Volume I Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026

Transcription

1 Volume I Nova Scotia Demographic Research Report: A Demographic Analysis of Nova Scotia into 2026 Prepared by Canmac Economics Ltd. Jozsa Management and Economics Dr. Jim McNiven David Sable and Associates December 2006

2 Acknowledgements Canmac Economics Ltd. wishes to thank the many individuals who contributed to the completion of this study. We appreciate the time that was taken by members of the federal and provincial governments to attend our focus groups and provide us with resources. We extend our gratitude to the members of the Demographic Research Report Steering Committee who provided excellent guidance and thoughtful comments throughout the study. Rick Anderson, Department of Health Jim Baker, Treasury and Policy Board Shirley Hazen, Department of Finance Adam Holmes, Department of Community Services Juanita Fawcett, Department of Education Jeannine Jessome, Nova Scotia Seniors Secretariat Pamela Jones, Department of Health Tamara Krawchenko, Department of Education Greg Landry, Office of Economic Development Maureen O Connell, Nova Scotia Advisory Council on the Status of Women Jacques Pelletier, Department of Education Bruce Roberts, Department of Education Michael Rushe, Service Canada William Steele, Department of Finance Donald Thomas, Department of Finance The opinions expressed in this Report are those of Canmac Economics Ltd., as are any errors or omissions. 2

3 Table of Contents Executive Summary... 1 Chapter One ~ Introduction Introduction Methodology Overview Report Outline... 7 Chapter Two ~ Where We Are Introduction Nova Scotia Demographics Today Labour Force Participation Current Government Policy Framework The Economy by Sectors The Job Market Fiscal Policy Chapter Three ~ Where are We Going? Introduction Population Economic and Fiscal Impacts Social Impacts Regional Impacts Conclusions Chapter Four ~ What Should We Do? Introduction Policy Levers Policy and Program Directions Chapter Five ~ In Conclusion Future States Conclusion Bibliography

4 List of Tables T 2.1 Annual Components of Population Growth, Canada and Nova Scotia 10 T 2.2 Births and Birth Rates, Canada and Nova Scotia 11 T 2.3 Age Specific Fertility Rates, Nova Scotia Base Case Population Projection 11 T 2.4 Death and Death Rates, Canada and Nova Scotia 12 T 2.5 Age Specific Survival Rates, Nova Scotia Base Case Population Projection 13 T 2.6 Net Migration and Residual Deviation, Canada and Nova Scotia 14 T 2.7 Labour Force Characteristics, T 2.8 Women with Children Under Age 6 20 T 2.9 Nova Scotia GDP by Industry, Value: 1997 Constant dollars % Share, Value: 26 Chained 1997 dollars % Share T 2.10 Nova Scotia Output (1997$), Goods and Services, 1987, T 2.11 Nova Scotia GDP by Industry (mill$), 1984 Value: 1997 Constant Dollars, 1997 and Value: Chained 1997 dollars T 2.12 Nova Scotia GDP by Industry (mill$), 1984 Value: 1997 Constant Dollars, Growth Rates, Value: Chained 1997 Dollars T 2.13 Unemployment Rates, T 2.14 Provincial Expenditures, 1989, 2005 (Current) 32 T 3.1 Natural Increase in Population, Base Case Population Projection 35 T 3.2 Nova Scotia Population by Gender, Nova Scotia Base Case Population Projection 36 T 3.3 Population Project Assumptions 41 T 3.4 Growth Rate of Labour Productivity by Industry, Nova Scotia 47 T 3.5 Key Economic Indicators for Nova Scotia 52 T 3.6 Real GDP for Selected Industries 53 T 3.7 The Province of Nova Scotia, Projected Growth of Key Economic Indicators and Output by 54 Industry T 3.8 Nova Scotia Aggregate Sector Outlook, Base Case, Average Growth T 3.9 Health Expenditures by Age, 2006, T 3.10 Nova Scotia Health Expenditures by Alternative Population Scenario, T 3.11 Demographic Impact, Volunteer Hours, 2006, T 3.12 Demographic Impact Disabilities, T 3.13 Characteristics of Current/Former Rural Youth by Age Group 85 T 4.1 Policy Directions, OECD Country Studies 91 T 4.2 Sources of U.S. Output and Productivity Growth, T 4.3 Industry Sector Council Policy Areas 117 T 5.1 Nova Scotia Socio-Economic Indicators 128 List of Figures F 1.1 Canmac Team Approach 6 F 2.1 Nova Scotia Population Cohorts 2006, A Schematic Profile 16 F 2.2 Labour Force Participation Rates of Prime-age Women (aged 25-54), 1981 and F 3.1 Nova Scotia Projected Population, Base Case 2006 Projection 37 F 3.2 Nova Scotia Projected Population, Base Case 2026 Projection 37 F 4.1 Major Impacts 90 F 4.2 Policy Overview 92 F 4.3 Policy Thrusts 114 4

5 List of Charts C 3.1 Nova Scotia Population Projections, Base Reference Case and Statistics Canada Scenarios 40 C 3.2 Nova Scotia Labour Force (15-65) Age Population Projections - Base Reference Case and Statistics Canada Scenarios 42 C 3.3 Historic & Projected Labour Force Participation Rates for Nova Scotia 43 C 3.4 Historic & Projected Participation Rates, Males & Females Years of Age 44 C 3.5 Historic & Projected Participation Rates, Males & Females Years of Age 44 C 3.6 Historic & Projected Participation Rates, Males & Females Years of Age 45 C 3.7 Historic & Projected Participation Rates, Males & Females Years of Age 45 C 3.8 Historic & Projected Participation Rates, Males & Females 65+ Years of Age 45 C 3.9 Nova Scotia Base Reference Case Labour Demand and Labour Supply, C 3.10 Population Distribution of NS Aboriginal Identity Population and Total NS Population C 3.11 Persons with Disabilities are Educationally Disadvantaged 83 C 3.12 Nova Scotia Labour Force Activity 15 to 64 by Gender and Severity of Disability 84 5

6 Executive Summary The aim of this study is to suggest some of the impacts that demographic changes will have on the Nova Scotian economy, labour force and government economic and social policy over the next 20 years. These impacts can be summarized as follows: Virtually all of the people who will be in the labour force of 2026 have been born. Given traditional Nova Scotian migration patterns, we have a clear idea how many there will be -- not enough. The proportion leaving the labour force due to retirement or death will grow. The proportion replacing them, coming into the labour force, will shrink. If nothing changes, there will be labour shortages, ignoring the effect of recessions, throughout the whole 20-year period. These shortages will neither be evenly distributed across regions nor across occupations. This will create a number of social and fiscal problems. In our base case reference scenario we project: Nova Scotia s total population will decrease from 932,389 in 2001 to 894,777 in The senior population (ages 65 and over) will increase from 127,546 in 2001 to 217,877 in 2026 (or from 13.7 to 24.3 per cent). The primary and secondary school age population (ages 5 to 18) will decline from 168,788 in 2001 to 115,657 in 2026 (or from 18.1 to 12.9 per cent). The post-secondary age population (ages 19 to 24) will decline from 72,950 in 2001 to 51,207 in 2026 (or from 7.8 to 5.7 per cent). The working age population (ages 15 to 64) will decline from 638,261 in 2001 to 558,058 in 2026 (or from 68.4% to 62.4%). Implications for government include: A shift of economic development policy from finding jobs for people to finding people for jobs. This constitutes a major change in emphasis and a reversal of 1

7 decades of practice. This will constitute a major paradigm change for policy makers. Productivity growth will be central to a prosperous economy and therefore to higher tax revenues. Higher tax revenues will be critically needed to pay for public services demanded by older voters, many with very low retirement incomes. Greater labour force participation by older people and underutilized groups will be necessary. A well-trained and educated workforce will continue to be important to ensure that the there is the right skills match to meet future labour market demands and that all Nova Scotians can participate successfully in the labour market. This will also be necessary for productivity growth. Social policy goals such as inclusion and diversity will be paramount as there will be a great need to increase the labour force participation rates of typically underrepresented groups. Seniors will become the dominant driving force in the social, cultural and economic life of the Province. Finding a balance between work and life will be increasingly stressful as labour demand increases across all demographic groups and dependency ratios rise. Finally, the problems resulting from this demographic shift will not go away, short of adopting a proactive approach to the overall problem. This requires an interdepartmental, coordinated policy framework. Leaving the problem to market force adjustment alone ignores the existing policy complex around the labour force issue, no matter how outmoded. It also assumes that other jurisdictions in Canada and elsewhere with the same problem will not act to interfere with the market. Finally, failure to meet the challenge may lead to a Province that is relatively poorer and more dependent on federal assistance than it is today. The problems are not however unsolvable. Increasing productivity above historic standards, increasing participation rates above current trends and increasing migration will all contribute to a sustainable growth solution for Nova Scotia. The 2

8 report documents alternative scenarios that clearly show that policy success can provide Nova Scotians with a sustainable economy and a high quality of life for all citizens. 3

9 Chapter One ~ Introduction 1.0 Introduction Sometime in the next decade, a rare event in Nova Scotian history will happen. For the first time in at least a century, the people available to work in the Province will be less than the jobs available for them. After this point in time, a general labour shortage will become a normal fact of life, as opposed to the specific ones, such as for health practitioners that have become part of everyday life. This impending event is already changing how Nova Scotia operates. Nova Scotia is experiencing net out migration and declining student enrolments. In addition, seniors issues are coming to the fore. This report is about what the future might look like for Nova Scotia and what the government and private sector can do about it. This study is intended to provide a better understanding of the demographic challenges and opportunities that the Province faces, and to identify some potential policy options to ensure future prosperity. The overall project objective is to conduct a study of demographic changes in Nova Scotia that will: 1. identify the demographic changes that Nova Scotia will likely face over the next 20 years and assess how these changes will impact on, and interact with social, economic, and labour market changes in Nova Scotia over the same time period; 2. identify the critical challenges and opportunities that will be faced by individuals, employers, educators/trainers and governments in responding to these changes; 3. identify some policy program options that could be implemented to address these challenges and opportunities. 4

10 1.1 Methodology Overview The approach used to document the demographic impact and uncover policy options is based on simulations using the proprietary Canmac demographic-econometric model of the Nova Scotia economy. Predictions about future trends are highly uncertain in detail, though their general direction may be very similar. In using a simulation approach, a base case is generated and then simulations are made to test the robustness of the base case results to alternative assumptions. The Canmac demographic-econometric model for this purpose provides a wealth of data to describe impending demographic impacts. Our approach also used focus groups, key informant interviews, and a focussed literature review to complement the simulation exercise. The framework for the Canmac approach is provided in Figure 1.1. The research began with the specification of three scenarios that describe possible states of the world that the Nova Scotia economy will operate in from now to The second stage of the research involved conducting an impact simulation for this base case and each scenario. 1 The impact simulation was conducted using the Canmac model which provides output for a significant number of variables. The Report examines the impact of demographic shifts on the labour force, government revenue and expenditures, demand for goods and services, sub-provincial dimensions and social dimensions. The third stage was to determine critical challenges and opportunities, using the Canmac model to assess them. Through a review of relevant literature, focus group discussions and key informant interviews, the critical factors that can impact on the simulation results were determined. consequences of demographic shifts. These critical factors hence affect the For example, the consequences of 1 Upon consideration by the Steering Committee, it was agreed that a business-as-usual base case would be used as the primary vehicle for describing the future (before policy) state of the Province. 5

11 demographic shifts could be impacted by increasing migration, productivity, and labour force participation from underutilized groups. The final stage involved deriving the major policy program options given the critical challenges and opportunities. The output from this discussion and experimentation is the present Report; a documentation of the critical challenges and opportunities that need to be met to address the demographic shifts facing the Province. 6

12 1.2 Report Outline The Report is provided in five chapters and supporting appendices. The chapters focus on the results while the appendices describe in more detail various aspects of the research. Chapter One introduces the study. Chapter Two provides a snapshot of Nova Scotia s demographics as they are today, with some discussion of the trends leading up to the present. Chapter Three presents the impacts on the economic, fiscal, social and regional aspects of the impending demographic shifts. Chapter Four discusses policy directions that result from the impacts. The final chapter, Chapter Five, provides summary and conclusions. 7

13 Chapter Two ~ Where We Are 2.0 Introduction Demography is the study of the basic characteristics of people, their ages (individually and collectively) and their living patterns (including their needs related to population size, age and geography). Demography underlies such issues as school and hospital placement, crime rates and employment prospects. Our concern here is with the effects of demographic change on Nova Scotia s employment prospects and its economic and social well-being. 2.1 Nova Scotia Demographics Today Population Change A fundamental input required for quality planning, be it market planning, government planning, etc., is a population projection that provides a realistic assessment of the future demographic situation. The Nova Scotia base case population projection was derived using the cohort survival model approach based on the most recent data available from Statistics Canada. This method projects population by single year of age, (less than one year of age to 89 years of age) and population aged 90 and over by gender. The model projects that population at time t is equal to population at time t-1 plus births minus deaths plus net migration. The process begins with 2004 population estimates by single year of age and gender available from Statistics Canada (Statistics Canada, 2004). Births are estimated by applying age specific fertility rates, deaths are estimated by applying age specific survival rates. For the base case population projection we have used the birth and death rates for Both in-migration and out-migration are driven primarily by economic opportunity. Historically, the Province has experienced modest net interprovincial out-migration. 8

14 The basic model (cohort survival model) used to develop the Nova Scotia base case population projection is derived from Statistics Canada (2003c). Natural increase is defined as the change in population realized by the difference between live births and deaths. For decades this component of population growth was the main contributing factor of overall population growth both nationally and in the Province of Nova Scotia. In recent years, natural increase has been replaced by net migration as the single largest contributor to population change. This result is due to a number of factors such as decreasing fertility (birth rates), high number of deaths associated with an ageing population and a significant shift in-migration patterns, both domestic (inter-provincial) and international migration. Table 2.1 provides the Statistics Canada estimated population, natural increase, net migration and residual (Statistics Canada, 2005a) for Canada and Nova Scotia between 1991/92 and 2004/05. 9

15 Period Table 2.1: Annual Components of Population Growth Canada and Nova Scotia Total Net Natural Migration Residual Population Increase (International and Deviation Interprovincial) Total Growth CANADA ,031, , ,887-22, , ,366, , ,247-22, , ,681, , ,320-22, , ,999, , ,160-22, , ,302, , ,546-21, , ,610, , ,616-9, , ,907, , ,768-9, , ,157, , ,427-9, , ,403, , ,769-9, , ,689, , ,741-8, , ,021, , , , ,372, , , , ,669, , , , ,974, , , , ,270, NOVA SCOTIA ,102 4,542 1,217-1,290 4, ,571 4,071 1,676-1,289 4, ,029 3, ,289 2, ,959 2, ,289 1, ,193 3,078 1,475-1,333 3, ,413 2, ,806 1, ,481 1, , ,907 1,756 1,991-1,807 1, ,847 1, , ,881 1, ,656-1, , ,347 2, , ,253 1, , , , , Source: Statistics Canada (2005a).. : not available for a specific reference period... : not applicable. Fertility / Births Fertility is defined as the number of live births per 1,000 females. The cohort survival model utilizes age specific fertility rates (single years of age) applied against the female population to estimate births on an annual basis. Over the last decade fertility rates have been in decline both nationally and provincially as shown in Table 10

16 2.2 which provides historic total births and the crude birth rate (births per 1,000 population) for Canada and Nova Scotia. Table 2.2: Births and Birth Rates Canada and Nova Scotia Period Births (Canada) Rate per 1,000 (Canada) Births (N.S.) Rate per 1,000 (N.S.) , , , , , , , , , , , , , , , , , , , , , , , , , , , , Source: Statistics Canada (2005a) The Nova Scotia base case population projection uses the average single year of age specific fertility rates for 2003/04. These fertility rates (per 1,000 population) are summarized in five year age groupings for females of child bearing age in Table 2.3. Table 2.3: Age Specific Fertility Rates Nova Scotia Base Case Population Projection Year to June-June 2000/ / / /04 Total Fertility Rate per 1,000 1, , , ,379.0 Females Females Females Females Females Females Females Females Source: Statistics Canada (2005a), 11

17 Survival / Death With the ageing of the national and provincial population, the baby boomer effect has given rise to an increased number of annual deaths. This increase in the number of deaths and the death rate (per 1,000 population) combined with the decrease in births has caused the natural increase in population to contract significantly over time (see Table 2.1). Between 1991/92 and 2004/05 the natural increase in population in Canada has gone from 206,140 to 103,211, a reduction of close to 50 per cent. This effect is even more pronounced for Nova Scotia with natural increase contracting from 4,542 to 167, a reduction of close to 100 per cent. Table 2.4 outlines deaths and death rates (per 1,000 population) for Canada and Nova Scotia between 1991 and Table 2.4: Deaths and Death Rates Canada and Nova Scotia Period Deaths (Canada) Rate per 1,000 (Canada) Deaths (N.S.) Rate per 1,000 (N.S.) , , , , , , , , , , , , , , , , , , , , , , , , , , , , Source: Statistics Canada (2005a) The Nova Scotia base case population projection uses the single year of age specific survival rates, (population less deaths divided by population) for 2003/04. These survival rates are summarized by age groups and gender in Table

18 Table 2.5: Age Specific Survival Rates Nova Scotia Base Case Population Projection Year to June-June 2003/04 Males Males Males Males Males Males Males Total Males Females Females Females Females Females Females Females Total Females Total Both Sexes Source: Canmac Economics Limited, Statistics Canada (2005c) Migration In recent years net migration has been the largest single growth component affecting population in Canada and Nova Scotia. Nationally, only international migration impacts the population, as inter-provincial migration nets out to zero. As shown in Table 2.1, during the early 1990s, net migration contributed less than 50 per cent of the national population growth and, by the millennium, net migration was contributing close to 70 per cent of the population growth as births declined and deaths increased. A similar but more pronounced and volatile effect is seen for Nova Scotia over the same period. During the early 1990s net interprovincial and international migration fluctuated between a high of 37 per cent to a low of -35 per cent (out-migration) of provincial population growth. By the millennium, net migration was contributing between 65 per cent to 80 per cent of Nova Scotia s population growth as natural increase (births minus deaths) dropped from a high of 4,542 during to a low of 167 for

19 Nova Scotia s migration patterns vary across age category. The pattern for inmigrants and out-migrants are similar. Data is provided in the latest Nova Scotia Department of Finance Statistical Review (2005) on total net international and interprovincial migration and shows that over the to period: the largest migration group (25-44) accounted for 40.2 per cent of total inmigration and 39.7 per cent of total out-migration; the second largest group (18-24) accounted for 19.2 per cent of total inmigration and 21.4 per cent of total out-migration; and the smallest group (65+) accounted for 5.2 per cent of the total in-migration and 5.1 per cent of the total out-migration. Table 2.6 presents Statistics Canada s estimated net migration and residual deviation between and Table 2.6: Net Interprovincial and International Migration and Residual Deviation Canada and Nova Scotia Canada Nova Scotia Period Total Net Residual Total Total Net Residual Total Interprovincial and International Deviation Adjustment To Net Migration Interprovincial and International Deviation Adjustment To Net Migration Migration Migration ,887-22, ,203 1,217-1, ,247-22, ,566 1,676-1, ,320-22, , , ,160-22, , ,289-1, ,546-21, ,979 1,475-1, ,616-9, , ,806-1, ,768-9, , ,807-2, ,427-9, ,133 1,991-1, ,769-9, , ,807-1, ,741-8, , ,656-2,567 14

20 , ,675 1,347 1, , ,742 1,253 1, , , , , Source: Statistics Canada Annual Demographic Statistics (2005a).. : not available for a specific reference period... : not applicable. Statistics Canada estimates inter-census population using recorded vital statistics (births and deaths), as well as estimated net migration. Net migration is inherently less accurate at the provincial level, as estimates of inter-provincial migration are obtained using tax filings, change of address postal records and average migration household size. The inter-census population is then adjusted by a residual deviation between the latest and previous census counts adjusted for under coverage and non-permanent residents. This adjustment plus estimated net migration shows that Nova Scotia has experienced a small net-outmigration when the residual deviation is included. This small number has led the project team to use a zero net migration assumption in the development of the base case population projection presented in this Report. The Baby Boom Akin to many other jurisdictions, Nova Scotia is also seeing fertility rates decline. Family size beings to decrease as personal income, labour market opportunities and education increases. All the Canadian provinces share this condition and reproduction is below replacement levels everywhere. Immigration is an important contribution to population growth in Canada. 15

21 Source: Canmac Economics Ltd. The demographic situation in Canada is complicated further by the Baby Boom. Between 1946 and 1964, all parts of Canada enjoyed a rapid increase in births. A decline began, coinciding with the introduction of the birth control pill in the latter year. The totality of people born in a given year is called a cohort and the cohorts of people born in this Baby Boom period were larger than those before or since. This group of people has dominated the Canadian economy and politics ever since the 1960s. Canada needed more schools in the 1960s, more universities in the 1970s, more jobs in the 1980s and more houses in the 1990s. In 2011, the first cohort of Baby Boomers will turn 65 and for the next few decades thereafter this age group will reflect seniors concerns, such as demand for more senior citizens homes. If we take the working age population of the Province as people being between 15 and 64 years of age, the largest single cohort was 15 in 1979 and the same cohort was 40 in 2004 and will be 65 in This is what we mean by an ageing or maturing workforce. Further, in any year that the cohort that retires at 65 is larger 16

22 than the new group of 15 year-olds potentially entering the workforce in any given year, then the workforce will begin to shrink. Regional Dynamics So far, we have only considered population dynamics. As well, our situation is complicated by geography. Within the five counties surrounding Halifax Regional Municipality, the population as a whole is steady or growing. Elsewhere the population numbers are declining. There are local exceptions depending on new plants, gas facilities, call centres or other major employment opportunities, but on the whole, this urban-rural split holds. Average ages are different as well, tending to be somewhat younger in the urban zone of the Province. 2.2 Labour Force Participation The labour force participation rate, defined as the proportion of the labour force-aged population (15 years of age and over) that is working or seeking work, is a major channel through which demographic changes impact the economy. Accordingly, it is important to understand the strategic factors that determine the participation rate. Two terms are important in understanding participation and unemployment: cyclical and structural. Cyclical refers to the ups and downs of the business cycle and even the seasons of the year. Structural refers to impediments that are due to the characteristics of the labour force (e.g. literacy, essential skills, and employment opportunities). The ageing of Nova Scotia s population combined with a slowdown in the number of new entrants to the labour force will decrease the participation rate (the portion of the population 15 and older that are either employed or seeking employment) as retired individuals leave the employed or seeking employment group but remain in the source population 15 and older. The most important determinant of the economy s labour force participation rate has been and continues to be demographics in particular, the age structure of the labour force aged population. While there is much uncertainty as to the structural 17

23 and cyclical factors that explain participation rates, a review of the evidence provided in a study by Dugan & Benoit (1999) suggests that: [y]outh participation rates appear to be sensitive to aggregate cyclical downturns; [a]dult participation rates appear to be mainly driven by structural factors; [r]ecent econometric analysis suggests about half the decline in youth participation reflects definite cyclical factors while the balance is likely to be structural; [t]he introduction of public pension plans in the mid 1960s and the increased share of the population covered by private pension plans have played a key role in lowering the participation rates for older men; and [o]lder Canadians are less educated than their U.S. counterparts, which may explain in part the higher participation rates in the U.S. for this age cohort (Dugan & Benoit, 1999, 46-47). A recent labour force participation model developed for British Columbia reinforces the conclusions of this literature on the importance of demographics as the main driver (Schrier, 2000). The report acknowledges that the most significant structural factor explaining historic participation rates has been the proportion of women entering the labour force, while future projections are driven by the ageing population. The author s model predicts a total participation rate in British Columbia of approximately 57 per cent by 2026, down from a high of 68 per cent in Because the labour force is defined in Canada as being 15 years and older, the retired population remains as part of the statistic and affects the rate. Table 2.7 provides a recent history of participation rates in Nova Scotia and Canada by sex from 1996 to A review of Table 2.7 shows that: 18

24 1. The participation rate for Nova Scotia (63.6 per cent in 2005) is lower than that of the National average (67.2 per cent). 2. The participation rate is also lower by gender. In 2005, the male rate was 68.6 per cent in Nova Scotia versus 72.8 per cent nationally and the female rate was 58.9 per cent in Nova Scotia versus 61.8 per cent nationally. Table 2.7: Labour Force Characteristics Participation Rates Sex Year Canada Nova Scotia Both Sexes Male Female Source: Nova Scotia Department of Finance (2005) A recent study by Roy (2006) examined a reversal in trend for female participation rates in different regions of Canada. Table 2.8 shows female participation rates for women with children under the age of six by province. Over the period, Nova Scotia s female participation rate for women with children under the age of six 19

25 increased from 67.5 per cent (near the national average) to 76.4 per cent (significantly above the national average). Table 2.8: Women with Children Under Age 6 Population Participation Rate Employment Rate Unemployment Rate % 2005 % 2005 % 2005 % Canada 1, Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Source: Roy ( 2006) The study s main conclusions are: 1. From the end of the Second World War until recently, a survey of women entering the labour force helped boost Canada s overall labour force participation rate in every non-recessionary year. In the initial decades of this period, women in Ontario and the west had spear-headed this movement. Over the last decade, however, women in eastern Canada have taken the lead, driven by Quebec, while women in the western provinces have participated less in the labour force. 2. The rising participation rate of women in eastern Canada appears associated with the greater use of day care and higher education levels in Quebec, lower birth rates in the Atlantic provinces, and a lower proportion of immigrants than in the west (Canadian-born women have much higher participation rates than immigrants) (Roy, 2006, 1). Female participation rates also differ significantly across countries. The difference in the rate of female participation across countries was examined by Jaumotte (2005a). As shown in Figure 2.2, the participation rates of prime age women (25-54) ranged from a low of under 30 per cent for Turkey to a high of over 80 per cent in Iceland. 20

26 More importantly, the study found that the actual participation rates may be below desired levels in many countries. The key findings of the study are noted below. 1. European Union survey, 1998: the traditional male-only breadwinner model is preferred only by 1 in 10 couples with small children but applies to 4 in European Union labour force survey, 2001: 12 per cent of inactive women would like to work (21 per cent of inactive women with family responsibilities). The many reasons for the differences in participation rates between Nova Scotia and Canada have not been empirically studied, but it is clear that structural factors such as industry structure, rural/urban mix, occupation mix, gender and age mix could all play a factor in the differences. Figure 2.2 Source: Organization for Economic Co-Operation and Development (2004a) 21

27 2.3 Current Government Policy Framework The Government of Nova Scotia has a number of major policy initiatives that are directly and indirectly linked to impending demographic shifts and will be complementary to the demographic challenges outlined in this report. As David Foote (1996) is widely quoted as saying Demographics explains two-thirds of everything; from this perspective, most of the current government policy initiatives are linked to demographics. The authors note before reviewing individual department efforts that we have found the demographics challenge is, with some exceptions, not given a high strategic priority at the departmental level. Interviews with key departmental personnel and a review of departmental business plans did not reveal that they had elevated the demographic issue to a key driving force in the delivery of department mandates. The first notable exception to our general finding is the Public Service Commission. This Agency s major initiative is its human resource plan. It recognizes the challenge of an ageing workforce and a tightening labour market. The Agency has recently allocated human resource personnel exclusively to the issue of retirement and its impact on maintaining a quality workforce and is currently analyzing the expected number of retirees for the coming years. The Department of Health and the Office of Health Promotion are keenly aware of the demographic challenge. A major policy initiative within the Department is a human resource planning model that links health policy directly to human resource planning, using work standards and scenario generation. The impending growth of the senior citizen population cohort has resulted in a major policy paper by the Seniors Secretariat. The Seniors Secretariat has released The Strategy for Positive Ageing. The Seniors Secretariat is the lead agency for the Task Force on Ageing, a commitment made in the government s Blueprint for a Better Nova Scotia. A key outcome of Phase One of the Task Force on Ageing is the 22

28 Strategy for Positive Ageing in Nova Scotia (Nova Scotia Seniors Secretariat, 2005), which outlines the wide range of approaches and solutions needed to ensure Nova Scotia can maximize the opportunities and overcome the challenges associated with an ageing population. The Strategy emphasizes that all levels of government, business, not-for-profit organizations and community groups must begin working together now to implement the strategy. Beginning over the next year, the Secretariat will work with partners (inter-government, cross government and community) to develop key strategic actions to move forward the implementation of the Strategy for Positive Aging. The Office of Economic Development (OED), with its mandate to promote economic development, has identified demographics as a key challenge. OED s current major policy thrust is the recently released Opportunities for Sustainable Prosperity (2006) framework. This government framework takes into account the demographic challenge. In addition, OED is undertaking initiatives to better understand and identify Nova Scotia challenges and issues relating to productivity and competitiveness. There are a number of initiatives in process regarding public and private sector research and development, innovation, technology adoption and trade. The Province of Nova Scotia has also developed a community development policy, led by OED which involves public and private community stakeholders across the Province. Issues related to sub-provincial differences in youth migration and ageing were highlighted in the discussion paper which led to the development of the community development policy. The Department of Education, given its direct focus on maintaining a quality education experience for Nova Scotia residents, has several major policy thrusts that support a more skilled workforce. Examples include: facilities planning in light of declining enrolments, Learning for Life and other initiatives to improve the P-12 education system, literacy, workplace education, apprenticeship, the Nova Scotia School for Adult Learning, youth initiatives, labour market information products and services such as Career Options, the Skills Nova Scotia Framework (a corporate 23

29 policy initiative), etc. These initiatives are part of the Department s overall mandate but are also in direct response to the pressure from changing demographics. Finally, the recent emergence of the Office of Immigration is in direct response to the impending demographic challenge. The overall economic and skills agenda for the Province is outlined in three documents: Opportunities for Sustainable Prosperity, Skills Nova Scotia Framework, and the Innovation Policy, and immigration is a component of each of these. Nova Scotia s Immigration Strategy (Province of Nova Scotia, 2005) sets out two major targets: a 70 per cent retention rate for the census period; and 3,600 annual immigrant arrivals within four years of the Strategy s full implementation. The report also notes a desire to further increase the targets increase as these objectives are realised. Nova Scotia s Immigration Strategy addresses the complex conditions that will be necessary to attract and retain more immigrants to Nova Scotia than we have in recent years. The four key strategic directions are: supporting a welcoming community by educating Nova Scotians about the contributions that immigrants can make to our future social, cultural, and economic prosperity; attracting immigrants by actively marketing and promoting Nova Scotia as an immigration destination; integrating immigrants into daily life by providing the settlement services necessary to help them live, work, and learn in Nova Scotia; and retaining immigrants by creating conditions that allow them to make Nova Scotia their permanent home (Province of Nova Scotia, 2005, 8). Each of these strategic directions is elaborated in the document with objectives, strategies and initiatives that are derived from consultations and review of successful precedents set elsewhere. For example, the document notes that the language needs of newcomers [in Nova Scotia] beyond basic language training are not being adequately addressed. The gaps in service, especially with regard to occupation-specific, sector-specific, and employment-specific language training, are 24

30 limiting employment prospects and opportunities (Province of Nova Scotia, 2005, 15). Since the document was released, portions of both federal and provincial immigration settlement funding are being allocated to improve language training beyond the basic level to improve employability and productivity. The Office of Immigration is working with other branches of government, including the Department of Education, Office of Economic Development, and Department of Health, to address complex issues related to immigration strategies such as obtaining and disseminating accurate labour market information, increasing foreign worker credential recognition without compromising the work of existing regulatory agencies, and providing access to some settlement services for immigrants outside Halifax Regional Municipality through programs at the Nova Scotia Community College. In conclusion, the Government of Nova Scotia has many policies and initiatives that address the challenges and opportunities presented by demographic shifts. However, they need to be put together in a more comprehensive way in a policy framework in order to ensure that there is an inter-departmental and co-ordinated approach to addressing these issues. 2.4 The Economy by Sectors The structure of the Nova Scotia economy is changing over time. A review of the data (Table 2.9) reveals that Nova Scotia, like many advanced economies, has transformed into a service economy. Depending on how services are defined, between 60 per cent and 80 per cent of output comes from various types of services. As shown in Table 2.10, Nova Scotia s export sector is dominated by goods exports 74.4 per cent of total exports in 1987 and 75.8 per cent in Nova Scotia is also increasing its international exports from 48.2 per cent in 1987 to 55.8 per cent in The authors note that the official data probably understates the role of services as a 25

31 generator of export wealth in the Nova Scotia economy. One of the most important export service sectors in Nova Scotia is defence spending which is not included in export service data. In a similar fashion, research and development and non-resident students are not captured in the export services of the university sector that are not provided in the export service data. Table 2.9 Nova Scotia GDP by Industry Value: 1997 constant dollars % Share Value: Chained 1997 dollars % Share Year Avg. Annual Change Rank All industries % % % % % % - - Agriculture 1.41% 1.13% 1.21% 1.09% 1.03% 0.83% % 11 Forestry and logging 0.61% 0.58% 0.43% 0.43% 0.69% 0.87% 0.013% 6 Fishing, hunting and trapping 2.01% 2.15% 1.23% 1.26% 1.20% 1.32% % 13 Mining and oil and gas extraction 1.71% 1.37% 1.89% 1.66% 2.78% 1.82% 0.006% 8 Utilities 2.39% 2.43% 2.58% 2.59% 2.40% 2.38% 0.000% 9 Construction 7.53% 6.70% 5.55% 5.34% 5.57% 6.10% % 14 Manufacturing 10.95% 9.80% 9.88% 10.37% 10.21% 10.29% % 12 Wholesale trade 2.93% 4.13% 4.54% 4.69% 4.92% 4.93% 0.100% 2 Retail trade 6.67% 6.10% 6.12% 6.28% 6.56% 6.83% 0.008% 7 Transportation and warehousing 3.89% 3.41% 3.82% 4.47% 4.60% 4.40% 0.026% 5 Information and cultural industries 3.64% 3.62% 3.93% 3.83% 4.05% 4.55% 0.046% 4 Finance and insurance, real estate and renting and leasing and management of companies and enterprises 16.76% 18.78% 21.64% 21.79% 20.93% 21.59% 0.242% 1 Other Services 8.27% 9.50% % 10.45% 10.01% 0.087% 3 Educational services 7.63% 6.54% 6.41% 6.46% 5.93% 5.54% % 15 Health care and social assistance 8.61% 9.55% 8.20% 8.05% 7.93% 8.15% % 10 Public administration 14.99% 14.21% 12.48% 11.71% 10.75% 10.39% % 16 Source: Statistics Canada (2005d). 26

32 Table 2.10: Nova Scotia Output (1997$) Goods and Services 1987, Actual % Actual % Goods Exports Other Countries 3, % 6, % Goods Exports Other Provinces 2, % 3, % Services Exports Other Countries % % Services Exports Other Provinces 1, % 2, % Source: Canmac Economics Ltd., Statistics Canada (2005g) The Nova Scotia economy is restructuring towards a more serviced based economy with respect to employment generation. Official employment data state that in 1987 the goods sector accounted for 26.5 per cent of total employment, services 64.9 per cent and public administration at 8.6 per cent. By 2005, goods sector employment was 20.6 per cent with services at 73.2 per cent and public administration at 6.2 per cent. Table 2.11 shows the dollar value of output of each sector in the Nova Scotia economy. Table 2.11 Nova Scotia GDP by Industry (millions $) 1984 Value: 1997 constant dollars, 1997 and 2004 Value: Chained 1997 dollars Rank Year All industries 14, , , Agriculture Forestry and logging Fishing, hunting and trapping Mining and oil and gas extraction Utilities Construction 1, , Manufacturing 1, , , Wholesale trade , Retail trade , , Transportation and warehousing , Information and cultural industries , Finance and insurance, real estate and renting and leasing and management of companies and enterprises 2, , ,

33 Other Services 1, , , Educational services 1, , , Health care and social assistance 1, , , Public administration 2, , , Source: Statistics Canada (2005d) As shown in Table 2.11, in terms of level of output the major sectors in 2004 were: 1. Finance, Insurance & Real Estate and Renting and Leasing and Management of Companies and Enterprises. 2. Public Administration 3. Manufacturing 4. Other Services 5. Health Care and Social Assistance Table 2.12 shows the long-term and medium-term growth rates for each sector of the Nova Scotia economy. 28

34 Table 2.12 Nova Scotia GDP by Industry (millions $) 1984 Value: 1997 constant dollars, Growth Rates Value: Chained 1997 dollars Year % Change Growth Rank All industries 14, , Agriculture Forestry and logging Fishing, hunting and trapping Mining and oil and gas extraction Utilities Construction 1, , Manufacturing 1, , Wholesale trade , Retail trade , Transportation and warehousing , Information and cultural industries , Finance and insurance, real estate and renting and leasing and management of companies and enterprises 2, , Other Services 1, , Educational services 1, , Health care and social assistance 1, , Public administration 2, , Year % Change Growth Rank All industries 18, , Agriculture Forestry and logging Fishing, hunting and trapping Mining and oil and gas extraction Utilities Construction , Manufacturing 1, , Wholesale trade , Retail trade 1, , Transportation and warehousing , Information and cultural industries , Finance and insurance, real estate and renting and leasing and management of companies and enterprises 4, , Other Services 1, , Educational services 1, , Health care and social assistance 1, , Public administration 2, , Source: Canmac Economics Ltd., Statistics Canada (2005d). 29

35 As shown in Table 2.12, in terms of long-term growth rates, the highest ranking sectors are: 1. Wholesale Trade 2. Forestry & Logging 3. Finance, Insurance & Real Estate and Renting and Leasing and Management of Companies and Enterprises (FIRE) Information and Culture Industries 2.5 The Job Market Nova Scotia s job market has historically been characterized by high unemployment rates. However, these appear to be trending downward. The Department of Finance s most recent Statistical Review (2005) shows unemployment rates decreasing from 13.5 per cent in 1994 to 8.4 per cent in During this time period, employment growth (19.0 per cent) outpaced labour force growth (12.4 per cent) which accounts for a decrease in the unemployment rate. Unemployment rates are shown by economic region in Table The Cape Breton region has the highest unemployment rates but these are trending downward from 17.6 per cent in 2000 to 14.4 per cent in The Halifax region has the lowest rates, 6.3 per cent in 2000, and 5.8 per cent in Complicating these percentages is the realization that while overall population was declining in most areas outside the Halifax region, it was increasing or remaining stable inside the Halifax region. Table 2.13: Unemployment Rates, Cape Breton North Shore Annapolis Southern Halifax Valley % 10.0% 8.4% 9.9% 6.3% % 11.3% 7.8% 10.9% 7.1% % 10.8% 8.0% 10.8% 7.6% % 9.8% 8.4% 10.7% 6.6% % 10.0% 8.6% 10.2% 6.0% % 8.7% 8.4% 11.2% 5.8% Source: Statistics Canada (2005f) 30

36 The nature of the job market has changed over time. The number of jobs requiring little or no formal education and training have tended to diminish and growth has taken place in jobs requiring some post-secondary education. Both the private sector and the public sector have moved to provide for training and upgrading on the part of existing workers and those seeking better employment opportunities. Community college seats have grown in number, external corporate training expenditures have grown while literacy programs and school upgrading for former dropouts are in great demand. 2.6 Fiscal Policy Historically, Nova Scotia s fiscal capacity has been dependent on federal transfer payments. In 1981, 47.6 per cent of Nova Scotia total revenue came from federal transfers, though by 2003, this proportion had declined to 33.9 per cent. The next largest source of revenues from the Province is direct income taxes, which rose from 16.0 per cent in 1981 to 21.3 per cent in Appendix G provides a review of provincial revenue and expenditures from 1981 to Detailed provincial expenditure data is available from 1989 to 2005 and is provided in Appendix G. Table 2.14 provides a summary of the data. The largest expenditure items are health, education, and debt charges. Health expenditures represented 26.4 per cent of provincial expenditures in 1989, growing to 35.2 per cent by Interestingly, the education share has decreased from 22.7 per cent in 1989 to 19.4 per cent in Debt charges have risen slightly from 15.1 per cent to 16.9 per cent. Under present growth trends, health expenditures will eventually crowd out other provincial expenditures. At the current market share growth rate of 1.1 per cent, health expenditure will represent 58.3 per cent of total provincial expenditures by

37 Item Table 2.14 Provincial Expenditures, 1989, 2005 (Current) Amount (mil$) % of Amount Total (mil$) % of Total Total expenditures $4, % $7, % General government services $ % $ % Protection of persons and property $ % $ % Transportation and communication $ % $ % Health $1, % $2, % Hospital care $ % $ % Medical care $ % $1, % Preventive care $ % $ % Other health services $ % $ % Social services $ % $ % Social assistance $ % $ % Education $ % $1, % Elementary and secondary education $ % $ % Postsecondary education $ % $ % Special retraining services $ % $ % Other education $ % $ % Resource conservation and industrial development $ % $ % Environment $ % $ % Recreation and culture $ % $ % Labour, employment and immigration $ % $ % Housing $ % $ % Regional planning and development $ % $ % Research establishments $7 0.17% $1 0.01% General purpose transfers to other gov't subsectors $ % $ % Debt charges $ % $1, % Other expenditures $3 0.07% $0 0.00% Surplus (+) / deficit (-) -$252 $115 Source: Statistics Canada (2005e) Conclusion The base case for examining demographic changes comes out of this picture of where the Province s economy is today. As presented in the next Chapter, it will extend the broad trends of the past into the future. That is what we mean by a business-as-usual case. It is not meant to be an accurate description of reality 10 and 20 years out, but it is probably a reasonable approximation. 32

38 Given that caveat, it is clear that we are nearing the end of an era. Nova Scotia has made some efforts to blend its small town and rural heritage with the demands of an urban technologically-oriented society. Like other relatively well-off societies, it has seen its population and labour force stabilize. But that stability is only temporary, as the Province moves into a different set of challenges, best characterized as those of an ageing society supported by a stable to declining workforce and an economy that needs more workers. 33

39 Chapter Three ~ Where are We Going? 3.0 Introduction This chapter sets out the analysis of the impending demographic shifts that will occur in the Nova Scotia economy. Our analysis is presented as a base case with alternative scenarios. In what follows, we first present the base case results. Next, we document the critical challenges to be faced by Nova Scotia implied by the base case. The reference base case is a future scenario of the Nova Scotia economy. The key assumptions of the base case are as follows: Nova Scotia population will experience zero net migration over the projection period; Nova Scotia productivity will average 1.0 per cent; the Canadian and U.S. economy will grow at an average of 2.5% per year; and government and business do not take a strong policy response to affect the base case results. Our purpose in including this last assumption is to help isolate those areas that may in reality require a strong policy response. A subsequent chapter discusses the type of policy responses required by government. 3.1 Population In this section we outline the results of the base case population projection developed utilizing the Canmac Cohort Survival Model under the parameters defined in the preceding Chapter. Over the period 2004 to 2026, Nova Scotia s population is projected to contract by 42,944 people, or 4.6 per cent. As the base case projection assumes no net migration, all of this decrease will be a result of natural decrease, with the Province experiencing 178,538 births and 221,482 deaths between 2004 and Table

40 presents the total births, deaths, and natural increases between 2004/05 and 2025/26. Table 3.1: Natural Increase in Population Base Case Population Projection Period Births Deaths Natural Increase 2004/2005 8,581-8, /2006 8,517-8, /2007 8,484-8, /2008 8,462-8, /2009 8,450-9, /2010 8,450-8, /2011 8,452-9, /2012 8,449-9,508-1, /2013 8,433-9,654-1, /2014 8,410-9,793-1, /2015 8,379-9,939-1, /2016 8,329-10,091-1, /2017 8,264-10,248-1, /2018 8,176-10,407-2, /2019 8,071-10,576-2, /2020 7,956-10,745-2, /2021 7,830-10,915-3, /2022 7,688-11,103-3, /2023 7,534-11,290-3, /2024 7,373-11,475-4, /2025 7,208-11,668-4, /2026 7,044-11,864-4,820 Total 178, ,482-42,944 Source: Canmac Economics Cohort Survival Model, 2004/05 and Statistics Canada (2005a) Table 3.1 clearly shows a declining provincial population which will result in the ageing of the general population. Births drop over time as females of child bearing age exit their fertility periods in larger numbers than replacements enter. At the same time, deaths increase as the overall population ages. The results of this negative increase of Nova Scotia s population are displayed in Table

41 Table 3.2: Nova Scotia Population by Gender Nova Scotia Base Case Population Projection Year Males % Change Females % Change Total % Change , , , , % 478, % 937, % , % 478, % 937, % , % 478, % 937, % , % 478, % 937, % , % 477, % 936, % , % 477, % 935, % , % 476, % 934, % , % 476, % 933, % , % 475, % 932, % , % 475, % 931, % , % 474, % 929, % , % 473, % 927, % , % 472, % 925, % , % 471, % 923, % , % 470, % 921, % , % 469, % 918, % , % 467, % 915, % , % 466, % 911, % , % 464, % 908, % , % 462, % 904, % , % 460, % 899, % , % 458, % 894, % Total -4.93% -4.20% 4.56% Source: Canmac Economics Cohort Survival Model, Statistics Canada (2005a). Figures 3.1 and 3.2 graphically illustrate what happens to the age cohorts in the Nova Scotia population from 2006 to A large group of people in their prime working years of their 40s and 50s move into their 60s and 70s and they are not replaced by groups of the same size. Behind them come even smaller cohorts; this means that the workforce will continue to shrink into the future as far as anyone can see. It is not a temporary condition that we are describing. The imbalance between females and males in society, as shown in the previous tables, in shown in the following population pyramids as being due to the disparity of survival rates between older men and women. Older women are more likely to be impoverished and this will lead to an increase in demand for various forms of public assistance. As their number grows between now and 2026, there will be more 36

42 pressure on public expenditures to meet their needs (Nova Scotia Seniors Secretariat, 2005). Figure 3.1 Nova Scotia Projected Population Base Case 2006 Projection Females Males Source: Canmac Economics Ltd. Figure 3.2 Nova Scotia Projected Population Base Case 2026 Projection Females Males Source: Canmac Economics Ltd. 37

43 Some of the estimated results from the base case are as follows 2 : during the projection period, the male population contracts by 4.93 per cent, the female population by 4.20 per cent with the overall provincial population contracting by 4.56 per cent; Nova Scotia total population will decrease from 932,389 in 2001 to 894,777 in 2026; the senior population (ages 65 and over) will grow by 70.8 per cent, from 127,546 in 2001 to 217,877 in 2026; the primary and secondary school age population (ages 5-18) will decline from 168,788 in 2001 to 115,657 in 2026; The post-secondary age (ages 19-24) population will decline from 72,950 in 2001 to 51,207 in 2026; and The labour force age population (ages 15-64) will decline from 638,261 in 2001 to 558,058 in Complete results of the base case Nova Scotia population projection are presented in Appendix A. Alternative Population Scenarios We have presented our assessment of the impact of demographic change using a base case. Projections however are conditional on a number of assumptions and more importantly market forces and policy initiatives. Indeed, the purpose of our base case is to highlight the need for policy changes necessary to achieve sustainability. Each of our assumptions can be challenged and it is important to document the sensitivity of our population projections to alternative assumptions. Fertility rates are a function of social customs, decision to work, policy disincentives etc. Death rates depend on health improvements. Migration is primarily an economic phenomenon. An example of how assumptions can change is provided in a data is referenced as it marks the definitive population estimate from the Census. 38

44 paper by Ahn (1999). The traditional view based on evidence over the last hundred years shows that as nations become more developed the fertility rate decreases. Ahn provides evidence based on 21 OECD countries that this relationship may no longer hold. First, average total fertility rates and female participation rates since 1970 conform to well known long-run historical patterns. Throughout these years the OECD average fertility rate decreased from 2.45 to 1.63 while the female participation rate increased from 44.1 per cent to 60.8 per cent. However, the average total fertility rate seems to be bottoming out whereas the female participation rate has maintained its upward trend. The total fertility rate was as low as 1.69 by 1985, and a very modest upswing is noticeable during the second half of the 1980s. On the contrary, 43 per cent of the increase in the average FPR occurred in the decade after Second, the cross-country correlation between the female participation rate and the total fertility rate reversed its sign. The correlation between the total fertility rate and female participation rates across developed countries was negative, significant and quite stable around 0.5 during the 1970s and up to the early 1980s. However, by the late 1980s the correlation was an equally significant but positive 0.5, and only small changes occurred during the first half of the 1990s. This reversal took place abruptly over a few years, resulting in the step-function pattern. In 1981, the correlations was still 0.44; by 1986 it was close to zero, and by 1989 it was already (Ahn, 1999, 3-4). Hence, the study shows that the link between falling fertility rates and increased female participation rates may no longer hold. Global fertility rates falling due to participation may have bottomed out and indeed show a reversal. However, one must keep in mind that the empirical data for Nova Scotia itself do not seem to reflect this trend as yet. Given that most of the new entrants (15 years+) into the Nova Scotian labour force from now until 2026 are already born, this reversal may only become of interest in the far future of the Province. It does not however affect our base case. Charts 3.1 and 3.2 compare alternative Statistics Canada projections with the Canmac reference case. Chart 3.1 shows total population projections to Table 39

45 3.3 provides a summary of the alternative assumptions. The major differences among the Statistics Canada estimates are fertility and migration assumptions. As shown in Chart 3.1, all the Statistics Canada projections are above the Canmac base case. This is due in large part to positive in-migration assumptions. Our reference case has excluded migration, as this is a policy lever. Canmac Economics Reference Case Chart 3.1: Nova Scotia Population Projections Base Reference Case and Statistics Canada Scenarios Statistics Canada Scenario 1 Statistics Canada Scenario 2 Statistics Canada Scenario 3 Statistics Canada Scenario 4 Statistics Canada Scenario 5 Statistics Canada Scenario 6 Year Source: Canmac Economics Ltd., Statistics Canada (2005c) Graphic Illustration of Chart Base Case Canmac Economics Ref erence Case St at ist ics Canada Scenario 1 (1) St at ist ics Canada Scenario 2 (2) St at ist ics Canada Scenario 3 (3) St at ist ics Canada Scenario 4 (4) St at ist ics Canada Scenario 5 (5) St at ist ics Canada Scenario 6 (6) Source: Canmac Economics Ltd. 40

46 Table 3.3: Population Projection Assumptions Statistics Canada Scenarios #1 #2 #3 #4 #5 #6 Canmac Base Case Fertility Migration - Immigrants - Emigrants - Provincial Migration - Immigrants - Emigrants - Provincial Note: Statistics Canada migration assumptions grow over time. Source: Canmac Economics Ltd., Statistics Canada (2005c) Chart 3.2 shows working age (age 15-65) population projections. Interestingly, all projections (Canmac s and Statistics Canada s) show a declining labour force after The base case is below others again, because of our zero migration assumption. The projection lines provided in Chart 3.2 are closer together than the total population. This reflects the fact that, in the Statistics Canada projections, the population greater than 65 increases, due primarily to inter-provincial migration. In effect, the value of the higher Statistics Canada population projections to the Nova Scotia labour force problem largely disappears if most of the in-migration is due to retirees choosing to relocate to Nova Scotia from elsewhere. The in-migration of retirees could have mixed results on the Province s fiscal situation, at least in the short-term. The net result depends of the amount of taxes they contribute and the amount of public services they consume (e.g., drug and health care costs). 41

47 Chart 3.2 Nova Scotia Labour Force (15-65) Age Population Projections Base Reference Case and Statistics Canada Scenarios Canmac Economics Reference Case Statistics Canada Scenario 1 Graphic Illustration of Chart 3.2 Statistics Canada Scenario 2 Statistics Canada Scenario 3 Statistics Canada Scenario 4 Statistics Canada Scenario 5 Statistics Canada Scenario 6 Year Source: Canmac Economics Ltd., Statistics Canada (2005c) Base Case Canmac Economics Ref erence Case Stat ist ics Canada Scenario 1 (1) St at ist ics Canada Scenario 2 (2) Stat ist ics Canada Scenario 3 (3) Stat ist ics Canada Scenario 4 (4) St at ist ics Canada Scenario 5 (5) Stat ist ics Canada Scenario 6 (6) Source: Canmac Economics Ltd., Statistics Canada (2005c) 3.2 Economic and Fiscal Impacts The economic and fiscal impacts associated with the impending demographic shifts are best described at the macro level and then at successively finer levels of disaggregation. Accordingly, in this Section we describe how these large-scale population dynamics impact on the Nova Scotia economy in terms of broad indicators participation rates, productivity, employment and unemployment. This is followed by an examination of Canmac s alternative scenarios, economic trends, the Canmac 42

48 outlook, and changes in goods and services demand. Finally, the regional and fiscal implications for Nova Scotia of this changing economy are discussed. It should be noted that many of the narrower, or micro, projections are carried out only to This was done because the possibility for error in such topics as industry mix increases over time and, as the labour projection reveals a shortage that economists call non-feasible the economy would have to contract to eliminate the shortage, throwing the business-as-usual case completely off. Participation Rates The macro-economic impacts of the demographic shifts are significant. The ageing population will result in a reduction in the size of the working-age population. This occurs because the vast majority of the labour force will decline as those turning 65 will outpace those turning 15. This occurs because the population of labour force age in the age group is declining and more importantly because participation rates decline with an ageing population. As previously discussed, labour force participation rates are subject to institutional factors, policy, and in the short run, the business cycle. Chart 3.3 shows the historic and projected labour force participation rates for Nova Scotia, i.e., labour force divided by the labour force population that are used in our base case. 64 Chart 3.3: Historic & Projected Labour Force Participation Rates for Nova Scotia Source: Canmac Economics Ltd., Statistics Canada 43

49 The projected labour force participation rates have an important relationship to the overall impact of demographics on the economy since these participation rates directly determine the overall supply of labour at any point in time. In the base case, we have estimated future participation rates based on a projection of trends. To ensure an accurate approach we have examined the historic performance of participation rates at a highly disaggregate level by age groups and gender. This has led the Canmac model to project labour force participation rates to decrease from the actual rate of 63.2 per cent in 2004 to 56.3 per cent by Charts 3.4 to 3.8 show the historic and projected participation rates by age group and gender Chart 3.4: Historic & Projected Participation Rates Males & Females Years of Age Males Females Source: Canmac Economics Ltd., Statistics Canada Chart 3.5: Historic & Projected Participation Rates Males & Females Years of Age Males Females Source: Canmac Economics Ltd., Statistics Canada 44

50 Chart 3.6: Historic & Projected Participation Rates Males & Females Years of Age Males Females Source: Canmac Economics Ltd., Statistics Canada Chart 3.7: Historic & Projected Participation Rates Males & Females Years of Age Males Females Source: Canmac Economics Ltd., Statistics Canada Chart 3.8: Historic & Projected Participation Rates Males & Females 65+ Years of Age Males Females Source: Canmac Economics Ltd., Statistics Canada One of the features of this projection is that participation rates for women and men tend to converge over time, erasing the current disparity. Increasing female 45

51 participation only serves to mitigate what would have been a more severe decline in participation rates. The discussion on participation rates leads to two projections: 1. labour force participation rates will decrease from the present rate of 63.2 per cent in 2004 to 56.3 per cent by 2026; and 2. Female participation rates will continue to rise to the vicinity of male rates amongst the workforce over this period. Productivity The growth rate of productivity is an important determinant of the standard of living (Centre for the Study of Living Standards, 1998). Given the impending demographic shifts, productivity growth is key to the ability for Nova Scotia to continue a sustainable growth path. Recent studies have measured productivity in the Atlantic Region (Iscan & Lesser, 2003). Iscan and Lesser provide productivity trends in Nova Scotia by year and by industry. These are reproduced in Table 3.4. Over the periods, Canadian productivity, defined as GDP divided by employment, grew by 1.26 per cent per year. The corresponding figure for Nova Scotia was 1.1 per cent. As the economy moves to be more service-oriented, productivity growth generally trends lower. This implies that the historic levels of productivity growth will be more difficult to maintain. As such, we have set the base case productivity growth rate to 1.0 per cent annually. 46

52 Table 3.4: Growth Rate of Labour Productivity by Industry, Nova Scotia GDP per employee, % Utilities Construction Manufacturing Trade FIRE Prof. & Tech Management & Admin. Services Education Health Acc. & Food Services Other Services Public administration GDP per hour worked, % Utilities Construction Manufacturing Trade FIRE Prof. & Tech Management & Admin. Services Education Health Acc. & Food Services Other Services Public administration Source: Iscan & Lesser (2003) Note: Annual averages, FIRE is finance, insurance, and real estate: Trade includes wholesale and retail trade; residual industries including agriculture, forestry, mining and oil and gas are not shown. Labour Force Simulations from the Canmac econometric model of the Nova Scotia economy have revealed several critical challenges that policy makers will likely face in the coming years. First and foremost, the simulation results reveal a very tight labour market with the unemployment rate is close to zero in many years. Under reasonable assumptions, it is easy to generate situations where labour demand exceeds labour supply. Hence we can conclude that, perhaps for the first time in its recent economic history, Nova Scotia is faced with a situation where the number of jobs will exceed the number of people willing to participate in the labour market. 47

53 The idea of a base case is to present the effects of demographic changes in a business-as-usual environment. This allows us to look at the changes and see where the potential stress points might occur that government and businesses may be asked to confront. The population projections of the base case are therefore largely extensions of what has happened in the past. The implication of the decline in the size of the labour force associated with age suggests a significant decrease in the supply of labour, on the order of 20.0 per cent by the end of the projection period. If Nova Scotia has a 9.0 per cent unemployment rate today and the latest figures from Alberta argue that 3.0 per cent is virtually full employment, then a contraction in the Nova Scotian labour force of 20.0 per cent, all other things left as they are, is far more serious than the present Western Canadian problem of finding workers. This is what the base case scenario predicts. Chart 3.9: Nova Scotia Base Reference Case Labour Demand and Labour Supply - Person Years (# of persons per year) Labour Force (000's) (1) Employment (000's) (2) Full Employment Labour Force (000's) (3) Source: Canmac Economics Ltd. Chart 3.9 shows what may happen in the labour market under the base case scenario. Nova Scotia reaches 2.22 per cent unemployment in It can be 48

54 assumed that 3.0 per cent unemployment constitutes full employment, as it takes into account those who live where there are no jobs available, are between jobs and who might have some serious physical or cognitive disability that keeps them from working. The chart also shows that demand for labour exceeds supply. Given the scenario s projections, the status quo is not an option for the economic and social well-being o the Province. For the past several decades Nova Scotia s policy-makers have been focussing on creating and sustaining employment opportunities. The next few decade s will require a shift in policy towards a focus on of the labour force availability and skill levels, which may not be an easy shift to make. This policy shift foreshadows current initiatives to recruit and retain people in specific occupations, such as health professionals. This transition period toward a wide-scale labour shortage in 2016 will be characterized by the following: 1) the labour force will grow from 474,600 in 2003 to reach a maximum in 2008 and decline thereafter to 476,480 by 2016; 2) the economy s output as measured by gross domestic product (millions 1997$) will grow from $24.9 billion (1997$) in 2003 to $31.4 billion (1997$) in 2016; 3) employment will grow from 431,200 in 2003 to by 2016; 4) overall, unemployment rates will fall from 9.1 per cent in 2003 to 2.22 per cent by 2016 and; 5) Nova Scotia runs completely out of an available labour supply by 2018 with the unemployment rate reaching zero per cent. Alternative Scenarios The previous section has provided a base reference case that showed under approximate historic trends in productivity, labour force participation, net migration and economic growth, the Nova Scotia economy will reach a point where the demand for employment will exceed the supply of labour. This is of course not feasible. In 49

55 this section we provide three scenarios on how the economy could adjust to the new environment. The appendix provides the detailed projections for each scenario plus the base case and a base case using Statistics Canada Scenario One population. Under Scenario One the low growth scenario, the economy will contract. Under this scenario the economy s growth does not achieve the growth rates consistent with export growth of 2.5 per cent, no policy reactions are allowed by stakeholders. The economy is constrained by labour supply with productivity at historic levels of 1.0 per cent. As we reach the point where the demand for labour exceeds supply, the economy will adjust by increasing wages as employers compete for labour. The increased wages (under our assumption of 1.0 per cent increase in productivity) will result in the Province becoming less price competitive in its exports. For an open economy like Nova Scotia, this will result in a loss of export markets and domestic markets. The economy will contract, shifting labour demand downward and pushing wage rates back to their original levels. Hence, under Scenario One we have an estimate of potential GDP the economy s output consistent with its labour constraint. Under Scenario One, average GDP growth over the 2011 to 2026 period is 0.5 per cent. Historically, GDP growth is 2.0 per cent. Hence the Nova Scotia economy s growth rate will be reduced by 1.5 percentage points if the demographic impact of a reduced labour supply without a policy response is the scenario that unfolds in the future. Under Scenario Two a modest policy success scenario - we postulate that the economy s stakeholders react to the rising wages by increasing productivity, labour force participation and net migration. Under Scenario Two, the economy has moderate policy success. Productivity increases to 1.25 per cent and by 2016, the participation rate is approximately four percentage points above Scenario One's 2016 rate and this gap is maintained. Under this scenario, we find that the economy is able to sustain itself at a growth rate of 1.6 per cent on average per year from 2011 to 2026, with unemployment rates staying above 3.0 per cent until

56 Scenario Three a highly successful policy scenario - we postulate that productivity grows on average 1.5 per cent -- a 50 per cent increase over historic levels, net migration increases by 3,500 per year and by 2016, the participation rates is 6.1 percentage points above Scenario One's 2016 rate and this gap is maintained. Under Scenario Three, policy is very successful. Under this scenario, the Nova Scotia economy can achieve annual growth of 2.0 per cent from 2011 to 2026 as determined by export demand. In this scenario employment is such that unemployment rates stay above 5.0 per cent until Economic Trends The purpose of this section is to provide a long term assessment of the two components that drive the Nova Scotia economy, namely; the goods sector and the services sector. The goods sector is comprised here of the primary sector, manufacturing and construction. The services sector includes commercial services, non-commercial services and public administration. There have been several recent studies of Nova Scotia s long term growth by sector (Conference Board of Canada, 2004, and the Centre for Spatial Economics, 2002). The results for Nova Scotia from the Conference Board s study are provided in Tables 3.5 and 3.6 by major sector. Table 3.7 provides similar results for a Centre for Spatial Economics study. The projections of output are similar in scope, with overall growth in the COPS study estimated at 2.6 per cent compound average over the period and 1.9 per cent over the period. The Centre for Spatial Economics Study projects growth of 2.9 per cent over the 2000 to 2010 period and 1.6 per cent between 2010 and The studies differ significantly in their employment projections. The Conference Board projects employment to grow by 1.0 per cent (average annual compound rate) over the period and to contract by 0.1 per cent from 2011 to The Centre for Spatial Economics study projects employment to grow by 1.2 per cent per year between 2000 and 2010 and 0.7 per cent per year between 2010 and The 51

57 Conference Board projection is more consistent with the low growth scenario developed for this Report. Contrasting this, the Centre for Spatial Economics is more consistent with our high end projections. Table 3.5: Key Economic Indicators for Nova Scotia (average annual compound growth and average values over each five and ten-year period) Nova Scotia Real GDP Nominal Labour Income Nominal Disposable Income Real per Capital GDP Total Population Population 15 and over Labour Force Employment Unemployment Rate (average over period) Participation Rate (average over period) Labour Productivity Consumer Price Index Housing Starts (average over period) 4,651 3,605 3,415 4,128 3,319 2,647 Source: Statistics Canada; Conference Board of Canada ( 2004) 52

58 Table 3.6: Real GDP for Selected Industries (average compound growth per cent) Total Output Agriculture Other Primary Forestry Fishing Mining Mineral Fuels Mining Services Construction Manufacturing Food, Beverage & Tobacco Wood Products Pulp & Paper Printing Mineral Products Rubber, Plastics, Chemicals Fabricated Metals Computer & Electronic Products Autos & Parts Other Transportation Equipment Other Manufacturing Commercial Services Wholesale Trade Retail Trade Transportation & Storage Finance, Insurance, & Real Estate Professional Business Services Computer System Design Other Professional Services Other Business Services Information, Culture, Recreation Accommodation and Food Utilities Other Services Non-Commercial Services Education Health Public Administration Source: Statistics Canada; Conference Board of Canada (2004) 53

59 Table 3.7: The Province of Nova Scotia Projected Growth of Key Economic Indicators and of Output by Industry Key Indicators Real GDP ($92 Millions) 18,578 21,648 26,737 31,385 (Average Annual % Change) Employment (000) (Average Annual % Change) GDP Per Employee ($92 000) (Average Annual % Change) Population (000) ,049 1,075 (Average Annual % Change) GDP by Industry at Factor Cost Total 16,162 18,596 22,968 26,961 (Average Annual % Change) Agriculture (Average Annual % Change) Other Primary (Average Annual % Change) Manufacturing 1,747 2,142 2,582 3,122 (Average Annual % Change) Utilities (Average Annual % Change) Construction 914 1,190 1,282 1,354 (Average Annual % Change) Transportation Warehousing ,120 1,342 (Average Annual % Change) Wholesale Trade 905 1,154 1,434 1,711 (Average Annual % Change) Retail Trade 1,134 1,389 1,700 2,041 (Average Annual % Change) FIRE 2,841 3,338 4,281 5,136 (Average Annual % Change) Business Services ,077 (Average Annual % Change) Accommodation & Food Services (Average Annual % Change) Education Services 1,157 1,152 1,277 1,318 (Average Annual % Change) Health & Welfare Services 1,355 1,389 1,726 2,033 (Average Annual % Change) Other Services 1,104 1,480 1,925 2,309 (Average Annual % Change) Government Services 2,128 1,957 2,403 2,720 (Average Annual % Change) Source: The Centre for Spatial Economics (2002) 54

60 At the sector level, the COPS long term GDP outlook is on balance, the same for goods as it is for services. For example, in the 2011 to 2020 period, construction growth is weak and manufacturing growth is above average. The growth of commercial services are below average while the growth of non-commercial services are above average. A similar story is projected by the Centre for Spatial Economics. Canmac Outlook In our view, the Nova Scotia economy will experience a period of modest growth under our base reference case. Under the assumption of a stable monetary and fiscal environment, a global economy that remains open to free trade despite threats to security and no major disruptions caused by war, disease, or other catastrophes, the Nova Scotia economy will maintain its historic growth relationship to other provinces and the rest of the world. The continuation of historic econometric trends does not imply that the economy will not have challenges or exhibit structural changes. In fact, it implies the opposite. The rise of the Indian and Chinese economies will provide both threats and opportunities. These economies will be built on low wages and hence threaten those industries that provide export oriented jobs such as call centres. The rise of the eastern economies will also provide opportunities for Nova Scotia s manufacturing and service export sector engineering, services, management consulting, and other high knowledge activities. Nova Scotia will have to successfully transform itself into a knowledge based economy if it is to succeed in maintaining historic growth patterns. Its traditional economic base to the extent it is reliant on natural resources will not provide sustainable growth into the future. The economic base of exports from the natural resource industries (e.g., fish and fish products, forest products, and oil and gas) face both natural resource constraints and competition from China and other industrializing countries. The economy will have to transfer itself into the knowledge based, high productivity end of this market (aquaculture, biotechnology). 55

61 In a similar fashion, the manufacturing sector will have to continue its transformation from basic manufacturing to, for example, advanced boat building and ocean technology. Finally, the service sector will have to continue to export its knowledge based activities (software, engineering, graphic design). Our outlook is provided in Table 3.8. We have kept the forecast at the aggregate sector level, namely, goods, services, and public administration. Given the long term nature of the forecast, an aggregate sector forecast provides for a more conservative approach. As discussed above, for our base reference case we see a continuation of recent econometric trends: the service sector will continue to outpace the goods sector as Nova Scotia successfully transforms itself into a knowledge based economy; the goods sector will continue to contribute to growth but become less important over time; the public administration sector, constrained by debt payments, will continue to grow slowly over time. Table 3.8: Nova Scotia Aggregate Sector Outlook Base Case, Average Growth Sector Output Average Annual Growth Rates Employment Average Annual Growth Rates Goods 2.29% 1.15% Services 2.73% 1.41% Public Administration 0.25% 0.20% Source: Canmac Economics Ltd., Statistics Canada (2005d) Overall, we expect the goods sector to have an average annual growth of 2.29 per cent to 2016 and the service sector to have average growth of 2.73 per cent. Goods sector employment will have average growth of 1.15 per cent and service sector employment will exhibit employment growth of 1.41 per cent. The public administration sector will grow by 0.25 per cent with employment growth of 0.20 per cent. After 2016, we have seen in our base reference case that the economy will enter a period of employment demand exceeding labour force supply. This is an untenable position which will require policy adjustments. 56

62 Changes in Goods and Services Demand Expenditure by age data is not generally available at a highly detailed level, however, one can ascertain the importance of the various expenditure components as a function of age by examining Statistics Canada household expenditure data. Statistics Canada provides expenditure data by age of household (Statistics Canada, 2003b). In Appendix D we provide average expenditure by age of household for 2003 for some 140 expenditure items. Shifts in expenditure patterns by age of household provide some important insights into how expenditure patterns will change as society ages. Some of the more interesting results are as follows: Total expenditures increase with age up to the age group and decrease thereafter. The lowest average household expenditure is for the 85+ household at $21,267.19, compared with the average expenditure of $34, Health care costs represent a major portion of total expenditures for the aged. After age 65, health care as a per cent of total expenditures rises from 4.38 per cent for the aged household to 8.85 per cent for the 85+ aged household. Average expenditures across all groups is 2.8 per cent. As a proportion of total expenditures, shelter ranks the highest cost for all age brackets. The actual levels rise with age. Shelter expenditures are per cent of households <25 and rise somewhat unevenly to per cent for the 85+ aged household. Transportation is the second highest ranked expenditure for households from <25 to the aged household. For households in the age group to the 85+ age group, food is the second largest expenditure. The pending demographic shifts in Nova Scotia s population will impact on the relative demand for goods and services. While this impact tends to balance out at the aggregate level, it presents economic development opportunities and challenges for more specific firms. Over the next ten years, baby boomers will move into the 45 to 65 age bracket. This age bracket will constitute over 30 per cent of the population. The youngest of the baby boomers will enter their most productive and high income years while those at 57

63 the upper end will enter retirement living. We have noted that the movement of the baby boom cohort through the age cycle has had a continuing significant impact on the economic, social and cultural fabric of the Canadian and Nova Scotian society. It creates new opportunities and challenges for the private sector, government and the not-for-profit sector. Some of the most significant changes have been documented in a study for the Niagara Economic and Tourism Corporation (Foot, Loreto & McCormack, 1999). The next 20 years will be a period during which the growth in the retiree feeder group (55 to 64) will overshadow the growth of the labour force feeder group (15 to 24). The ageing of the labour force will lead to more diverse forms of labour force participation because: the inclination to work part-time rather than full-time increases as people approach the years of retirement; the older the population in the community, the more they have time to participate in volunteer activities; self-employment is an option that is more attractive after the age of 35; and the likelihood of working at home increases with age, especially after age 55. In the housing market, the age of 55 is a potential watershed in the life cycle. At this age, there is a good possibility for most households that the mortgage is paid up and the children are living on their own. Confronted with the reality of the "empty nest," a number of options regarding housing are potentially available. With age, the composition of household wealth shifts decidedly toward financial wealth. Persons 55 and older accounted for just 22.0 per cent of Canada's population in 1997, yet they received 61.7 per cent of the investment income in Canada. The ageing of the baby boomers involves a number of shifts in the way individuals use their time from: physically demanding sports to less physically demanding sports and passive leisure activities; 58

64 entertainment to cultural activities; independence to dependence in carrying out the daily chores of life. An analysis of the data on major diseases reveals a marked increase after the age of 60. In the absence of dramatic developments in medical technology that reduce the mortality rates for these diseases, population ageing will place great pressure on health care institutions and personnel. High users of physicians' services are individuals who visited a doctor two or more times during the previous 12 months. Although their visitation rate is close to the life cycle average between the ages of 25 to 54, it rises above the average at age 55 and continues a steady upward path after that point. This trend indicates that an ageing population will create pressure not only on the health system's physical infrastructure but also on its human resources (Foot, Loreto & McCormack, 1999, 3-11). As the Nova Scotian baby boomers move into retirement they will have lower incomes resulting in lower tax bills. The movement of the baby boom cohorts through the age cycle has and will continue to have a significant impact on the economic, social and cultural fabric of society. It creates new opportunities and challenges for the private sector, government and the not-for-profit sector. For instance, some of the more significant business opportunities that will emerge in the adult living sector may include: active living, adult learning, accessible transportation, universal design, homecare, assisted living, coaching, alternative health care treatments, information technology, health insurance, hospital services, and housekeeping services. Fiscal Impact At the macro level, it is the overall matching of aggregate demand with aggregate supply that determines the economic health of the provincial economy. Aggregate demand for open economies like Nova Scotia is dependent on success in export markets. However, the impending demographic shift provides an important new factor in aggregate demand. 59

65 An important consideration for the fiscal health of the Province is the revenue from personal income taxes which are from earned and unearned income (e.g. CPP, RIFF, pensions, interest payments). As people age and leave the workforce, individual transfer payments and pensions form an important part of their income. If this income is less than pre-retirement income, people will pay less income tax which has fiscal implications. The impact of demographics on the Province s fiscal position has both positive and negative effects. The Province will benefit from the demographic effects in areas dominated by a younger population. For example, the student population is expected to contract 31.5 per cent in our base case. Under an optimistic output to cost ratio this would argue for a potential cost savings of 31.5 per cent. There is also a positive fiscal impact as the Province s employees retire. Retirees typically leave with higher salaries than new entrants are paid. Discussion with officials at the Public Service Commission suggest that the Nova Scotia government will face retirements in the range of 2.5 to 3.0 per cent per year over the next 10 years given no strong policy thrusts to reduce this rate. Services that are geared to the older population will expand. These areas include primary health care, pharmacare, and community services to serve an ageing population. The Canmac model projects (before accounting for the demographic effect) a modest surplus in the provincial fiscal position. We have estimated the demographic impact on health expenditures (the largest provincial expenditure item) under each of the demographic scenarios discussed previously. Table 3.9 shows the impact of age on health expenditures for 2006 and 2026 under the Canmac base case. Table 3.9 applies 2003 per capita health expenditures by age to the population in 2006 and In 2006, the over 65 population accounted for 29.5 per cent of total health costs. In 2026, the over 65 population will account for 42.8 per cent of total health costs. 60

66 Table 3.10 shows total health expenditures by demographic scenario. The increase in total health costs due to demographics increase in 2003$ from 5.0 per cent under our base case to 19.0 per cent under Statistics Canada Scenario Six. Health care costs based on historic trends will rise significantly without the demographic impact. A recent study by Matteo (2004) on provincial health expenditures notes that the impact of time (a proxy for productivity technological change, etc.) accounts for over 40.0 per cent of the increase in health costs with the 65 and over age group accounting for 19.5 per cent. Hence one can expect to see health expenditures rise with or without age related effects. The age effect will add a significant additional burden to provincial expenditures. In the final analysis, the demographic impact on the Province s fiscal position will be the result of management decisions. The potential impact provides the opportunities for savings and the challenge of expenditure increases. Table 3.9: Health Expenditures by Age 2006, 2026 (2003$) Age Group 2006 % of Total 2026 % of Total 0-4 $89,239, % $76,142, % 5-14 $227,435, % $178,515, % $2,872,520, % $2,317,505, % $2,308,360, % $2,109,976, % $761,103, % $1,304,458, % $868,708, % $1,372,018, % 85+ $665,512, % $825,279, % Total $7,792,879, % $8,183,895, % Note: Total health expenditure refers to the sum of the public and the private sectors. Source: Statistics Canada, Canmac Economics Ltd., National Health Expenditures Trends (2005) 61

67 Table 3.10: Nova Scotia Health Expenditures by Alternative Population Scenario % Change NS Base Case $7,792,879.5 $7,967,232.7 $8,058,388.3 $8,112,536.7 $8,183, % Scenario 1 $7,718,644.2 $7,970,809.9 $8,191,678.5 $8,434,175.6 $8,755, % Scenario 2 $7,717,058.0 $7,954,204.2 $8,175,344.3 $8,429,913.2 $8,771, % Scenario 3 $7,727,684.9 $8,000,854.0 $8,272,114.4 $8,577,528.1 $8,972, % Scenario 4 $7,735,285.2 $8,039,633.2 $8,351,274.2 $8,700,172.3 $9,143, % Scenario 5 $7,723,207.9 $7,981,903.0 $8,222,529.3 $8,504,512.7 $8,861, % Scenario 6 $7,730,077.8 $8,040,943.8 $8,357,276.0 $8,718,227.7 $9,201, % Source: Statistics Canada, Canmac Economics Ltd., National Health Expenditures Trends (2005) 3.3 Social Impacts This section describes major social implications and challenges that stem from the forthcoming changes in the size, age and gender structure of the Nova Scotia population over the next 20 years. The challenges are described under the five broad headings: Inter-generational Relationships Volunteerism Family Structure Issues Women in the Workforce Social Inclusion Inter-generational Relationships The base case projection indicates that by 2026 persons aged 65 and older will make up about 24 per cent of the population (about 217,000) compared to about 14 per cent in 2001 (about 128,000). In 2001 for every 100 persons aged 0 64 there were about 16 persons aged 65 and older. This ratio will shift significantly by 2026 so that for every 100 persons aged 0 64 there will be about 32 persons aged 65 and over. The almost doubling of the ratio of persons aged 65 and over to the rest of the population has implications for the scope and number of relationships that will 62

68 exist between the two age cohorts. The fact that the size of the senior age group population will expand in the near future is itself reason to pay renewed attention to the challenges and opportunities brought forward by that growing population. Nova Scotia's "Strategy for a Positive Ageing in Nova Scotia (Seniors Secretariat, 2005) outlines the issue of "Celebrating Seniors" that is fundamentally about changing attitudes towards the capabilities and roles of seniors in society and hence the nature and intensity of their relationships to the younger age cohort. Attitudes that that limit the scope and intensity of the integration of those 65 years of age and older into the mainstream of the society will detrimentally affect the social and material quality of life of both the younger age cohort and the seniors cohort. For example, Nova Scotia, and Canada in general, if they are to avoid labour shortages without substantially increasing numbers of immigrants, must accommodate seniors in the employed labour force. As well, many seniors will need to work beyond the historical date of retirement at 65 in order to maintain their desired standard of living. The retirement age of 65 was set in Germany in 1876 when life expectancy at birth was about 50 years (The United States Social Security Administration, 2006). In 1934 the United States President Franklin Roosevelt created the Committee on Economic Security. The Committee recommended a retirement age for Social Security purposes of 65 years. In 1935 average life expectancy at birth was 62 years compared to over 77 years today (National Vital Statistics, 2004). Members of the Baby Boom generation can expect more retirement years than retirees in the 1930s but still have to try to save sufficient funds over the same number of working years. As a result, many may need to keep working to supplement their pensions. However, age is often related to seniority and thence to pay. For a number of reasons, boomers who want to continue to work after formal retirement will, in some situations, need to accept that their wages will be based on what they are worth to their employer rather than their salaries at the top of their 63

69 careers. While a shortage of skills might push up wages for all workers, older ones nevertheless may have to accept a relative decline in salary and status (The Economist, 2006a,11). The reasoning for this is complex and still subject to some debate. The literature indicates that there is no significant difference between the job performances of older and younger workers. Studies have found (see Warr, 1994) that variations within each age group were much larger than between them. A paper by Fitzgerald (2002) goes on to suggest that older workers may be productive in different ways. Older workers may be better at tasks that require the integration of broader and longer-term experience. Hence, relationships and roles in the workplace may need to evolve so that the productivity that comes with the ability to integrate a wide range of experience into the productive process is valued in a similar way that the ability to bring and adapt to new technology in the workplace is valued in the current world of work. Several empirical studies have shown that there is little significant overall difference between the job performance of older and that of younger workers (Human Resources and Skills Development Canada, 1999). As Fitzgerald suggests, with a broader definition of productivity and other things being equal, younger and older workers can be equally productive (Fitzgerald, 2004). However, Bound (1997) reports that one of the causes of large productivity differences within (versus between) age groups is poor health, and that poor health is significantly related to age. The risk of poor health and disability rises with age, and the onset of health problems affects the timing of retirement. Yet there are contradictions. Increases in longevity appear to have been accompanied by a significant reduction in the incidence of disability at older ages. Recent research has shown that the percentage of those over 65 in the United States who had a disability that caused a substantial limitation in life activities decreased to 19.7 per cent in 1999 from 26.2 per cent in These data suggest 64

70 that the extent to which poor health reduces the productivity of workers at any given age is declining. Another perception is that older workers are less adaptable to changing skill requirements and that this in time will impact their productivity. Yet, the International Adult Literacy Survey (OECD & Statistics Canada, 1995) literacy scores are substantially lower for older individuals, but when the results are controlled for demographic and economic variables, the data suggest that literacy skills generally decline only modestly between ages 40 and 65. Evidence from the IALS also indicates that literacy skills improve with practice and deteriorate if not used: workers, regardless of age, in a learning environment appear much less susceptible to a decline in trainability. In looking at the situation of older displaced workers, the ILO (International Labour Organization, 1998) recently argued that policies are needed to allow for training throughout one s working life in order to avoid the obsolescence of skills. While it may be too late to correct for the low educational attainment of many displaced older workers today, for the older worker of tomorrow, training today is even more important in light of the greater responsibility that will be placed on older workers in the labour market (Human Resources and Skills Development Canada, 1999, 8). Based on the above discussion we expect that policies will need to be implemented that encourage and accommodate older workers to remain active in the labour force should overall productivity gains not keep pace with the declining numbers in the core labour force age group and to re-tool the skill sets of older workers so that they can effectively work in the economy of the future. In 2005, 61.8 per cent of Nova Scotians ages were in the labour force. The United States, Japan, Denmark, Norway, New Zealand, Sweden, Switzerland and Iceland all had higher labour force participation rates for the same age group, from 70 per cent for the United States and up to 90 per cent in the case of Iceland (OECD, 2005). Hence, there seems to be plenty of room for Canada to increase the participation rate of older citizens. 65

71 On the other side of the equation, if employers and policy-makers wish society to have access to a larger pool of labour, then they must adapt their taxation and human resource management practices to encourage older workers to remain active and in the workforce. This will require collaboration across all levels of government and with private sector. Policy makers need to examine ways to facilitate the labour force participation of older workers. For example, seniors should not be subject to reductions in pensions if they choose to accept fewer hours or pay cuts to extend their working life and work schedules may require added flexibility. If employers want to retain older workers, and older workers want to stay in the workforce, both need to accept this emerging new relationship. Beyond participation in the labour force, other issues exist. The absolute increase in the size of the population aged 65 and over and its large increase relative to the size of the population aged 25 to 64 (about 514,000 in 2001 and about 473,000 in 2026) suggests that more persons aged 25 to 64, for longer time periods will be involved in care and support of senior citizens. In 2001 there were about 25 persons aged 65 and over for every hundred persons aged 25 years to 64 years. By 2026 there will be about 46 persons aged 65 and over for every 100 persons aged 25 to 64. The Strategy for Positive Ageing in Nova Scotia" (Seniors Secretariat, 2005) begins to address the consequences of this structural shift in its recommendations to create communities that are supportive of seniors by: assisting Nova Scotia communities that have large concentrations of population over the age of 65 to be senior ready; making it easier for persons in the active labour force and for seniors to participate in volunteer activity; expanding older adult education opportunities for seniors; paying special attention to the creation of support systems in small rural communities; 66

72 developing true partnerships in establishing appropriate funding levels with non-governmental organizations; and implementing the Nova Scotia Elder Abuse Strategy. Clearly, given the large growth in the senior numbers, substantially more attention and investment will need to be paid to seniors' housing needs. The "Strategy for Positive Ageing in Nova Scotia" provides a wide range of recommendations for housing options for seniors that could help respond to the growing need. Waiting lists for appropriate seniors' housing and for long-term care facilities are already long in Nova Scotia and it stands to reason that, without accelerated attention, the deficit in supply could easily become worse. Impacts on Volunteerism Volunteering is the backbone of the not-for-profit sector. It is an important contributor to the well-being of families, communities, and individuals across the country. The idea of social capital has often been used to describe the links and benefits of volunteering. The rate of volunteerism is highest among persons with a university education (56 per cent in Nova Scotia) and secondly among persons aged 50 to 64 (42 per cent) (Statistics Canada, 2000). Seniors provide substantial volunteer services. For example, the "Strategy for Positive Ageing in Nova Scotia" points out that the majority of persons that account for the contribution of about 75 per cent of all volunteer hours in Canada are seniors, who in general are aged 65 to 74 (Seniors Secretariat, 2005). The demographic impact of volunteerism is provided in Table 3.11 by each demographic scenario. We used existing rates of volunteers per age group and applied these to the population projections by age group. The demographic impact ranges from an increase of 6.58 per cent for the base case to per cent under scenario six. 67

73 Table 3.11: Demographic Impact, Volunteer Hours 2006, 2026 Population Scenario Volunteer Hours Volunteer Hours % Change Base Case Scenario Scenario Scenario Scenario Scenario Scenario Source: Canmac Economics Ltd. Based on current volunteering trends, the coming change in the demographic age structure could bode well for the health of the volunteer sector. However, at the same time that we would hope these trends would support the future of the volunteer sector, we will also be searching for labour to fill the ranks in the wage economy. Greater demands placed by the workplace on persons aged 50 and older and encouragement for later retirement could reduce the rates of volunteering among the age groups traditionally most inclined to provide volunteer support in their communities. The cautious conclusion is that Nova Scotia cannot assume that the ageing population structure will produce the level of volunteer hours that past trends suggest. Attention must be paid to ensuring that barriers to volunteering related to work conditions, personal expenses, training, and so on do not depress the ability of people willing to volunteer time to the Nova Scotia community. Family Structure Issues The form and operation of the family structure has changed and will continue to change in response to social and economic forces. These forces have led to a large number of women entering the workforce, lower fertility rates and smaller families, delayed family formation, the rise of one-parent families with children from about 17 per cent of all families with children in 1981 to about 25 per cent in 2001 (Statistics Canada Censuses, 1981, 2001). Forthcoming changes in Nova Scotia s demographic structure include an increase in the ratio of persons 65 years of age and over to the prime working age population (25-59 years of age). 68

74 In 2001, there were about 3.7 persons aged available to take direct responsibilities for every senior for related care and to contribute taxes to government to provide public sector delivered services. By 2026, the ratio of persons aged to persons aged 65 years and over will drop to about 1.9, which represents a 49 per cent decline. The magnitude of these changes is indicative of the increasing proportion of time and effort that will be required by families to maintain supportive relationships between their younger and older members. Demographic trends over the past 30 years toward smaller families combined with the future movement of the baby-boom population into their senior years means that there soon will be fewer middle-aged people to take care of seniors than in decades past. In addition, increased mobility of families puts strain on their ability to provide care for ageing parents. Jenson (2001) summarises the consequences of these developments and their impact on family structure and the operation of the family as the blurring of the distinction between work and life outside of work. As the world of work collides with the demands of life outside of work, she notes that new ways need to be discovered to enable the two to co-exist and be mutually supportive. Clearly, the private sector, for the good of its employees and hence its own well-being will need to respond to help families of the future strike work-life balances that match the realities of the family structures, size and family care relationships that the demographic changes will only serve to intensify (Jenson, 2004). Given the shift to smaller families and the rising ratio of seniors to the middle-aged reliance on the historical model of families as the primary care-provider for elder family members may not long be sustainable. Jenson argues that this model is no longer functioning and the public sector has yet to put polices in place that address the change. This means that more pressure may be placed on private and public 69

75 institutions to provide substitutes for family care. However, the declining numbers of middle aged persons may put strains on the ability of the public sector to collect sufficient taxes to provide the kind of care the community deems appropriate. Pressure on the middle-aged also comes from the younger cohorts. As of 2004, over 40 per cent of young adults in their 20s were living at home, up from 20 per cent in Rising demands for educational credentials mean their real work careers start much later in life. [t]he relative earnings of young adults have been falling for over two decades. Postponed adulthood combined with declining entry-level wages means that both the cumulative earning and the accumulated wealth of adults in the mid-30s have fallen dramatically since the end of the 1970s. (Beaujot, 2004) There are suggestions that this may change as the need for employees may force companies and governments to take on those with less credentials and to depend on part-time education and on-the-job training for upgrading. At the same time, family earnings for many young families have been rising as a result of higher female employment. According to the Canadian Council on Social Development, postponed adulthood is the major driver of low fertility that is characteristic of almost all post-industrial societies (Myles, 2005). Myles (2005) comments that when asked about the number of children they would like to have, the most frequent response of young Canadians is two; the second most frequent response is three. This means that young Canadians are not reaching their ideal family size. This may be occurring for a number of reasons such as the time it takes to obtain one s education and establish a career and household. By waiting until they are established in their careers and households, women are delaying the decision to have children. By postponing the decision to have a child after past the mid-30s, it may become to late for many women to have a second child. The average age of first births in most 70

76 of Europe is now 30 (Kohler, Billari & Ortega, 2006). Because of this delay, one child becomes the apparent social norm. There is a similar trend underway in Nova Scotia. Both the public and private sectors may have to examine what might be done over the long term to affect this trend. Unless the conflict between the desire to establish families and the demands of the workplace can be ameliorated, this trend is likely to continue. From 1988 to 1997, the Government of the Province of Quebec implemented a program that offered substantial financial incentives for additional children in families. It continues to offer the most affordable and widely available child care program in Canada. The Province s total fertility rate was 4.0 births per woman aged 15 to 49 in This decreased to below 2.1 in 1970, to 1.6 by 1991, and stabilised at about 1.6 until 1998 at which case is decreased to about 1.5 by 2003.In 2003, Quebec had the third lowest total fertility rate among the provinces at 1.5. In the same year, Nova Scotia has the second lowest rate at 1.4 per women aged 15 to 49 (Statistics Canada, 2005a). Based on these data, the ability of financial incentives for larger families and low cost, widely available child care to raise fertility rates seems inconclusive at best. However, the key may be that policies supporting families need to be multi-faceted to address the variety of needs among families. Following up on research by Japan s Ministry of Internal Affairs and Communications and other research groups in Europe, The Economist (2006b) offered that: It seems that if higher female labour participation is supported by the right policies, it need not reduce fertility. To make full use of their national pools of female talent, governments need to remove obstacles that make it hard for women to combine work with having children. This may mean offering parental leave and childcare, allowing more flexible working hours, and reforming tax and social security systems that create disincentives for women to work. Countries in which more 71

77 women have stayed at home, namely Germany, Japan and Italy, offer less support for working mothers. This means that fewer women take or look for jobs; but it also means lower birth rates because women postpone childbearing. Japan, for example, offers little support for working mothers: only 13 per cent of children under three attend daycare centres, compared with 54 per cent in America and 34 per cent in Britain (The Economist, 2006b, 73). High female participation rates and high fertility rates need not be mutually exclusive. As a point of reference, in 2001, the female participation rate in Canada stood at 56.5 per cent and the fertility rate stood at 1.5, well below that of economically developed countries with much higher female labour force participation rates. A recent study by Jaumotte (2005b) made the following conclusions based on an analysis of OECD countries: [p]olicy distortions and market failures seem to maintain female participation at sub-optimal levels in many countries; [r]eforms of family taxation and family support (towards more childcare subsidies and some parental leave) can go a long way to raise the participation of women; and [a] careful design of policy is needed to keep the cost of reforms low, limit other negative participation effects, and preserve equity between different family types (Jaumotte, 2005b, 27). Many visible minorities in Nova Scotia do not face the same changes in their demographic structures as the rest of the Province. For example, as discussed below, the Aboriginal and African Nova Scotia populations have a younger age profile and their overall numbers are growing much more quickly that those of the rest of Nova Scotia. The fertility rates of these groups remain relatively high. However it is probable that these fertility rates may decline as the educational levels and associated socioeconomic conditions of these groups improve. 72

78 The age structure of the immigrant population and immigrant families is younger than that of the average for Nova Scotia. The fertility rates of these immigrants may differ from Canadian norms, at least in the first generation. In addition, immigrants, who are more likely to be visible minorities, face challenges related to social acceptance and integration, language, and recognition of credentials that would facilitate establishing their economic footholds. Demographic changes will exacerbate the stress associated with child and senior care. First, there will be fewer middle-aged persons to care for seniors. Second, as the size of the core group of the labour force age group reduces, the economy s demand for labour will likely further increase the participation rate of females in the labour force. Third, females continue to be primary caregivers for children and seniors. Without additional support for child and senior care from non-traditional caregivers, the volunteer community, the private sector and/or the public sector, the demands on women for unpaid care giving will reduce their personal quality of life and their ability to contribute meaningfully to the economy. Women in the Workforce and Retirement The participation rate of women in the labour force was about 29.0 per cent in 1961 and rose significantly to about 52.0 per cent by 1981 and then climbed more slowly to about 56.5 per cent in 2001 (Statistics Canada, Census, 1961, 1981, 2001). During this period, the shift from a goods economy to a service based economy was accompanied by the entry of women into higher education and higher paying professions. Despite these gains, the role of women as primary child and senior adult caregivers has not changed as significantly which is a major factor in women s delayed advancement within their chosen professions. In most Nova Scotian husband-wife families, both partners are now employed, including most women with very young children. While in 2003 more than half of all Nova Scotian women in the labour force had paying jobs, a further rise in this rate 73

79 toward male participation rates, as noted in the base case figures above, does not give similar relief to the labour pressures the next decade will bring. Women are much more likely to be working part-time and tend to be concentrated in relatively few occupational categories. Nova Scotian women who work full-time earn, on average, about 30 per cent less than their male counterparts, in part as a result of occupational clustering (Nova Scotia Advisory Council on the Status of Women, 2001). Women s economic disadvantage extends across their entire lifespan, so it is not surprising that they are less likely to be eligible for or earn less benefits under a pension program. They are also likely to make smaller RRSP contributions than men due to interruption in work. This means that unattached senior women, often widows, will continue to have high poverty rates and need more government assistance 3. The low-income situation of women and the change in Nova Scotia s demographic structure have both short-term and long-term policy implications. In the short-term, the number of women over the age of 65 will increase significantly and this cohort will live longer and therefore the policy challenge will be to provide income and other supports to the growing number that have not had sufficient time in the labour force or the opportunity to work in higher paying jobs to build wealth for retirement. The longer term policy challenge is to ensure that the situation does not repeat itself for women who are now just entering or are early in their working careers. Earlier sections of this report that discussed raising the participation of women in the workforce, work-place accommodation of their social roles as primary care givers and changes in social policy and business practice that enable women and 3 The incidence of poverty among women aged is about 9% higher than that of men of the same age. Women aged are 15% more likely to be poorer than men. The differences escalate at age when women are 36% more likely to be poor and spike to a 125% greater likelihood of being poorer than men at age 65 and over. Source: The Dynamics of Women s Poverty in Canada, Lochhead, Clarence; Status of Women Canada,

80 men to make and establish more meaningful family friendly workplace practices. Also, young women will need to be informed about the implications that present policy and life choices will have on their future. Policies that accomplish these objectives would mean that the economy will be stronger, government revenue will be increased and women will have more control over their material well-being during their retirement years. Social Inclusion The concept of social inclusion grew out of concern in developed countries, particularly in Europe, that immigrants are being more marginalized than integrated into the larger society than previous generations of immigrants. Social inclusion involves the basic notions of belonging, acceptance and recognition - for immigrants and refugees, social inclusion would be represented by the realization of full and equal participation in the economic, social, cultural and political dimensions of life in their new country (Omidvar & Richmond, 2005, 3). The concern is no less valid in Canada, especially in the larger urban areas. The general trend is summarized by Shields: [t]he great difficulty is that since the 1980s immigrant performance in the Canadian labour market has deteriorated precipitously, dampening the possibilities of economic integration and expanding the dimensions of immigrant social exclusion (Shields, 2002, 21). The underlying concern can easily be extended to other excluded groups included in the following pages of this report. The brief descriptions will show there has been limited progress for these groups in Nova Scotia. With the projection of key economic indicators as shown in Table 3.5, a powerful new argument for social inclusion emerges: social inclusion is now an economic imperative. While increasing immigration, improvement in productivity and postponing retirements will all likely play their role, social inclusion needs to be recognized as a vital factor in mitigating the negative effects of demographic change on the economy. Nova Scotia needs to include and enable all the socially marginalized groups as they are a significant untapped human resource. In this 75

81 section we profile three populations, African Nova Scotians, Aboriginal Nova Scotians and Persons with Disabilities. African Nova Scotians 4 Visible minorities are defined by the Employment Equity Act as persons, other than Aboriginal peoples, who are non-caucasian in race or non-white in colour. Statistics Canada does not ask individuals to identify themselves as African Nova Scotians or African Canadians. Instead, they have a category for Black. However, in this report we use the term African Nova Scotian to capture the Black population. Provincially, 34,525 individuals identified themselves as visible minorities in 2001 which accounted for just under four per cent of Nova Scotia s total population. A total of 19,760 individuals identified as African Nova Scotian accounting for 2.2 per cent of the provincial population and approximately 57 per cent of the visible minority population. Between 1996 and 2001, the African Nova Scotian population increased by 8.6 per cent. This stands in contrast to the 0.1 per cent decline of Nova Scotia s total population over the same period of time. The African Nova Scotian population is younger than the general population. In 2001, approximately 51 per cent of African Nova Scotians were under 30 years of age compared with 37 per cent of the general population. Almost 30 per cent were under the age of 15 compared to 19 per cent of their counterparts in the general population. In general, African Nova Scotian education levels are lower than the general population but improving over time. Amongst this population, those who were 15 years of age and over, almost 11 per cent were university graduates, in comparison with 17 per cent for the general population in At the other end of the educational continuum, approximately 44 per cent of African Nova Scotian people have less than high school diplomas compared with 35 per cent of the general population. 4 Unless otherwise stated, the data on the African Nova Scotian population included in this section is from Rushe (2005). 76

82 The 2001 Census reported that 57 per cent of the African Nova Scotian population participated in the labour force, compared with approximately 61 per cent of the general population. African Nova Scotians have higher unemployment rates compared with the general population (15 per cent versus. 11 per cent). In 2000, for the African Nova Scotian population 15 years of age and over, employment income represented 68 per cent of total income compared with 71 per cent of their counterparts in the general population. Government transfer payments accounted for approximately 23 per cent of total income for the African Nova Scotian population 15 years of age and over compared with 16 per cent for the general population. At $19,523, the average income for African Nova Scotian was about 23 per cent lower than that of the general population in Lower participation, higher unemployment and lower wages lead to lower incomes. In 2000, 36 per cent of African Nova Scotian families were living below the Low Income Cut-offs (LICOs) compared with 13 per cent of Nova Scotian families. The disparity becomes more acute when children under the age of 15 are considered. According to Census 2001, close to 47 per cent of African Nova Scotian children in this age category lived in low income situations compared with 21 percent of children in general. The base case labour force participation rates are projected to decrease from the rate of 63.2 per cent in 2004 to 56.3 per cent by The African Nova Scotian population is likely to continue to grow during the same period and their participation rate could increase and potentially fill some of the gap left by the general participation decline with the right policy supports. However, with no change to current policies, the number of African Nova Scotian people in low income will likely increase. 77

83 Aboriginal Nova Scotians 5 There are many ways of defining the Aboriginal population, which can result in different estimates of its size. There is no single or correct definition and the choice depends on the purpose for which it is to be used. This report uses data on the Aboriginal Identity population. The Aboriginal Identity Population refers to individuals who reported identifying with at least one Aboriginal group, i.e. North American Indian, Metis or Inuit and/or who reported being a Treaty Indian or a Registered Indian as defined by the Indian Act of Canada and/or who reported they were members of an Indian Band or First Nation. In 2001, 17,010 or approximately 2.0 per cent of individuals in Nova Scotia identified themselves as Aboriginal. Between , this population increased from 12,380 to 17,010 or 37 per cent. The Office of Aboriginal Affairs reports that much of this increase reflects an increase in the number of people choosing to identify themselves as Aboriginal. According to The Office of Aboriginal Affairs, since 1998 the Aboriginal population growth rate has averaged about 2.0 per cent per year compared to an average of 0.2 per cent for the general population. However, this is down from 3.1 per cent for the period 1993 to The Aboriginal population in 2001 was much younger than the general population. Approximately 50 per cent of the Aboriginal population was under 25 years of age compared with 31 per cent the general population. The median age of the general population was 38.8 years compared with 25.3 for the Aboriginal population. Chart 3.10 compares the general cohort distribution of the two populations in 2003: 5 Unless otherwise stated, the data on the Aborigional Nova Scotian population included in this section is from Rushe (2005). 78

84 18 Chart 3.10 Population Distribution of Nova Scotia Aborigional Identity Population and Total Nova Scotia Population, years 5-9 years years years years years years years years 65 years and over Population reporting an Aborigional Identity Nova Scotia Population Source: Census, 2001 The 2001 Census shows that Aboriginal people are more likely to have lower levels of education than the general population. In 2001, 41 per cent of Aboriginal people in Nova Scotia had less than high school compared to 35 per cent of the general population. Six percent of Aboriginal people aged 15 and over held university degrees compared with 14 per cent of the general population aged 15 and over. Among Aboriginal youth, aged 15 to 24, just over 51 per cent were attending school full or part-time as compared with 63 per cent of the general population in Overall, the labour force participation rate for the Aboriginal population in Nova Scotia was only slightly less than that for the general population (60.6 per cent versus 61.6 per cent) in However, the Office of Aboriginal Affairs points out, this is the result of differences in age structure of the two population groups. Within each age group, participation rates of the Aboriginal population are significantly 79

85 lower than those of the Nova Scotia population. The previous chart indicates that there are smaller relative percentages of older people in the Aboriginal group. Participation Rates Aboriginal and non-aboriginal Aboriginal Identity population (age range) population (%) (%) and over and over Source: Nova Scotia Office of Aboriginal Affairs, Aboriginal People in Nova Scotia s Labour Market (Draft) (undated) In 2001, the unemployment rate for Aboriginal population was 22 per cent which is more than double the rate for the general population (10 per cent). For the onreserve Aboriginal population, the unemployment rate increases to just over 30 per cent. In 2000, for the Aboriginal population 15 years and over, government transfer payments represented 25 per cent of total income compared with 16 per cent for their counterparts in the general population in Nova Scotia. Average income for Aboriginal people, 15 years and over, was approximately 35 per cent lower than that of the general population ($16,646 vs. $25,297). In 2000, 31 per cent of Aboriginal families in Nova Scotia were living below the LICOs compared with 13 per cent of Nova Scotian families. Almost one in four (39 per cent) Aboriginal children under 15 years of age in the province lived in low income situations in 2000 compared with 21 per cent of all children. Since the 2001 Census, there have been significant economic successes at the Millbrook and Membertou reserves. The results of these successes are not captured here. The promising economic growth on the Millbrook and Membertou reserves has improved the employment rate, but it is too early to determine the impacts on lifestyle, health, population levels, and education. 80

86 Aboriginal reserves are largely in rural areas thus the rural/urban shift in the general population will mean declining services for the majority of the Aboriginal Identity population living on reserves and in rural areas. Some of these changes may include: declining health services and health levels for all age groups on reserves; increasingly limited access to trades people and local employment/apprenticeship opportunities; and even fewer employment opportunities for youth on reserves, regardless of gains in education However, for the Aboriginal Identity population in general, impending labour shortages in Nova Scotia may provide new opportunities. For example, there are currently recruitment initiatives in the trucking, trades and automotive sectors, to name a few that will target the Aboriginal workforce. In addition, important economic development initiatives related to set aside contracts and affirmative action policies of government have increased employment and economic benefits on the Membertou and Millbrook reserves. The improvements were not due to government policies alone. The Mi'kmaq community at Membertou received official ISO 9001:2000 certification in 2002, making them the first Indigenous Government in Canada, and likely the world, to meet internationally recognized business standards. Such success points out the potential of untapped human resources in Aboriginal communities. Persons with Disabilities 6 Individuals are considered to have a disability if they have a physical or mental condition or a health problem that restricts their ability to perform activities that are normal for their age in Canadian society. It is important to note that individuals completing the Census form self-identified as to whether or not they have an 6 Unless otherwise noted, statistics in this subsection are drawn from Census 2001 and the subsequent PALS data appearing in Rushe, Michael. Environmental Scan Highlights Nova Scotia Region, Service Canada, November,

87 activity limitation. Data on Persons with Disabilities are taken form a report by McFadyen (2004). In 2001, 152,210 persons lived with some form of disability in Nova Scotia, according to the 2001 Participation and Activity Limitation Survey (PALS). This is approximately 17 per cent of the total population and is the largest proportion of any province. (The national average in 2001 was 12.4 per cent.) In part, the higher rate of persons with disabilities occurs in Nova Scotia because many disabilities are age-related and occur amongst seniors (65 and over). Approximately five per cent of Nova Scotians report a disability between the ages of while 61 per cent who are 75 and over report some level of disability. The prevalence of most types of disabilities increases with age. Mobility, agility, and pain-related disabilities are the most common types of disabilities among adults. A large percentage of persons with disabilities experience multiple types of disability, less than 19 per cent of adults with disabilities report having only one type of disability. For females the most commonly reported disabilities rank as follows: mobility, pain, agility, hearing, and seeing. For men it is pain, mobility, agility, hearing and learning. Table 3.12: Demographic Impact Disabilities % Change Base Case 170, , Scenario 1 170, , Scenario 2 170, , Scenario 3 170, , Scenario 4 170, , Scenario 5 170, , Scenario 6 170, , Source: Canmac Economics Ltd. The demographic impact for persons with disabilities is provided in Table We applied Nova Scotia disability rates by age group to each of the population scenarios. As shown in Table 3.12, the levels of disabilities increase under ageing 82

88 population Scenarios. The increase ranges from per cent under the base case to per cent under Scenario Six. According to McFayden, persons with disabilities are educationally disadvantaged. Amongst men with disabilities, 43 per cent have not completed high school compared with 32 per cent of men without disabilities. Amongst women with disabilities, 38 per cent have less than high school compared to 27 per cent of females without disabilities. Chart 3.11 shows corresponding deficiencies for persons with disabilities at all levels of education. Chart 3.11 Source: Statistics Canada (2003d) In Nova Scotia, labour force participation rates for persons with disabilities were almost half the rate for the general population in 2001 (31 per cent vs. 61 per cent). At $19,246, average income for persons with disabilities in 2000 was approximately 22 per cent below the average income level of their counterparts in Nova Scotia without a disability ($24,523). Disabilities within this group vary. Recruitment and retention of persons with disabilities depends on attitudinal change and 83

89 accommodation in the workplace. Human resource management professionals need to be educated and informed as to how they can best facilitate the participation and employment of persons with disabilities. Chart 3.12 Source: Statistics Canada (2003d) 3.4 Regional Impacts Demographic impacts have a regional dimension. The following studies have examined the rural/urban dimension in Nova Scotia and Atlantic Canada: Canadian Institute for Research on Public Policy (CIRPP), 2005, Atlantic Provinces Economic Council, 2006, Malatest & Associates, As a general theme, we find that the more rural areas will be more negatively affected by demographic changes than urban areas and those rural areas adjacent to urban centres. Appendix E provides a detailed population forecast by county by age category by gender. More specifically, these studies concluded that: 84