A new economic model developed at Western University calculates the cost of reallocating working‐age Canadians (20-64 years old) from one industry to another and shows that an unwillingness by many to relocate or change careers really hurts the economy and leads to high unemployment regionally and nationally.
The study, which was led by Western Economics professors Simona Cociuba and James MacGee, rings a deafening warning bell at a time when Canada’s manufacturing sector is shrinking and service industries are on the rise.
“Older workers are unwilling to move across industries in search of job opportunities,” says Cociuba, a macroeconomics expert in Western’s renowned Department of Economics. “They are often raising families and have roots in the place they live. For many, re‐training for new skills is time‐consuming and costly.”
Cociuba and MacGee developed a novel economic model that uses worker characteristics – including age, skills and willingness to move – to calculate how costly it is to reallocate workers from one industry to another. Since young workers (20‐34 years old) typically lack industry‐specific skills, they are more willing to move industries. This means that economies with a larger share of young workers are more dynamic and find it easier to respond to changes in regional industry employment.
“Discussions regarding the mobility of workers and unemployment are important in the face of aging populations,” says Cociuba.
This is particularly relevant because Canadians are having fewer children, which means fewer young workers will be entering the workforce in the near future. Seniors already outnumber the young in Canada and this gap is expected to continue growing.
Cociuba has two suggestions to help mitigate the adverse effects of an aging population: provide incentives to encourage people to move to areas where industries are growing and create policies to attract young, skilled working immigrants willing to move.
Canada is not the only country confronting these challenges, of course. Many of the world’s top economies, including China, Germany and Japan, face even larger demographic changes.
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