Demographics, technological change, participation rates and Canada’s future labour shortage

An essay contribution to “Technology, automation and employment: Will this time be different?” report. The business media is rife with warnings about automation—primarily driven by technological change, artificial intelligence (AI), and machine learning—leading to dramatic changes in the labour markets of developed countries (Robertson, 2019). Media reports often warn of large net job losses from a new era of automation with a corresponding need for government initiatives such as a guaranteed annual income to take care of those rendered unemployable by technological change (see Noonan, 2017). Contrary to warnings about a growing unemployment problem, this essay highlights the potential for a growing scarcity of labour in Canada. Specifically, a slowing population growth rate and a declining labour force participation rate due to retiring baby boomers and an aging population will reduce labour force growth rates over the next few decades. Furthermore, historical experience suggests that technological change primarily alters the mix of employment while promoting faster economic growth, which also creates new jobs. Hence, it seems unlikely that technological change will result in a decline in the aggregate demand for labour. Indeed, rather than facing a future unemployment crisis, Canada is more likely to face a prolonged period of labour scarcity