From an article in the Bank of Canada Review (14-page pdf):
Since 1980, the growth in labour input has accounted for just over half of the growth of real gross domestic product (GDP) in Canada. Most of this rise in labour input can be attributed to increases in the size of the working-age population and to an upward trend in the aggregate employment rate stemming from the strong increase in the labour force attachment of women. These two factors have been partly offset by a declining trend in average weekly hours worked.
This large positive demographic productivity dividend is not just going to disappear. It’s going to go negative: female participation rates are starting to level off, and the working-age population is going to fall.
Yikes.
(See also this post)
Worthwhile Canadian Initiative 
So won’t this mean increased job security, especially as all those managers retire? What with organizations becoming flatter and less hierarchal, don’t we want fewer people competing for the same jobs? I don’t want to compete with a bunch of boring workaholics to see who can ignore their family and health more just to land a little bit more responsibility, to be honest.
Workers will be in a much stronger position, certainly, and we should see higher wages as the demand for labour outstrips supply.
The problem will be that there won’t be very many of them. To the extent that services (think health care) for an increasing number of retired people will have to be ultimately provided by a decreasing number of people who are working, then something will have to give.
Unless, of course, we can increase output per worker. But we’ve not been having much luck with that.
Canada has it good. You get a steady inflow of well qualified and motivated migrants (often bringing capital with them). Try explaining why you are worried to Italians for instance.
As wages rise the profitability of capital investments to improve productivity rises. I’m reasonably convinced this will lead to an increase in such investments.
Of course we haven’t seen increased output per worker, there is no point in making investments in that area with all the cheap labour lying around.
Capital deepening is part of it, and we’re seeing some signs of that as firms substitute capital for labour (the manufacturing sector is a good example of this).
The worrying bit is the low growth rate of ‘pure’ technical progress (typically measured by a Total Factor Productivity Index), the kind that doesn’t amount to accumulating inputs.
Isn’t this confusing the difference between productivity and gross GDP? I don’t care if the population shrinks and gross GDP does as well, as long as per capita GDP is growing. Changes in the size of the labour force have minimal or zero effects on productivity, depending on what you believe about how technological progress comes about, learning by doing, spillovers, etc.
There’s a legitimate concern about the labour force, as addressed in the second comment, but I’ve yet to hear of a theory of economic growth that links slowing or negative population growth and decreasing per capita GDP, and for me, this dominates.
Sure: the only thing that really matters is the growth rates per capita. But the rate of growth of the population as a whole is going to be faster than the rate of growth of the working-age population, so that’s going to be a drag on on the per-capita growth numbers for the next decade or two.
Oh, and welcome to the still-too-small Canadian economics blogosphere!