Final wave of boomer retirements to reshape workforce
Canada is approaching a pivotal demographic milestone as the last and largest cohort of baby boomers nears retirement age, according to a report by RBC Economics.
While unemployment has risen over the past three years, RBC notes that the country is on the verge of experiencing the most significant reduction in labour supply in decades as the final wave of boomers exits the workforce.
Over the last 15 years, more than two-thirds of boomers have left the workforce, resulting in a structurally tighter labour market and a notable decline in the overall participation rate.
This has contributed to a structurally tighter labour market, with the average participation rate falling by 1.6 percentage points between 2010 and 2024, despite a rise among prime-age workers, says author Cynthia Leach, assistant chief economist at RBC.
Looming slowdown in population growth
Looking ahead, she projects that population growth will slow sharply due to recent changes in federal immigration policy.
“Near-zero population growth is expected in 2026 and 2027 under new and drastically lower targets,” says the report, projecting that even if immigration returns to typical levels after 2027, the labour force participation rate will drop by more than two percentage points between 2024 and 2030, a steeper decline than in the previous 14 years.
Source: RBC Economics
Leach emphasizes that only sustained, exceptionally high levels of immigration—well above two per cent of the population annually—would be enough to stabilize participation rates. Otherwise, the effects of an aging population will continue to weigh on the workforce.
Sector and regional differences with aging
The effects of an aging workforce will not be felt evenly. The RBC report highlights that sectors with older workforces, such as agriculture and fishing, are likely to experience labour shortages sooner.
In fact, nine out of 21 major industries already have more than a quarter of their employees over age 55. Provinces with higher median ages, including British Columbia, Quebec, and the Atlantic provinces, are expected to face greater pressures.
Additionally, the aging population is expected to shift demand towards services, particularly health care and social services, which have maintained above-average job vacancy rates since the pandemic, says Leach.
Solutions to tighter labour markets
She projects that, after all boomers have retired, the participation rate could stabilize for a period as Generation X—smaller than the boomers—moves into retirement. However, the long-term trend will remain downward due to continued aging and low fertility rates.
Canada must look beyond immigration to address these challenges, says the report, which recommends expanding the domestic labour pool through training, skills recognition, and recruiting underrepresented groups, but cautions that “a lot of the burden, though, will fall to the other determinants of potential economic growth such as capital intensity and productivity-enhancing innovations.”
“None of this will be easy with geopolitical uncertainty hanging over business investment, and many structural changes needed to make a difference,” says Leach.
“Yet, the currently weak labour market, and approaching end of boomers reaching age 65 should not lull the country into complacency. Structurally tighter labour markets are coming and measures to address it will have benefits that outlive the last of the boomer wave.
As organizations grapple with skills shortages, an aging workforce, and the impact of generative artificial intelligence (GenAI), the role of older workers is becoming increasingly critical, according to another expert.
