully integrate the marginalized into Nova Scotia society and economy. These demographic pressures will be felt unevenly across Nova Scotia. Migration patterns will continue to shrink populations of counties further from Metro Halifax. The number of seniors will be higher in rural areas. There will be continuing urban-rural tensions over policy decisions, some of which will be seemingly incompatible (e.g., rural youth retention vs. strategic investment in “hub cities”). 14 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 3 What Should We Do? The previous section indicated not implementing policy to deal with demographic changes, on the part of both the public and private sector, would result in a low growth economy that would worsen the fiscal situation of the Province. It was made clear that “business as usual” is not an option. This chapter of the Report was designed to set forth a policy roadmap. A complete list of policy suggestions from the Canmac Report is found in Appendix A: Compilation of Policy Suggestions from the Nova Scotia Demographic research project. For each of the three policy areas, Canmac identified the major objective: • Economic/labour market - maximize economic welfare and prosperity, i.e. grow the economic pie; • Fiscal - ensure the public needs of citizens are met in a fiscally responsible manner; and • Social - ensure that all citizens share in the economic progress, i.e., share the economic pie. These policy areas are interrelated. Actions to achieve one of these objectives can reinforce policy success in another area. However, in some cases the actions are contradictory, policy success in one area can imply reduction of success in another area. In order for government policy to be effective it must adopt a holistic approach. As part of the holistic approach on the part of government, and indeed the larger society, life- course flexibility is the key to ensuring an appropriate policy environment. This means designing policy with more choices for the individual and ensuring better family friendly workplace policies. As well, effective policy formulation must include its gender/diversity analysis. The key to achieving these goals is that the economy has to grow, which removes some fiscal pressure and makes sharing the pie easier. The key to economic growth in terms of demographics is labour force development. This issue is more than increasing the size of the labour force; it is also about improving the quality of the labour force. Management of human resources or human capital, both in the context of the Province and of the firm will become the number one strategic planning issue in the next decade. The Canmac Report indicated that there are three policy levers to use to address the management of human resources: • Productivity; • Labour Force Participation; and • Migration. 3.1 Productivity Labour productivity is the [value of ] output produced per unit of labour input (employee, hours worked, etc.). Growth in productivity allows wage levels to rise on a sustainable basis. In Nova Scotia, improvements in productivity must occur in both the public and private sector and in the goods and services sector. Growth in productivity can occur through any combination of three sources. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 15 • Capital deepening, increase in capital services per unit of labour. It is investment in capital (e.g., machinery such as computers, precision cutting tools) that enables workers to become more productive. • Labour quality, labour input per unit worked. This reflects a better educated/trained and more experienced work force. • Total factor productivity, output growth not accounted for by growth in inputs. It can include technological change and management changes. The benefit of pursuing a high-quality labour force strategy is not only for productivity but it enables people to be employed in high-wage, high-skill jobs. The pressure to improve the quality of the labour force is compounded by a combination of changes in the economy and existing skill level. As the economy becomes increasingly knowledge-based, which includes the ability to adopt and use different equipment and processes in what is generally seen as “traditional” industries, there is greater need for the “Level 3” skills. However, as indicated by the 2003 International Adult Literacy and Skills Survey there is considerable room for improvement in literacy, numeracy and problem solving skills. Life-long learning must focus not only on workplace training but also on the underlying need for literacy and numeracy skills. As well, raising the portion of students, our future workforce, to at least “Level 3” is essential. It is critical that middle-aged and older people in the labour force group have easy access to education/education enhancement and training/re-training. A key to productivity growth is innovation, and for small open economies such as Nova Scotia this innovation is driven by diffusion (access to) and adoption of technology (DAT). For companies which have head offices elsewhere, new technologies are often centrally adopted and then implemented, through training etc., in their Nova Scotia operations. DAT is more problematic in the public sector where the process can be irregular. For local business which do not have good connections to innovations elsewhere and/or the managerial skills to effectively adopt these ideas, DAT is poor. 3.2 Increasing Participation Rates Labour force participation rates can be increased by: • increasing the participation rate of existing key traditional segments of the population, primarily ageing workers already in place; and • increasing participation rates of population segments that have historically low participation rates. The base case already assumed increasing female participation rates in the prime working age groups while the male rate remain relatively stable, recovering from the dip in the 1990s. Participation rates show a sharp decline with age, even before the “official” retirement age. The participation rate at 36.0 per cent for people aged 60-64 was less than half that for people age 50-54. In some cases, retirement was involuntary (e.g., job losses, poor health). 16 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 A number of existing policies serve to depress employment of older workers: early retirement programs; pension rules; and mandatory retirement. Attitudes regarding older workers also affect their working career as some employers are reluctant to train, viewing older workers as having a shorter working life. Changing the above policies, adopting an unconventional mix of pension benefits and work, improving job flexibility and encouraging movement of the retired into self-employment will help increase the participation rates of older workers. As well, in an effort to recognize the increasing levels of retirement we need to improve workplace mentoring. As indicated earlier in the paper, the Aboriginal and African Nova Scotian populations have lower rates of participation in the labour force. Policies to encourage increased participation will be complicated. As Canmac noted, these policies will require a multi-faceted approach involving education, community services, health and economic development programs. In the larger community, anti-racism education and increasing cultural competency will need to be complementary actions. Policies to increase the participation rates of persons with disabilities will include increasing education levels where needed, changing attitudes in the workplace, providing improved adaptive technologies and, where appropriate, provide affordable and accessible transportation. 3.3 Migration Migration to Nova Scotia can come either through interprovincial or international (immigration) sources. Immigration is a shared responsibility with the federal government and there is the constraint of federal policies and administration. As well, Nova Scotia must compete with other more economically attractive provinces for immigrants like British Columbia, Alberta and Ontario. Attracting interprovincial migration may require special incentives. These policies are not without their disadvantages, including impact the on relationships with other provinces and attractiveness to retirees who may not enter the labour force, thereby defeating the purpose of the program. Successful migration programs will require proactive efforts at the community level. Two examples were provided (Halifax Regional Immigration Strategy and the Colchester project to return youth to rural areas) with the recommendation that the initiatives be monitored for their potential as key components of future immigration policy. Canmac judged that productivity is the most effective policy thrust. Although increasing the labour force participation of marginalized groups is both socially and economically desirable, it is not enough.9 A common theme is the importance of labour market training. It is an integral part of successful technological adoption, it increases labour force quality and it increases the participation rate or 9 Editorial Comment – Although there is considerable room for increasing the participation rate of older people, improvement will not be easy because of a number of factors (underlying educational attainment, health issues, pension issues that would require federal policy changes, location, etc.). Increasing the rates will help but it is more in the nature of easing the transition as people will age and eventually leave the workforce. The migration lever will prove difficult. The population flows in this area are the largest and the policy must increase the inflows and/or decrease the outflows in an era when individual’s movement cannot be constrained. Nova Scotia has to compete both nationally and internationally for migrants as many jurisdictions face the same issues as Nova Scotia. At the moment, Nova Scotia is not viewed as having the same economic opportunities as other jurisdictions within Canada. Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 17 marginalized groups including immigrants, who often need specialized training to support language requirements. Response to these demographic changes may require an examination of work and definition of job requirements. Part-time work which may offer part of a solution should be examined in light of benefits, pension and union requirements, among other factors. Redefining job responsibilities may include shifting carefully defined responsibilities from high-credentialed to low-credentialed positions. Canmac noted that effectively dealing with the demographic impact will require a combination of training initiatives, demonstration and pilot project, research and policy change. 3.4 Fiscal On the expenditure side, Canmac identified the policy challenges as increasing productivity and containing health expenditures. These will have to occur in an environment where government will be facing its own human resource challenges. On the revenue side Canmac noted that the Province’s own source revenue growth is constrained by the economy and the need to remain competitive. On the subject of federal transfers it was suggested that these transfers should include an age-related factor, provinces with larger senior populations should have this factor reflected in their transfers. As well, the Province should argue for advanced funding transfers to reflect future problems of pending demographic shifts. 3.5 Regional Demographic impacts will be felt unevenly as population shifts tend to favour urban areas, which have a significant impact rural economic and social development. This is one area where policy can have contradictory results. A number of provincial policies initiatives such as migration can be more difficult to achieve in rural areas. Other initiatives such as productivity improvements that include centralization could have more of a negative impact on rural areas. It is challenging to develop regional development policy so that there is not a tradeoff between economic prosperity and other social goals.10 Canmac noted that there is a need for consistent support over the next decade for community development organizations and programs that may be able to promote the creation of business ventures that offset rural out- migration. In conclusion to quote the last paragraph of Canmac’s report: “Canmac concludes that if Nova Scotia continues as it has in the past, when it has had to deal with long- term labour surplus, it will find itself in a fiscal and economic upheaval. However, future challenges are solvable - Nova Scotia can meet the challenges of the ageing population. Greater efforts to increase productivity above historic levels, more flexible work arrangements to increase participation rates and more success in attracting in-migration will create an environment where our society will be fully employed and prosperous into the next generation (pg. 128-129). 10 Canmac noted that although education levels have been rising in rural Nova Scotia there is a residue of lower literacy and numeracy skills in these areas which can result in structural unemployment, even though there are labour shortages. Labour force development programs could be used to achieve both social and economic goals in this area. 18 Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026