While immigration would help, experts call for increasing participation of Canada's working-age population
More than five million workers will be coming into Canada’s labour force within the next two decades or so, according to a recent report from Statistics Canada (StatCan).
Overall, the labour force would increase from 21.7 million in 2023 to 26.8 million in 2041.
That’s assuming the scenario where 500,000 permanent immigrants will be admitted to Canada in 2025 and 2026 as per Immigration, Refugees and Citizenship Canada’s (IRCC) 2024–2026 Immigration Levels Plan, as well as over the rest of the projection period.
That’s an estimated annual increase of 1.17% over the next 18 years.
In comparison, the labour force increased from 16.1 million in 2001 to 20.5 million in 2021, at an average annual growth rate of 1.21%, according to StatCan.
Meanwhile, assuming an annual admission of 250,000 permanent immigrants, the labour force would reach 24.1 million in 2041, while it would reach 29.5 million if 750,000 permanent immigrants were admitted per year. The average annual growth rates would be 0.57% and 1.72%, respectively for these two scenarios.
“Assuming a complete halt to permanent and temporary immigration as early as 2024, the labour force would start to decline—albeit slightly—as early as 2025,” said Samuel Vézina and Jean-Dominique Morency, both senior analysts with the Demosim microsimulation projection team at the Centre for Demography; François Pelletier, head of the centre; and Laurent Martel, director of StatCan’s Centre for Demography in their report.
“By 2041, it would reach the same level as in 2021.”
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Immigration considerations
Admitting 500,000 permanent immigrants per year – as per IRCC’s immigration plan – until 2041 would also cause the foreign-born share of the labour force to rise steadily to 43.8% in 2041, they said.
This same proportion would reach 37.4% if 250,000 permanent immigrants were admitted annually, and 49.0% if 750,000 permanent immigrants were admitted annually.
Meanwhile, a complete halt to temporary and permanent immigration as early as 2024 would result in the proportion of foreign-born individuals declining slowly to 29.2% by 2041. That number is “very close to the level observed in the 2021 Census,” said the experts.
Prime Minister Justin Truduea said earlier this year that the federal government is looking to limit the number of temporary immigrants coming to the country as it has ballooned far beyond what the country can absorb thanks to employers’ use of the Temporary Foreign Worker (TFW) Program.
Overall, the number of positions approved to be filled by temporary foreign workers in 2023 stood at 239,646, more than double the 108,988 recorded in 2018, CBC reported, citing data from Employment and Social Development Canada (ESDC).
What are the effects of baby boomers retiring?
The experts from StatCan also said that the proportion of people aged 55 and older would stabilize as the last baby boomers are turning 55 at the start of the 2020s. According to the reference scenario, the proportion of people aged 55 and older in the labour force would remain below 22.0% until 2036 and would reach 23.1% in 2041.
“Much of the transition to an older labour force is already well underway and, as a result, the proportion of the labour force aged 55 and older should become more stable over the next few years,” said the StatCan experts.
A number of sectors in Canada are projecting worse labour shortages in the future, and the ageing population is one of the reasons.
The experts also cautioned the government against relying too much on immigration, saying that while immigration increases Canada’s labour force,“it has a limited impact on the overall labour force participation rate and on the ageing and renewal of the labour force”.
“Beyond its purely demographic impact, immigration also exerts pressure on housing supply, infrastructure construction and the provision of services to the population, while also addressing unfilled job demands in certain employment sectors.”
Instead, the government must increase the participation rate of Canada’s working-age population to help sustain Canada’s overall participation rate.
“Participation rates among adults aged 55 and older have already risen significantly over the past two decades, especially among women. The continuation of these upward trends in the participation rate of older people could have a significant impact on the size, composition and demographic weight of the labour force, but also on the needs of older workers in terms of employment assistance, labour market flexibility and skills upgrading.”