RBC outlines impact of rise in retirements, slowing immigration
Canada's labour force is heading toward a structural crunch that will eventually reverse today's high unemployment — and businesses should be paying attention, according to a new report from RBC Economics.
The report, authored by assistant chief economist Nathan Janzen and economist Annie Zheng, warns that two forces are converging: record-high retirement rates among aging baby boomers, and tightening immigration policy that is cutting off the main pipeline of younger workers.
Monthly retirements have climbed to roughly 25,500 workers per month — nearly double the rate of two decades ago, when retirements averaged closer to 14,000 per month, the report says. The youngest baby boomers won't turn 65 until 2029, meaning the retirement wave has further to run.
RBC projects this will continue weighing on Canada's labour force participation rate, which has already declined 4.5 percentage points over the past two decades due to population aging.
Immigration shrinks pool of younger workers
At the same time, current caps on immigration are shrinking the pool of younger workers. Without any immigration, RBC estimates the population aged 15 to 34 would decline by roughly 186,000 per year over the next five years.
"The supply of potential new younger workers will shrink without immigration at the same time a historically high share of the workforce leaves for retirement," say the economists.
For now, elevated youth unemployment — above 14 per cent as of April, according to Statistics Canada — means businesses are not yet feeling the pinch.
But the RBC economists caution that this window is closing: "Labour shortages will, eventually, return once the unusually high level of unemployment is absorbed.”
Shortages of unskilled workers
About 17 per cent of firms surveyed by the Canadian Federation of Independent Business still report shortages of unskilled or semi-skilled workers, and approximately one-fifth of businesses in the Bank of Canada's Business Outlook Survey reported labour shortages and expected them to intensify.
Sectors including accommodation, food services, and construction are already reporting labour shortages more frequently as an obstacle to near-term growth, the report notes — a dynamic that has relevance beyond macroeconomics for HR professionals and employers planning their workforce strategies.
RBC expects current immigration caps may need to be eased once the temporary resident population approaches the federal government's target of five per cent of the total population, which the economists project will be reached around mid-2027.
