Full Breakdown
Canada’s Aging Population and Reduced Immigration Set to Reshape the Economy
By Drooid · · How we work
Demographic Trends and Immigration Policy
A Bank of Canada analysis notes that Canada’s population grew by about 3 percent annually in the first half of this decade—far above the 1.2 percent pace that persisted for five decades. The surge added new workers and eased labour shortages, but it also heightened pressure on housing and social services. Beginning in 2024, the federal government lowered immigration levels, and by 2025 the overall growth rate fell to 0.5 percent, the slowest in more than a century after a century-and-a-half of steady expansion. The report warns that fewer newcomers combined with an increasingly older citizenry will shrink the labour pool and dampen demand for many goods and services.
Labor Market and Workforce Implications
With the baby-boomer generation reaching retirement age, the median age is projected to rise from 26 in 1971 to over 40 by 2026. The shrinking supply of young workers is expected to create pronounced labour shortages in several sectors, prompting firms to raise wages to attract talent. The analysis suggests that higher wages could feed into broader price increases.
Housing Demand and Consumer Spending
The housing sector historically lags behind rapid population growth, and the slowdown in immigration is anticipated to reduce demand for new homes, potentially easing upward pressure on housing costs. However, the report expects a sharp decline in overall consumer demand for other goods and services, which could further restrain economic expansion. Retirees are likely to boost spending on travel, pharmaceuticals, adaptive-living products, and home-care services, reshaping the composition of consumption.
Fiscal Pressures and Inflation Risks
Given Canada’s universal health-care system, an older population may increase government outlays for hospitals and long-term care, raising questions about future taxation levels. The combination of tighter labour markets, higher wages, and shifting consumption patterns could contribute to inflationary pressures, according to the report.
Projected Economic Outlook
Deloitte Canada projects that Canada’s real GDP growth could slow to roughly 1.5 percent in 2026 if current demographic and immigration trends persist. The analysis underscores that demographic aging and reduced immigration together will influence the size of the workforce, the mix of goods and services produced and consumed, and the overall pace of economic growth.