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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

How to address an aging population in New Brunswick

Herb Emery

We have heard a lot lately about population aging in New Brunswick, how it is a bigger problem than in most of Canada, and why the rest of Canada should help New Brunswick more.

But what can New Brunswick do to address this problem itself? And what would it look like if the province raised labour productivity – in addition to bringing in more people – so that our smaller workforce produced a higher income?

In 2000, New Brunswick’s population had 5.26 persons aged 15-64 for every person over age 64. That compared to 5.44 for Canada overall. In 2018, Canada’s working population to elderly population ratio had fallen to 3.9 and New Brunswick’s had fallen further to 3.12.

At the historical rates of population change and if nothing changes, the ratio will be closer to 2.5 for New Brunswick in 2027. 

A simple number to keep in mind is that growing the population to 1 million in New Brunswick would completely reverse population aging since 2010, and 1.1 million would turn the clock back to 2000 in terms of the old-age-dependency ratio.

So our population target should be 1 million New Brunswickers and let’s give ourselves a decade to get there.

The question is: Where do we find 200,000 more New Brunswickers over the next 10 years?

The Department of Post-Secondary Education, Training and Labour (PETL) estimates that New Brunswick will have 120,000 job openings over the coming decade, 97 per cent of which are to replace aging New Brunswickers withdrawing from the workforce or dying. If nothing changes in the New Brunswick economy, there will be little “expansion demand,” or increases in the number of jobs over what we have today.

PETL projects that after accounting for the net out-migration of New Brunswickers, around half of the jobs that will open can be filled with young workers, also known as labour market entrants. Around 15 per cent will come from the projected 20,000 newcomers to Canada who settle in New Brunswick.

That leaves 40,000 jobs to be filled either with increasing labour force participation, higher immigration to the province, reduced out-migration or elimination of jobs. 

The elimination of jobs can be for good reasons such as automation and increased productivity of labour, or bad reasons such as employers closing businesses or leaving the province. The former increases our tax base by raising incomes, while the latter lowers our tax base and ability to pay for the needs of an aging population without raising tax rates.

So our opportunity to grow the population is 40,000 workers, which if they have families could get us close to 100,000 in extra population. That’s not bad at all.

If we do this solely with immigration, then we need to increase our intake from around 4,000 total newcomers per year – not all of whom work – to likely something closer to 8,000 per year.

It should be clear at this point that while we want immigration just to keep the economy from getting worse, without growth of the economy and expansion demand, it’s hard to see where we can find the extra 100,000 population – or extra 40,000 workers over and above the same number to meet replacement demand.

We need 16,000 immigrants per year up from our current level of 4,000 per year to reach our “1 million New Brunswickers” goal. 

Interestingly, Saskatchewan managed to gain 200,000 population in just five years by exploiting its abundance of natural resources. I am often told by New Brunswickers that this province doesn’t have natural resource left to exploit so this same “miracle” is not possible here.

To me, this translates to: “New Brunswickers prefer not to exploit their province’s natural resources.” Whatever the reason, it seems we cannot expect New Brunswick to pursue natural resource exploitation as a way to grow.

So where will expansion demand come from? Or what can we do to find 40,000 more workers over the coming decade?

My answer won’t surprise anyone who reads my commentaries. The solution will come from business sector investment that increases the size of the province’s capital stock by adding machinery and equipment, which embody state-of-the-art production technology. This will increase the demand for labour, the expansion demand we seek, and it will raise labour productivity – the value of what the average worker adds to GDP in an hour of work.

This means each worker we add in the future would be worth a multiple of a worker today. Productivity growth increases the size of our effective workforce as the same number of workers produce more GDP.

In 2000, New Brunswick’s labour productivity was around 80 per cent of Ontario’s. With export growth and investment, New Brunswick had closed the gap to 87 per cent by 2010, before falling back to around 80 per cent today as investment has disappeared and export values have plateaued.

If New Brunswick could close the productivity gap with Ontario, this would be equivalent to increasing our labour force by 20 per cent, or 77,000 workers. Our incomes would be 20 per cent higher.

If you are keeping track of the arithmetic, this gain in income is likely around what we need to fix population aging and equivalent to adding 200,000 population with fixed labour productivity.

Averaging two per cent annual growth in labour productivity was the norm in New Brunswick before 2006 and has occasionally shown since 2010. So the issue is really one of sustaining that growth by encouraging consistent investment. 

Solving the aging population problem is not an either/or proposition. The provincial government needs support both growing the workforce through immigration and raising labour productivity.

If it does so, there will be light at the end of New Brunswick’s fiscal tunnel.

Herb Emery is a Brunswick News columnist and the Vaughan Chair in Regional Economics at the University of New Brunswick.

This article first appeared in Brunswick News publications – Aug. 21, 2019

The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.