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Executive Summary
The Canadian economy is under constant pressure to adapt — and it does so remarkably well. As the Panel writes this report, the Canadian dollar is at a 30-year high and unemployment rates are at 30-year lows. However, adaptation creates pressures — on businesses, on the people who work in these businesses, and on governments to provide the correct framework to allow this necessary adjustment to occur.
The Expert Panel on Older Workers was established as a response to two divergent pressures that threaten the high standard of living that Canadians are currently enjoying. First is Canada's changing demographics. The Canadian population is aging, and that will have significant impact on the Canadian economy and could reduce its growth potential. The second pressure is how to provide for those Canadian workers — in this case, older workers — who are displaced as the economy adapts.
The Minister of Human Resources and Social Development Canada established the Expert Panel on Older Workers on January 23, 2007. The Panel members were selected for their experience in studying policy issues. They comprised retired Senator the Honourable Erminie Cohen, who was appointed Chair; Bill MacKinnon, Chief Executive Officer and Senior Partner, KPMG Canada; Craig Riddell, Professor, University of British Columbia; and Diane Bellemare, Senior Vice President and Chief Economist, Conseil du patronat du Quebec. In the spring of 2007, Diane Bellemare resigned from her position with the Expert Panel. The government subsequently appointed Ms. Françoise Bertrand, President and Director General of the Fédération des chambres de commerce du Québec.
The Panel's task was to consider the current situation and future prospects of older workers, and to make recommendations to the government. Although a broad range of social and economic factors affects the situation of older workers, the mandate established a clear labour market focus. The Panel, after determining for the purposes of this study that older workers are those 55 years and older, established two overarching themes to guide its work:
- enhancing the labour market prospects of older workers; and
- supporting older worker adjustment, with special attention to the circumstances of displaced older workers.
The Panel started its examination with consultations to find out the level of awareness of Canadians on this topic and to hear what Canadians had to say.
The Consultations
The consultation process on older workers was both central and critical to the work of the Expert Panel. The consultations were aimed at hearing the concerns and issues confronting them, as well as the challenges facing employers, unions, governments and the many and varied organizations that represent individual Canadians and older workers. A discussion paper provided background on the labour market issues affecting older workers and initiated a dialogue with interested stakeholders. Meetings with provincial and territorial representatives were rounded out through consultations with interested stakeholders in the broader private, not-for-profit and other non-governmental sectors. The Panel met with academics whose work centres on labour market and workplace issues related to this target group. It also called on international experts to gain insight into what other countries are doing to address the issues of an aging labour force. Experts from the US also spoke about the dynamics of displaced workers in their country and the impact of policies designed to help them gain re-employment.
Through the consultations and submissions from all of these stakeholder groups, the Expert Panel was able to learn about the broader strategic issues confronting governments, the challenges and opportunities employers must address from a human resource management perspective, and the concerns and problems individuals face in their personal lives. The Panel was impressed with the knowledge and awareness of the issues of the participants; inspired by the passion with which participants expressed their concerns; and struck by the extent to which many of the participants articulated thoughtful, reasoned policy options and alternatives.
What the Panel learned is that, like the country itself, views diverge on how to address these two broad themes both within and between provinces and territories and across the different stakeholder groups.
A few things were obvious. Canadians for the most part understand and accept the need for economic adjustment. They recognize the need to support diverse forms of learning and training activities during the entire course of a career. They also believe that those closest to the problems have the best chance of solving them.
There was a large amount of support for improving the participation of older workers in the labour market. One of the major barriers to engaging them in the labour force was thought to be myths about the need to retire early in order to more fully enjoy life and to make room for the younger generation. The Panel found that many older workers still have years of potential contributions to the labour force, are healthier, live longer and are more productive than previous generations. The psychology developed around "freedom 55" is changing as many Canadians are looking for opportunities to continue to contribute either out of necessity or out of a sense of self-fulfillment. Stakeholders were clear that governments should be active in efforts to maximize participation rates among older workers.
Canadians also expressed a strong view that private and public policies ought to support flexibility and choice throughout people's lives.
The Panel's Findings and Recommendations
Enhancing Labour Market Prospects
The Panel acknowledged the importance of population aging as a fundamental underlying dynamic that will determine the situation of older workers. This development is significant because it stands to alter, quite fundamentally, the make-up of the labour force and the functioning of the labour market. It also has consequences for individual employees and employers who must adapt and make decisions within an environment characterized by new labour market and workplace realities.
A key dimension of the labour market prospects of older workers is their participation in work. The Panel examined the overall extent and characteristics of their participation in today's labour market. The Panel paid particular attention to barriers to increased participation as well as the factors that underpin successful participation and attachment to work. The Panel also considered the prospects for improving the participation of the next generation of older workers, in the context of an aging labour force. An individual's level of "human capital," including their levels of literacy, training and formal education, is a major factor determining their long-term success in the labour market. The Panel therefore carefully considered the roles of governments, employers and individuals in encouraging, supporting and promoting the training, education and lifelong learning required to enhance the prospects of current and future cohorts of older workers.
The Expert Panel examined the range of current government policies that affect older workers' participation. This included examining policies that affect them in terms of when and how they transition between jobs and from work to retirement. The Panel identified important, specific areas for government involvement relating to mandatory retirement, pensions and new transition approaches to retirement.
As a result of these policy reviews, the Panel proposes the following:
Recommendation 1:
That the federal government, in consultation with the private sector, unions and civil society, undertake a comprehensive and sustained awareness campaign to promote the value and benefits to individuals and employers of continued and active participation in the labour force, to reduce ageism and to remove negative stereotypes surrounding older workers.
Recommendation 2:
That the federal government eliminate mandatory retirement in the federal jurisdiction by amending the Canadian Human Rights Act to extend the coverage of the Act by removing exceptions that have the effect of permitting mandatory retirement for persons aged 65 and older. This amendment of the Canadian Human Rights Act should be undertaken in a manner that allows for flexibility by respecting current bona fide occupational requirements based on age.
Recommendation 3:
That the federal government work with provincial and territorial governments to promote the value, benefits and importance to individuals and employers of increasing the levels of training and literacy, both in the workplace and through other programs, and to also promote the need for continuous learning throughout individuals' working lives.
Recommendation 4:
That the federal, provincial and territorial governments work together to undertake and implement changes to the tax and pension systems that would remove systemic barriers and disincentives to work, with the aim of achieving a program design that provides choices and flexibility for older workers who wish to participate in the labour force and earn income.
Recognizing that this will require coordination of changes to pension and tax systems across jurisdictions, the governments should:
- move to eliminate the work cessation clause in the Canada Pension Plan;
- allow eligible individuals to work and receive benefits while still contributing to a pension plan;
- minimize work disincentive effects associated with the Guaranteed Income Supplement clawback provisions; and
- continue to promote phased retirement through facilitated changes in the tax and pension systems.
Supporting Older Worker Adjustment
The second theme is supporting older worker adjustment in the labour market. Particular emphasis is placed on the special challenges and circumstances of older workers displaced from their jobs. In the course of their work, the Panel encountered significant information gaps surrounding older workers — in particular, displaced older workers — in Canada. If governments, employers and individuals are to make informed decisions and choices, the Panel considers that more information and analysis needs to be available on an ongoing basis.
In supporting labour market adjustment, the Panel was again mindful of the need to consider the appropriate roles for individuals, unions and employers to address some of the issues faced by older workers. But especially in those situations where they adjust slowly or unsuccessfully to job losses, the Panel was concerned about the best role and scope for government policy in addressing the adjustment challenges confronting those workers. Given this concern, the Panel carefully examined the current federally funded program that supports older worker adjustment, the Targeted Initiative for Older Workers (TIOW), as well as other potential policy options to assist displaced older workers.
While displaced older workers generally have available a range of existing programs that provide income support as well as active support for adjustment, there may exist gaps in these programs. Emerging labour market conditions may also require an adjustment to existing programs that currently support older workers, such as Employment Insurance (EI). Two particular policy areas concerned the Panel. The first was whether the current supports available to older workers within EI are adequate. The second was whether existing policies adequately support the prospects for older workers' long-term employability, especially if barriers and disincentives exist for them to become re-employed.
In light of the above, the Panel proposes the following:
Recommendation 5:
That the federal government authorize Statistics Canada to design and implement a new national Survey of Displaced Workers as a regular supplement to the Labour Force Survey. The new survey should be conducted at least biennially and in a manner that permits analyses on older worker transitions between work and retirement. It should include relevant information about permanent job losses experienced during three or more years prior to the survey.
Recommendation 6:
That the federal government authorize Statistics Canada to design and implement a new national longitudinal Survey of Work to Retirement Transitions. The new survey should be conducted at least biennially and preferably annually. The survey would permit longitudinal analyses of older worker transitions from work to retirement and should include information about the factors that influence workers' retirement decisions.
Recommendation 7:
That the federal government establish a centre for the study of the implications of the aging population on the labour market, the economy, competitiveness and productivity. The role of the centre would be to:
- collect relevant information about older workers;
- conduct research and analysis on the economic implications of the aging population, and increase public awareness of the realities of the aging labour force and the economic issues associated with the aging population; and
- disseminate relevant up-to-date information and knowledge about the economic aspects of the aging population to employers, individuals and other interested and affected stakeholders.
Recommendation 8:
That the regulations under the existing EI program be changed so that severance payments made to workers who become unemployed after a period of long tenure in the workplace and who have not been EI recipients on a regular basis, are no longer considered earnings for purposes of EI. This would enable those claimants to collect EI Part I benefits after the 2-week waiting period.
For the purpose of the recommendation, the operational definitions of "long tenure" and "regular basis" need to be determined. As guidelines, the Panel suggests that these benefits be available to unemployed workers who had been employed for at least 10 years and had not collected benefits in the last five years.
Recommendation 9:
That the federal government, under the existing EI program, initiate through EI Part II (innovation and research capacity) a demonstration project to test the viability and cost effectiveness of a wage insurance plan that would help to mitigate the income losses faced by displaced older workers and thereby encourage these workers to more rapidly return to employment.
Recommendation 10:
That the Employment Insurance Act be modified such that workers who become unemployed after a period of long tenure in the workplace, and who have not been EI recipients on a regular basis:
- be eligible to receive benefits for longer than they are eligible to receive them under the current program; and
- that the extended duration of benefits and mobility assistance (see Recommendation 11) for these long-tenured employees not depend on the unemployment rate in the region, as is the case for special benefits such as maternity, parental, compassionate and sickness benefits.
For the purpose of the recommendation, the operational definitions of "long tenure" and "regular basis" need to be determined. As guidelines, the Panel again suggests that these extended benefits be available to unemployed workers who had been employed for at least 10 years and had not collected benefits in the last five years.
Recommendation 11:
That the Employment Insurance Act be modified such that the suite of measures under EI Part II be expanded to include a specific mobility assistance measure with a commensurate adjustment to the budget allocated to EI Part II.
Recommendation 12:
The Panel strongly recommends that the federal government engage in a fundamental review of the Employment Insurance Act.
Recommendation 13:
That the termination date of the current TIOW program be extended until the government has modified the EI program to provide improved benefits to long-tenured displaced older workers (see Recommendation 10); that mobility assistance measures and commensurate funding be added to any new TIOW agreements being extended or negotiated; and that the TIOW program be modified to provide for financial mobility assistance as an eligible program activity.