Oh, hi again. About 25,500 workers are retiring in Canada every month, according to RBC Economics. That’s about double compared with two decades ago. That, along with other factors, are throwing the labour market into a tailspin. Let’s get into it.
Shrinking from both ends
Welcome to Economics 101, I’ll be your teacher today. Our topic is Canada’s labour force.
The labour market is going through what the Bank of Canada called this week a “structural change,” creating a “low-hire, low-fire” environment.
In plain English: Companies aren’t hiring aggressively, but they’re also not laying people off at the pace you might normally expect during a slowdown.
That complicates things for the central bank.
Usually, when unemployment rises, it signals there’s slack in the economy, giving the Bank of Canada room to cut interest rates to stimulate demand. But if unemployment is being driven by deeper structural shifts (rather than a temporary economic slowdown) lower rates may not solve the problem.
A new report from RBC Economics points to two major forces behind those structural shifts: retirements and immigration policy.
Without immigration, RBC says Canada’s population of younger workers, particularly those under 35, would begin shrinking into the 2030s. At the same time, retirements are hitting record highs. The country is currently capping both temporary and permanent resident arrivals, and the country’s population is on track to shrink in 2026 for the first time on record.
Meanwhile, the historically large generation of baby boomers continue to exit the work force. And there’s still more to come: the youngest boomers don’t turn 65 until 2029.
That wave of retirements will open up jobs, sure. But there’s a catch. RBC estimates that, without significant changes in labour force participation rates, the number of workers under 35 would decline by roughly 139,000 per year over the next five years, or about 11,600 fewer younger workers each month.
In the near term, that could ease some of the pressure younger Canadians are facing in a difficult job market (yay!). But over time, a shrinking pipeline of workers could create broader labour shortages across the economy (boo!).
In fact, there are already signs that some shortages either never fully disappeared or are beginning to re-emerge.
About 17 per cent of businesses surveyed by the Canadian Federation of Independent Business still report shortages of unskilled or semi-skilled workers. That’s well below the peaks seen in 2022, when more than 40 per cent of firms reported shortages, but it’s already hovering around prepandemic levels, despite unemployment remaining relatively elevated.
The job market is being pulled in two directions at once, and policy makers are trying to rectify it in real time.
The Calculator
Canadians tend to become more satisfied with life as they age, according to an analysis by Frederick Vettese, former chief actuary at Morneau Shepell, based on Statistics Canada survey data.
Yes, but: The increase wasn’t perfectly linear. Men’s life satisfaction scores peaked in their 80s, while women’s peaked in their 70s before dipping slightly later in life.
The takeaway: Vettese says the findings suggest many Canadians may be doing a better job saving for retirement than they think, and that anxiety about retirement finances may ease once people actually settle into retirement and better understand how much income they need.
The Retirement Receipt
Photo illustration by The Globe and Mail. Source: Getty Images
Why this grandma gifted $100,000 a year to her grandchildren while she was still alive
The situation: A 90-year-old grandmother with nearly $1-million in investments was paying significant taxes on money her family realized she would likely never spend. So her daughter, a retired lobbyist in Vancouver, worked with the family’s financial planner to gradually gift $100,000 a year to her four university-aged grandchildren while she was still alive.
What she’s saying: “Better a gift from a warm hand than a cold one,” the daughter said. “The money is worth so much more to them than it would be to us.”
Best of the Rest
🏘️ Locked out of city housing markets, some younger Canadians are turning to cottage country. Recreational properties can offer more space, rental income potential and lower prices than urban homes, but experts warn the costs and risks of owning a cottage can add up quickly.
🕯️ Many Canadians are choosing celebrations of life over traditional funerals. The shift is being driven in part by rising cremation rates, changing attitudes toward religion and a growing desire for memorials centered on storytelling, community and shared memories.
🏙️ Ontario’s new HST rebate is helping revive sales of newly built single-family homes, but it’s doing little to rescue the condo market. Many buyers and investors still see condos as too small, too expensive and too difficult to profit from, leaving thousands of unsold units sitting on the market.
📈 WonderFi clears final regulatory hurdle to be acquired by Robinhood. The deal gives Robinhood a foothold in Canada’s fast-growing digital asset space, and could eventually set up competition with homegrown investing platforms such as Wealthsimple and Questrade.
Try This
💰 Investors looking for income are being pushed beyond traditional bonds and dividend stocks as inflation stays elevated. Morningstar says areas such as emerging-market debt, bank loans and global high-yield bonds are offering yields well above inflation, but the higher payouts often come with higher volatility and risk.