Vital Signs: Kingston needs more people (Kingston Whig-Standard)

Tuesday, October 1, 2013

By Peter Kirkham

KINGSTON - Our future economic prosperity is contingent upon having a larger population.

At the moment, we are well positioned economically. Our family income levels, income distribution, and poverty levels, all compare favorably with both Ontario and the rest of Canada. The population growth in the Kingston CMA during the past decade, with its increasing workforce, and increased output per worker, was essential to this success.

Unfortunately, these conditions are unlikely to continue into the future. Our labour force is going to shrink, and we will not be able to maintain our current income levels, unless we can attract new workers into the city.

Graph 1 projects the natural population for the Kingston CMA for the period 2011 to 2041, in five-year census increments. This natural population projection excludes any permanent movement of people, either into, or out of, the community. Excluding migration, for the moment, will give us an accurate picture of our future population without migration. Once we understand what our population will look like without migration, we will then add in estimates for migration, to get an overall population picture.

The uncertainty in natural population projections only depend upon new births, and the rate of death of our elderly. The graph below assumes death by age 90. This assumption will not be literally true, but any variation will not be important enough to matter. We have assumed that each woman, in her child bearing years, has about 1.6 children on average, approximating the 2011 census results. As long as this number is less than 2.1, we will get the curve in the graph turning down.

line graph projecting natural population for the Kingston CMA for 2011-2041

This natural population profile, for the next 15 years, is almost guaranteed, increasing at about half of 1% per year. This natural population picture still shows growth, even if we haven’t yet included our expected migration estimates.

Graph 2 divides this natural population into three age groups, each expressed as a percentage of the total natural population.

The 15 to 64 year age group drops from 69%, of the total natural population, to 58%, in the next 15 years. Our labour force, drawn from this group, will mirror this pattern. People reaching age 65 cause this drop, as they move into the age 65 and over group. Those people within the labour force, from this group, will have to be replaced. This number of people to be replaced gives us our first estimate of the number of migrants that we will need in the future. If we can replace these retirees, we will be able to maintain the income generated by these workers. But including the pensions of new retirees, the average income per person will be lower.

line graph dividing natural population into three age groups

These retirees add to the age group 65 and older, which increases the percentage of this group from 16%, of the total natural population, to 28%, during this 15-year period. This development will have two effects: first this group will have less income in retirement, compared to when they were in the work force, resulting in a lower aggregate income for the community. Second, their numbers represent a much heavier burden on the health care, and other support, services, with much these costs having to be borne by the public sector.

The only way in which the picture of this population profile can change would be for us to attract even more new citizens into the community.

The city is updating its population projections. Their projections include migration into the community. Their (preliminary) estimate of the 15 to 64 age group, even including migration, still declines from 69% of the total population (natural population plus net in migration) to 62% over the next 15 years. In numerical terms their estimates represent an increase of approximately 4,800 people by 2026, relative to 2011. The replacement of retirees in the labour force, estimated at 6500, must be added to this number. Together, we will need another 11,000 people for our labour force, over the next 15 years. This represents 725 people per year, only obtainable from migration into the community.

Overall, these city estimates project a migration of 1,650 persons per year, in all age groups, into Kingston, over the 15 years, including the 725 persons per year, required for the labour pool. This migration requirement exceeds the average migration per year that we had over the period 2001 to 2011, by over 60%; 1,650 versus 1,000. This target for migration is ambitious.

A net gain of 725 workers per year represents about a 1% increase per year in our labour force. We cannot expect large increases in output per worker. It is the combination of increases in our labour force, combined with gains in output per worker, that will determine our community income gains in the future. The situation described here, will make it difficult to achieve even a 2% increase in community income per year.

The current city budget projects an annual revenue increase of 2.5% per year. It is going to be difficult to square the circle.

This budget captures, in numbers, the hopes and aspirations for our city in the future. Currently, we are well positioned economically. The above scenario, even the city’s population projections which include migration, signals that these good times are far from certain in the future.

So there we have it. If we have no population increase, both our labour force, and aggregate community income, will decline. If we replace the expected retirees, we can maintain our current aggregate income level, although our average family income will decline. With the city projections, we will have small income gains; although too small to balance future city budgets, as currently envisaged, without increased tax burdens for our taxpayers.

This is why Kingston needs more people if we wish to maintain our current level of average family income in the future.

http://www.thewhig.com/2013/10/01/kingston-needs-more-people

Dr. Peter Kirkham is former chief economist with the Bank of Montreal and chief statistician with Statistics Canada.

Canadian Index of Wellbeing (CIW) note: This year, the Kingston Vital Signs report featured results from the CIW Community Wellbeing Survey conducted earlier in 2013 in Kingston and area, although the data above is not from our survey.

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