January 10th, 2018
Changes in the structure and composition of human capital in Canada
Factors that contribute to the population growth of a country play a critical role in determining the structure and composition of the human country of the country. A country’s change in population is influenced by natural increase (the excess of births over deaths) and net migration (the difference between immigration and emigration). In Canada, the role of these factors in contributing to the country’s workforce has varied in recent times with immigration becoming a core source of workforce, while natural increase diminishing its contribution as discussed subsequently.
Effect of factors contributing to natural increase in population
The natural increase or decrease in a country’s population results from the difference between births and deaths. In respect to births, fertility provides a measure to evaluate how births affect the size and age structure of the population. The fertility rate (the number of children per woman) for Canada, reported by Statistics Canada, gradually declined from values above 2.1 in 1971 to values slightly above 1.5 in 1987 before picking up to values slightly above 1.7 in 1990 (2010, p. 2010; appendix fig 1). The rates then dropped to an all-time low of around 1.5 in 2000 and 2002 before increasing to levels slightly below 1.7 in 2007 (Statistics Canada, 2010, p. 20; appendix fig 1). Projections at a medium-rate assumption are that the rate would continue at a level of 1.7 for the next two decades, a level that is below the estimated population replacement rate of 2.1 (Statistics Canada, 2010, p. 20; appendix fig 1). The mean child bearing age is also estimated to increase marginally in this period (Statistics Canada, 2010). Such statistics indicate that the country could face shortage of human capital if fertility rates remain substantially lower than the population replacement rate over extended periods.
The status of fertility in Canada seems to be between two distinct groups of developed nations that have also experienced fertility rates below the population replacement rate in recent years. One the one end, countries such as the U.S., the U.K., Sweden and France have fertility rates higher than Canada with the U.K., for instance increasing its fertility rate from approximately 1.65 in 2001 to 1.9 in 2001 (Statistics Canada, 2010, p. 21). In this group the U.S. has been the country with the highest fertility with its rate reaching the population replacement rate of 2.1 in 2006 (Statistics Canada, 2010, p.21). On the other end, countries such as Switzerland, Germany, Japan, Italy and Spain have fertility rates that are significantly lower than Canada’s rate (Statistics Canada, 2010, p. 21). Among the countries in this group, Japan has experienced the highest decline in its rate being surpassed by countries such as Italy and Spain, which had a lower rate up to the months preceding 2003 (Statistics Canada, 2010, p. 21). Although Japan’s fertility rate picked up in 2005, it was yet to reach 1.4 by 2007. In essence, the low fertility rates in the developed nations limits the extent to which Canada can look to such countries as sources of replacing the retiring workforce.
On the negative end of the contributors to natural increase in the population is mortality. In this respect, Canada’s mortality rate has been declining and it is expected to continue declining marginally past the year 2036. For instance, the life expectancy for males in 2006 was calculated at 78.2 years but such expectancy is expected to increase to 84 years by 2036 (Statistics Canada, 2010, p. 24). For females, the life expectancy, which stood at 82.9 in 2006, is expected to increase to 87.3 by 2032 (Statistics Canada, 2010, p. 24). Such increasing life expectancy arises from aspects such as improved healthcare that has provided treatments to conditions that increased morbidity and mortality in the past. The increased population of the elderly requiring social support and a low population of young workforce, arising from the lower fertility rates witnessed after the baby boomer generation, threaten to lower the quality of social initiatives and challenge the sustainable development of the Canadian economy. For instance, the Canada has increasingly turned to international immigrants to satisfy the expanded need for health services (“Canada increasingly reliant on foreign-trained health professionals”, 2008).
Effect of net migration on Canada’s human capital
Net migration has been a core source of Canadian population increase, with its contribution being more significant than natural increase in recent decades (Statistics Canada, 2010). Net migration is the difference between immigration and emigration. Canada’s attractiveness to immigration has been contributed to by various factors. Firstly, the formulation and implementation of a multicultural policy, reinforced by the enactment of the Multiculturalism Act in 1988 provides proof of Canada’s respect and tolerance for a multiethnic, multiracial composition (Minister of Justice, 2003). Such regard for multicultural fabric within society has attracted immigrants from non-traditional sources (Austin, 2011). A second contributing factor to immigration to Canada has been better living conditions than those present in countries of the Asian continent, Eastern Europe , Latin America and Africa that have become significant sources of immigrants for the country (Statistics Canada, 2011).
The immigration trend and composition in Canada has also been influenced by the changing population structure in other developed countries. Initially, immigrants to Canada were mainly from the U.K and France resulting in the recognition of English and French as official languages in the Country. Subsequently, however, as such traditional sources have faced shortage of manpower due to decreasing fertility rates, countries such as China and India that have high fertility rates have become significant sources of immigrants to the country (Statistics Canada, 2011). Such increasing acceptance of immigrants from non-traditional sources has also been facilitated by globalization and information technology revolution that has led to the increase in skilled labour in these countries. Since countries such as China and India are increasingly playing an important role in the global economy (Enderwick, 2009), having immigrants from such areas offers Canada the opportunity to forge positive relations with such countries to promote economic growth.
In terms of numbers, the immigration rate in Canada was higher in the late 1950s when the rate surpassed 18 persons per thousand (Statistics Canada, 2010, p.26). Subsequently, the rate has undergone through a gradual decline in the long term interspersed by periods of intermittent increases and decreases. A minimal rate of approximately 3 per thousand was achieved around 1986 with subsequent increase in immigration raising the rate to a relatively stable range around 8 persons per thousand in the period from 2000 to 2008 (Statistics Canada, 2010, p. 26; Appendix, fig. 2). Such rate of immigration is projected to grow at approximately 7.5 per thousand in the next two decades (Statistics Canada, 2010, p. 26). Although such immigration has helped to reduce the shortage in human capital, forces such as emigration may counteract the effect of the immigrant population in redressing the shortage in human capital. Additionally, highly prevalent internal migration from rural areas to metropolitan regions serves to increase disparities in availability of intellectual capital among Canadian provinces (Coulombe & Tremblay, 2009).
The effect of emigration in Canada is contributed by Canadian citizens who go to other nations or landed immigrants who subsequently leave to settle in other countries. The number of such persons has averaged 45,700 annually since the 1990s and projected to increase to 59,200 persons by 2036 (Statistics Canada, 2010, p. 27). Most of such emigrants go to the U.S with the proportion of emigrants comprising the landed immigrants mainly being Americans who returned to their country of origin. Returning emigrants also counteract such emigration, albeit in a modest way, with many returning emigrants settling in Ontario, Quebec, Alberta and British Columbia (Statistics Canada, 2010).
The trends in human capital and its determinants offer Canada three alternatives to address potential shortage of capital in the future. As a short-term measure, encouraging the aging workforce to work past their retirement age would offer the country an extended pool of experienced and skilled labour. Measures aimed at providing such an incentive, such as abolishment of laws allowing mandatory retirement at the age of 65 (CBC 2010), have encouraged those willing to work to continue working without facing discrimination. For instance, the population of Men and Women over 65 who continue to work increased significantly from 1997 to 2010 (Carrière & Galarneau, 2011). Although such increases could offset for the shortages in workforce, the decreasing working hours as the workforce ages could offset such gains if productivity remains unaltered. In Canada, whereas the number of hours worked for women aged 65 and above remained relatively unchanged between 1997 and 2010, those for men declined marginally towards 2010 (Carrière & Galarneau, 2011, p.13). Such indications buttress the increased participation of women in the workforce, a factor that could affect the effectiveness of other initiatives for addressing the human capital shortage with respect to younger women.
A second initiative to address the shortage of human capital would be to encourage immigration of skilled workforce. Canada already rates favourably compared to countries such as the U.S. in enhancing the immigration of high skilled immigrants (Austin, 2011). However, the potential of immigration to redress the shortage of human capital in Canada is limited various factors. Firstly, since a multitude of other countries facing a similar fate as Canada (e.g. those highlighted in Statistics Canada, 2010, p. 21) will be competing for the same pool, Canada must strive to enhance its incentives beyond those offered in such other countries. With regard to wages, such might prove difficult since corporations are turning to low-wage countries to source some of their processes hence reducing the pressure to increase wages in home countries. Accordingly, incentives such as better standards of living may have more influence in attracting such immigrants; in this respect, Canada would be at a disadvantage to countries such as the U.S. where standards of living remain higher than those in Canada.
A third, long term solution to human capital shortage would be to encourage citizens to have more children. Such a policy has for instance enhanced the fertility rates in France (Statistics Canada, 2010, p. 21). However, for such incentives to work, the must provide a fair reimbursement for the costs (e.g. education) that the family would incur in raising such additional children.