A new study reveals that while baby boomer retirements have lowered the labour force participation rate to a 20-year low of 65 per cent in 2023, the overall labour force is projected to grow in the coming decades.
The study, Canadian Labour Force: What Will Happen Once Baby Boomers Retire?, explores how various factors will shape the workforce through 2041. It includes six scenarios, each varying by assumptions about immigration and labour force participation rates.
Despite high levels of baby boomer retirements since 2011 (when the first wave of boomers turned 65), Canada’s labour force is expected to increase from 21.7 million in 2023 to 26.8 million by 2041. This growth is attributed to recent surges in permanent and temporary immigration, which have hit record levels.
The reference scenario anticipates that the labour force growth rate will slow slightly compared to the past two decades. From 2023 to 2041, the growth rate is projected to be 1.17 per cent annually, down from the previous 1.21 per cent.
The study forecasts that the overall labour force participation rate will stabilize around 64.6 per cent by 2041, which is expected to occur after the last baby boomers turn 65 in 2030.
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Projections also indicate that an increase in participation rates among older workers could positively impact the labour force. For instance, if older workers’ participation rates matched those in Japan, the rate could reach 69.7 per cent by 2041.
Most Atlantic provinces, including Newfoundland and Labrador, New Brunswick, and Nova Scotia, are expected to see decreases in their labour forces, with Newfoundland and Labrador facing the possibility of experiencing a reduction of up to 20.2 per cent.
In contrast, Saskatchewan is projected to maintain its labour force participation rate from 2023 to 2041. Overall, participation rates are expected to decline in most provinces, particularly in the Atlantic region.
The study underscores the importance of addressing regional disparities and the challenges posed by an aging workforce. Policymakers will need to implement strategies to ensure balanced growth and sustain Canada’s economic vitality.
Immigration is expected to play a key role in counteracting the impact of an aging population, with Canada having undergone record immigration levels in the recent past.
In fact, 468,817 new PRs came to Canada between July 1, 2022 and July 1, 2023. This influx, in combination with a significant increase in temporary residents, is expected to add benefit to the country labour force.
The reference scenario in the study assumes an annual intake of 500,000 permanent immigrants and a steady proportion of non-permanent residents.
Under this scenario, Canada’s labour force is projected to grow from 21.7 million in 2023 to 26.8 million by 2041. This represents a slightly lower growth rate compared to the previous two decades, reflecting a growth rate of 1.17 per cent per year from 2023 to 2041 compared to the 1.21 per cent observed from 2001 to 2021.
Immigrants have been documented to fill shortages in many sectors, even accounting for 84 per cent of the growth in the total labour force in the 2010s. 55 per cent of the growth in high- and medium-skilled jobs was also attributed to them by StatsCan.
Since the 2010s, immigrants have increased the most in transportation and warehousing, professional services, and accommodation and food services.
In 2021, recent immigrants (residing in Canada for 10 years or less) made up 8 per cent of the total employed labour force, but accounted for 13 per cent in the accommodation and food services sector, 11 per cent in the professional services sector, and 10 per cent in the manufacturing and transportation sectors.
