Structural Influences on Participation Rates: A Canada-U.S. Comparison

with the skill requirements of employers. This de-
velopment may end the decline in the rates for
men and may help to further narrow the gap be-
tween the rates for men and women, albeit at a
slower pace than in the 1970s and 1980s. There is,
however, a possibility that participation rates for
women will rise to a higher level in Canada than
in the United States. The participation rate for
teens is likely to make some large gains in the face
of continued economic expansion, but the small
weight of this group will also keep the impact on
the aggregate rate relatively small. In the case of
young adults, the room for cyclical gains is quite
large but, again, their weight in the population is
relatively small. The participation rate for older
workers could well increase further, although the
greatest uncertainty surrounds this group’s par-
ticipation rates.

Structural and demographic factors will likely
prevent the aggregate participation rate from re-
turning to its 1989 peak before 2006, but the fac-
tors exerting upward pressure on the participation
rate are likely to outweigh those that are pulling it
down.

Another feature of the aggregate participation
rate that appears likely to emerge is a greater pro-
pensity for the participation rate to react to a
change in the employment rate, closer to the U.S.
experience. This results partly from the rising
weight in the population of groups whose partici-
pation rates tend to vary closely with the corre-
sponding employment rate, e.g. students and
those aged 55 and over. In addition, the decline in
the proportion of the unemployed who qualify for
EI may produce a reduction in the labour force at-
tachment of some groups, such as seasonal work-
ers, and an increased responsiveness to changes
in the employment rate.

Taking into account all the developments and
factors that seem to be influencing the outcome
for each Canadian group examined, plausible pro-
jections have been made for eight age/sex groups.
The rates are then weighted by their projected
population shares to estimate what the aggregate
Canadian participation rate might be in 2006.
These projections are summarized in Table 2 with
those made by the BLS in its most recent biennial
employment outlook (Fullerton, 1997). These es-
timates suggest the aggregate participation rate
could rise to more than 66.5 per cent by 2006,
compared with 64.9 per cent in 1996. That would
still be a percentage point below the U.S. pro-
jected rate although the projected rise for Canada
between 1996 and 2006 is about double the U.S.
rise. Considerable uncertainty, however, sur-
rounds many of the assumptions underlying this
projection.

Irene Ip is a Research Advisor in the Re-
search Department at the Bank of Can-
ada. Sheryl King and Geneviève Verdier
are Senior Analysts in the Research De-
partment at the Bank of Canada.

Notes

* Gordon Wilkinson helped in many different ways in
the course of this project. The authors would like to
thank their colleagues at the Bank of Canada for their
assistance and comments. Of course, since the authors
are solely responsible for the paper’s content, none of
the above mentioned is responsible for any remaining
errors. No responsibility for errors should be attributed
to the Bank of Canada. An earlier version of this paper
was delivered to the Congress of the Canadian Economic
Association, University of Ottawa, May 30, 1998.

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