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Can Canada’s labour force rebound after baby boomers retire?

A new study by Statistics Canada is trying to answer the looming question of how the country will be impacted once the remaining baby boomer generation retires — and it points to immigration as a factor that could both help and challenge.

The study, released Tuesday, looked at how different immigration levels and labour force participation rates would impact both the size and the composition of the force through to 2041.

It comes just ahead of the labour market report set to be released this week.

According to the study, labour force participation has declined since the early 2000s and it’s expected this will continue until 2030 when the last group of baby boomers reach age 65.

Jean-Dominique Morency, a co-author of the study and demographer at Statistics Canada, told Global News this is because after that point it will be smaller cohorts such as gen X retiring, which will have less of an impact than the large baby boomer generation.

“The impact on the labour force participation rate will be small or there will be no impact on this rate,” he said in an interview about retirements after roughly 2030.

The study notes that come 2030, if Canadian immigration remains at the set 500,000 permanent immigrants per year target set by the federal government, the labour force participation rate will stabilize and reach approximately 64.6 per cent by 2021.

That would amount to a growth from 21.7 million in 2023 to 26.8 million in 2041 — by comparison, the labour force increased from 16.1 million in 2001 to 20.5 million in 2021.

Claire Fan, an analyst with RBC Economics, told Global News newcomers can have a big impact on the labour force and, in turn, the economy.


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“When you do add in newcomers, they tend to be younger as well and then that’s why it matters for the participation rate,” she said.

“Essentially what they would do, think of it this way, is it slows the aging of the labour force by pumping in, essentially, prime-age workers predominantly…. That really does help in terms of slowing this sort of a clock of how demographics can quickly age in Canada.”

The study didn’t suggest there would be a major difference in labour force participation between immigration targets of 500,000 or 750,000, but did warn that a complete halt to permanent and temporary immigration as early as 2024 could lead to a decline as early as 2025.

A halt could drop the participation rate down to the same 20.5 million seen in 2021.

Age also is a factor influencing participation rates, with the study noting older workers staying on the job could have a “greater impact” on the overall participation rate.

The study showed the proportion of people age 55 and older has doubled since the early 2000s, from 10.9 per cent in 2001 to 22.4 per cent in 2021.

“If they stay longer to participate in the labour force, this can help maintain the overall participation rate,” Morency added.

Increasing productivity remains a challenge, as well.

“If you don’t have productivity growth, the only way for labour or wages to grow is essentially to take away business profit and vice versa, and that’s not really sustainable over the long run,” Fan said.

Diana Palmerin-Velasco, senior director, future of work at the Canadian Chamber of Commerce, told Global News tapping into underutilized domestic talent, finding methods to keep experienced workers in the workplace and accelerating the adoption of technology can also help avoid economic impacts from big waves of retirements.

She added that while some of the looming challenges are on the horizon, now is the time to tackle them.

“We have known for years that we have an aging population, we have known for years that we are going to face this wave of retirements. How are we preparing for that?” she said.

“I think we need to be more intentional and to be better prepared for what is coming up tomorrow.”

&copy 2024 Global News, a division of Corus Entertainment Inc.

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