Canada is entering “peak aging”, economist warns

RBC assistant chief economist Cynthia Leach warned in a Sept. 24 report that Canada is entering “peak aging” as the last of the baby boomers retire, creating a structural drag on the labour force and long-term growth, even as today’s labour market still struggles with cyclical weakness.

“Despite current labour market weakness, Canada must prepare for tomorrow’s tighter market,” she said. “Remaining boomers will reach age 65 by 2030, bringing the largest retirement wave yet.”

Leach estimated that more than 5.2 million boomers have already exited the labour force, pushing down the participation rate by 1.6 percentage points since 2010. Another two percentage-point decline is likely by 2030, a sharper drop than the prior 14 years combined. The result, she said, will be the peak impact of boomers on the workforce.

Immigration has been the only factor keeping Canada’s working-age population growing in recent years, briefly lowering the country’s median age between 2022 and 2024. But with Ottawa now reversing course and scaling back permanent and temporary resident inflows, population growth is expected to slow to near zero in 2026 and 2027.

“Higher population growth would directionally mitigate aging impacts,” Leach said, “but Canada would need annual in-migration north of 2 % of the population to flatten the participation rate by 2030.”

The impact will not be felt evenly across the economy. Industries with older workforces, including agriculture, fishing, wholesale trade, non-durables manufacturing, and business support services, are already seeing retirement churn double relative to the past. Ageing will also amplify demand for health care and social services, where job vacancies have remained high since the pandemic.

The fiscal costs are mounting. Leach noted health care costs rise steeply with age, from roughly $3,400 at age 40 to more than $36,000 by age 90. She estimated only 11% of the additional health care costs tied to boomer aging have been felt so far. While the Canada and Quebec Pension Plans are funded, Old Age Security and provincial health care programs remain major unfunded liabilities.

Longer term, Canada’s labour market could see some relief when the smaller Gen X cohort completes retirements in the mid-2030s. But Leach stressed that the overall trajectory is clear: declining participation rates and fewer workers to support a rising seniors’ dependency ratio.

“Canada has been reminded of the limits of immigration,” she said, adding that growth will need to come from productivity, capital intensity, and pulling in underutilized groups, such as women and underrepresented workers. “Structurally tighter labour markets are coming, and measures to address it will have benefits that outlive the last of the boomer wave.”

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