Canada’s working population is getting older and the growth of our labour force is not keeping pace. The Baby Boomers have begun to retire out of the workforce in large numbers, dropping Canada’s labour force participation rate from 68 percent in 2008 to 64 percent in 2020. Statistics Canada projects that Canada’s labour force growth will dwindle to zero by 2026.
Senior fellow and analyst at the Fraser Institute Philip Cross outlines the effects this will have in a new paper The Implications of Slowing Growth in Canada’s Labour Force.
“Unless significant changes occur in the coming years, Canada’s aging population means labour force participation rates will continue to decline, making government deficits harder to avoid,” he writes.
Additional consequences will include a hindered economic recovery, higher spending on health and income supports, and a greater reliance on immigration to boost our dwindling labour force numbers. It’s a worrying sign, then, that Canada’s immigration numbers plummeted in 2020 due to the pandemic.
The pandemic has exacerbated this problem in other long-term ways that are still to be understood. While it is still too early to fully account for the devastation of COVID-19, the disruptive effects on labour force participation and human capital formation of youths are likely to be overwhelmingly negative.
“The percentage of Canadians working or looking for work has continued to drop, even before Covid-19, and policymakers should understand the potential consequences,” warns Cross.
Ultimately, he says that, “slower labour force growth underscores the importance of adopting measures that boost investment and productivity to sustain economic growth in the long run. Canada can no longer rely on labour force growth to offset its poor investment and productivity record of recent years.”
