The most important statement in Finance Minister Paula Cox's Budget Statement last week concerned Bermuda's ageing population.

Ms Cox touched on the issue in response to criticisms that the Progressive Labour Party Government had failed to do enough to encourage Bermudian employment, as shown by the decline in the number of Bermudians in the workforce.

Not so, said Ms Cox, who used the statistics on how the total number of Bermudians of working age are declining as an explanation.

Leaving aside whether that has been true in the last five years — the Opposition disagrees — it is indisputable that the Bermudian working population is shrinking now, both as a proportion of the work force and in real numbers.

The causes of this, as Ms Cox said, are demographic. First, the "baby boom" generation born between 1945 and 1964 is now entering retirement and not enough Bermudians are entering the workforce to replace this massive group of people.

The second related cause is the birth rate. If you put aside the usual hysteria about teenage and single mothers for a moment, the reality is that the birth rate in Bermuda is too low to replace the existing Bermudian population, let alone to increase it.

According to Ms Cox, this means that the Bermudian working population will fall from around 40,000 in 2000 to 32,000 by 2040, a decline of 20 percent or one in five workers.

One result is that a proportionately smaller segment of the Bermudian population will be called upon to support an expanding body of retirees who will live longer. In theory, pensions and other financial support should be in place now, but instead are certain to be inadequate. Equally, the kind of nursing homes and extended care facilities that will be needed are not in place yet either, although that shortage is slightly less urgent.

In terms of the economy, this change means that Bermudians of working age may have to take on more jobs and that the economy will need to import more non-Bermudians. The latter move seems inevitable.

That in turn makes a mockery of Government's policy on work permit term limits. Regardless of the merits of the policy when it was enacted, at a time when Bermuda will, like it or not, need more non-Bermudian workers, term limits will force people to leave after six years to be replaced with other non-Bermudians who will likely have less commitment to the Island.

Ms Cox has repeated Government's promise (now about two years old) to increase the retirement age from 65. This is a good first step. Today's 65-year-olds are, in general, fitter in body and mind than they were generations ago when 65 was chosen as a mandatory retirement age.

Many wish to continue to work but are forced out. For others, there is no choice. With inadequate pensions and ballooning health care costs, they must continue to work. Other than the homeless, there may be no sadder sight in the streets of Hamilton than septuagenarians, many of them working through the night, guarding flashy office buildings and the younger and fitter people who work within them. Not only would they be incapable of stopping a determined trespasser of half of their age, but it is an affront to their dignity, not to mention Bermuda's self respect as a caring community.

It is also a waste of talent. Senior citizens may not be cut out for security work, but they have other talents and experience Bermuda needs and is being deprived of.

Assuming that the retirement age will be raised, working patterns will need to change as well. A recent article in the Economist notes that those companies that have successfully hired and retained older employees have instituted flexitime, telecommuting and less tiring ways of working to help older people to stay in the workforce.

At the same time, younger workers must not feel that their careers are being stifled — and older people must accept they will be led by younger and perhaps less experienced managers.

It is unlikely, however, that raising the retirement age and issuing more work permits will be sufficient to solve the problem on their own. Indeed, not all people reaching the age of 65 will wish to continue to work, and it would seem invidious to force them to continue on if they an afford to retire and enjoy their golden years.

In a globalised economy, Bermuda needs to continue to find smarter and more automated ways of working in order to remain competitive. Those entering the workforce and those remaining in it need to be better trained and retrained and education, as usual is key.

Because Bermuda's labour costs are already among the highest in the world, the ageing population gives added incentive to finding ways to contain workforce growth and its vast associated costs.