Assistant Professor, Department of Economics
Wilfrid Laurier University
Retrain or Retire: Options for Older Workers Following Job Loss" with
Christine Neill, in Retirement
Policy Issues in Canada, edited by Michael G. Abbott, Charles M. Beach,
Robin W. Boadway and James G. MacKinnon.
|Prepared for the John
Deutsch Institute Conference on Retirement Policy Issues in Canada,
As the Canadian population continues to age, so does its workforce. There are concerns among policy makers that stark labour shortages may occur as the baby boomers enter retirement. There are also concerns that an ageing workforce is less mobile, less able to adjust to technological change and other shocks to the economy, and may be particularly hard hit by job loss. Policies designed to reduce the costs to older individuals affected by such labour market shocks could potentially improve the adjustment of the economy over the long run, and have been the subject of considerable recent policy interest.
Both these policies involve substantial targeting of resources to older workers. Is such targeting of resources toward older workers merited or even useful? Could these resources be used more efficiently elsewhere? Here, we focus on workers who are displaced – they lost their job due to company closure or business slow-down rather than simply being laid off.
We show that the costs of displacement for older workers are not substantially greater than the costs of displacement for younger workers. Both younger and older workers are likely to experience large and persistent earnings losses following job displacement. Because older workers have a shorter expected remaining working life, their responses to displacement will systematically involve a higher retirement rate and lower rate of participation in training and education.
Developing an appropriate policy response to assist older displaced workers is a complex task. Policies designed to reintegrate older workers into the labour market will not make up for earnings losses associated with displacement, even if substantial training and education is involved. Income support policies have serious disincentive effects, which can be minimized using wage subsidy schemes or eliminated in the case of income support that is not conditional on employment status. Unfortunately, the lack of detailed study of the labour market decisions of displaced workers over the age of 50 means that there is relatively little hard evidence on which to base policies for this group.
|Last Updated: January 2010|