The size of Canada’s work force is likely to shrink over the next 15 years unless we can find some way to get more people to migrate to Canada.
The numbers showing how this is likely to happen are quite stark. People resident in Canada between the age of 50 and 65 in 2021 totaled over 7.3 million. They are most probably going to retire over the next 15 years. Young Canadian residents presently between 10 and 25 years of age and most likely to enter the labor market, will, in that same 15-year span, number close to 6.8 million. That means about 500,000 fewer entrants than those leaving the labor force.
Think for a moment what, in general, this implies. A shrinking work force means tax revenue for the federal government and contributions for the Canada Pension Plan would decline.
While automation will offset some of workforce decline, there still remains a heavy demand for human labor particularly in the service sector (restaurants, accommodation and health care)
With those over 65 years of age being the fastest growing portion of the population and also the proportion with the highest demands on the health-care system — well, you can see how this poses a unique challenge for those recruiting personnel.
Statistics Canada has reported that, in the most recent quarter, job vacancies were up in all 20 sectors of the economy in spite of increased employment in these same sectors. What can the government do to alleviate this growing labor shortage?
Some would advocate providing economic incentives for women to have an increased number of children. There are two basic problems with this. First, where similar efforts have been tried elsewhere, the results have been generally unsuccessful. The number of births for women of childbearing age has been declining for several decades.
Moreover, children born today will not enter the labor force until at least 16 years in the future at the earliest. The labor shortage is a problem right now.
Currently, 61% of women of prime working age are already employed, so increasing female participation in the labor force is a tall order. Providing affordable childcare will yield a positive impact but will fall far short of the numbers needed. So, the only viable alternative strategy is via increased immigration.
Canada’s record with respect to immigration is outstanding, despite temporary declines during the pandemic. The number of immigrants arriving each year is close to 400,000, one of the highest per capita rates in the world. But that annual number will still not solve the labor shortage.
In 2021, 169,580 immigrants to Canada were between the ages of 25 and 64. This number undoubtedly included some women and possibly even a few men who did not enter the labor force.
A rough estimate of what immigration at the current annual rate would do to the force is therefore perhaps an annual gain of as much as 150,000. So, to eliminate the labor shortage, annual immigration inflows will have to increase to over 500,000 and this assumes no outflows or emigration. But Canada has experienced outflows as well as inflows — about 44,000 in 2021, the most recent figures.
The current immigration system is designed to attract predominantly skilled workers and it is not surprising, therefore, that around two-thirds of recent immigrants have a university degree or post-secondary certification.
Given the political polarity in our neighbor to the south, it would also be reasonable to assume the potential for an increased inflow of highly-educated immigrants from that nation in particular.
Raising the immigration inflow is not impossible. But, it would certainly require an expansion in the Department of Immigration and Citizenship simply to process the higher numbers expeditiously and to undertake proactive recruitment of migrants in parts of Asia and Latin and South America and even in the United States.
We will see if the Liberal government can rise to the challenge.
David Bond is a retired bank economist who lives in Kelowna.