Several people responded to my last column by suggesting that baby-boomers need to retire to make way for the younger generation. But I think they are overlooking the coming changes in the dependency ratio.
This is the ratio between the number of people who are dependent and those who are working. There are two groups of dependents: those age 14 and under, and those age 65 and over. The overall ratio has been steadily declining, from 91 dependents per 100 working age people in 1971 (mainly comprised those age 14 and under, who were 74 of those 91) to 44 per 100 in 2009 (24 youth and 20 seniors). In other words, more people are working and fewer are dependent upon them.
But that ratio was projected to bottom out about now, and then start to steadily increase. In part, this is because of a decline in the fertility rate and family size, in part because of an increase in life expectancy. But it is also because we baby-boomers are starting to retire.
Statistics Canada projections are that the dependency ratio will be 65 in 2036 and about 70 in 2061, with the youth-dependency ratio staying fairly steady but the seniors’ rate increasing. So, fewer workers to support more seniors. Thus, the next generation needs more of us to keep working to reduce that growth in the dependency ratio. In addition, in a knowledge-based economy, retirement can mean the loss of much valuable knowledge, experience and expertise.
In remarks to the Economic Club of Canada in 2012, Jean Boivin — then deputy governor of the Bank of Canada — reflected on the impacts of this increase in the dependency ratio. He anticipated rising labour costs as fewer people are available to work, coupled with higher public costs as seniors require more health care and social support.
He identified several remedies, starting with the idea that “individuals might decide to stay longer in the work force.” This would be aided by the fact that we are healthier than previous generations and our economy is more knowledge-based. He suggested that “businesses could offer more flexible working arrangements … such as teleworking, part-time work, job-sharing, offsite consulting and other innovations.”
Of course, this is fine for knowledge workers, but less so for those working in all forms of manual labour. So again, as I see it, the challenge is to develop a more flexible and equitable retirement system that allows for inequalities in occupation and income.
But then there is the question of whether retirement is healthy, a question that one would have thought we could answer relatively easily, with a simple “yes.” But that is not the case. For some, perhaps many, retirement comes as a release from a life of drudgery and hard work or stress or boredom, and is something to welcome and embrace: “Freedom 55!” is their rallying cry.
But for others, retirement involves a severing of social ties and a meaningful social role, the loss of engagement and stimulation. In fact, in the long-established Holmes-Rahe Life Stress Inventory, retirement is ranked 10th out of 43 stressful life events, just below being fired and ahead of a major business readjustment and a major change in financial circumstances. (Death of a spouse is ranked first and divorce second.)
Studies on the health impacts of retirement have come up with varying results. In large part, this seems to reflect people’s circumstances. Those who retire in good health, rather than for health reasons, obviously are more likely to do well. If you are retired against your wishes (fired, in effect), it will be very stressful, while if you opt for early retirement with an attractive package, you will likely do well — and of course, might keep working elsewhere anyway.
It also depends on your marital and social relations. If your work was a retreat from an unhappy marriage, or all your social relationships were work-based, you will not fare as well, and will find retirement stressful. You will do better if you have a life outside of work and continue to learn, play and be creative.
I will discuss the health impacts of retirement in more detail next week.
Dr. Trevor Hancock is a professor and senior scholar at the University of Victoria’s school of public health and social policy.