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The CEO of the world’s largest asset manager sees a Boomer demographic crisis brewing. Earlier this week, Blackrock CEO Larry Fink warned the US is rapidly approaching a crisis as Baby Boomers retire. BMO isn’t quite sure if it’s “crisis or karma,” but in either case—they see the problem as overstated. The bank argues Canada has greater exposure to the issue than the US, and so far the crisis up north has been exaggerated.
Canada Is More Exposed To The Boomer Retirement Wave
Most Western countries saw a post-war population boom that began to fade in the 70s. As a result, a “demographic collapse” is brewing in most of these regions. This is when population growth isn’t sufficient to support previous generations. As a result, there’s a concern that Boomers will retire before their skilled labor can be replaced. A problem that Canada is not immune to.
“If anything Canada had an even more extreme baby boom in the 1950s/early 1960s so it’s worth examining its experience,“ said Douglas Porter, chief economist at BMO.
Canada Saw Labor Near Retirement Triple Over 25 Years
He notes the labor force aged 55 to 64 has tripled over the past 25 years to 3.5 million people. As a share, this group went from 8% to 16% of workers over that period. A doubling of near-retirement labor is certain to present some challenges when it comes to skill replacement.
“Not surprisingly, the number of those reporting that they have retired in the past year has roughly doubled since 2000,” says Porter.
However, there’s a big but when it comes to sizing up the seriousness of this challenge that’s apparent by charting this trend over time.
Crisis Averted? Canada Is Already Past Peak Retirement
Source: BMO Capital Markets.
Since 2016, the retirement issue hasn’t eroded much and we’re past the demographic peak. He argues the number of new retirees has been broadly stable since 2016 and the share of 55 to 64 year old workers peaked in 2021 at 17.5% of the labor force.
“The point is that the economy has been dealing with this ‘crisis’ for some time now,” he concludes.
Phew! Crisis averted—onto the next one.
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