Baby Boomer Retirement And The Labour Shortage In Canada

Baby Boomers, the large generation born between 1946 and 1964, are retiring in huge numbers, creating a labour shortage in Canada in several key industries. As this large demographic leaves the workforce, there aren’t enough younger workers to fill all the open positions. This gap makes it harder for businesses to find skilled employees — driving up wages, and increasing the need for immigration to fill roles. In simple terms, as Baby Boomers retire, Canada will be left with more skilled jobs than people who can do them. This causes challenges for many sectors such as manufacturing, construction, trades, and health care. From low birth rates in the subsequent generations to differences in work preferences, a wide range of challenges have emerged with this shift. In this blog, we dive into the labour shortage in Canada and why Baby Boomer retirement is something businesses need to actively plan for.

Changing Workforce Dynamics

Millennials and Gen Z are digital natives, having grown up with technology at their fingertips. Young people increasingly pursue careers in technology-related fields because self-guided, at-home learning has lowered the barrier to entry. They can train for jobs in software development, data science, artificial intelligence (AI), and digital marketing without spending money on university. These fields are viewed as innovative, high-paying, and future-proof. They also offer flexibility with remote and hybrid work options.

In recent years, schools have increasingly emphasized technology and university education, often promoting these pathways as the best way for students to succeed. This push for higher education and high-paying tech careers has contributed to the perception that success means earning more than their parents, many of whom may have worked in skilled trades. As a result, fewer young workers are entering traditional industries like manufacturing, food production, construction, and skilled trades. Many retirees are vacating jobs that require a physical presence on the job site, the use of physical tools, and often involve dangerous working conditions. Although these roles are critical to the economy, young workers often perceive them as less attractive compared to the tech industry’s promise of better pay, innovation, and flexibility.

Fewer Mentors for Younger Workers

Older workers often serve as mentors to younger employees. They provide guidance on not just technical skills but also workplace culture, problem-solving, and leadership. With Baby Boomers retiring, younger workers may find it harder to access this hands-on mentorship. This, unfortunately, can leave companies with a less experienced, and therefore less efficient and profitable, workforce. Another factor in this loss of knowledge is companies failing to have their older employees document key company information before they retire. Proper documentation of this tribal knowledge can serve as a form of mentorship, long after the skilled worker who wrote it down has retired.

Housing and Affordability In Canada

The unaffordability crisis, particularly rising housing and living costs, is worsening the labour shortage in Canada across various sectors. Employers face challenges meeting workers' wage and benefit expectations, as many employees need higher pay to afford to live near their jobs. This is especially true in cities like Toronto and Vancouver. This issue is particularly severe in lower-wage sectors like retail and hospitality, where workers leave for better-paying opportunities. It also affects skilled trades, where high demand goes unmet due to unaffordable housing. Businesses that struggle to offer competitive wages that align with the cost of living often struggle with recruitment and retention. Additionally, immigration is less effective as high living costs deter newcomers from settling in major cities.

Declining Birth Rate?

Declining birth rates are a significant contributing factor to the long-term labour shortage in Canada. The birth rate has been steadily decreasing over the past few decades. This means fewer young people are entering the workforce to replace retiring workers. In 2021, Canada had a total fertility rate (TFR) of about 1.4 children per woman. This number fell significantly below the replacement rate of 2.1 needed to sustain the population without immigration. This is a sharp decline from the 1960s? when the fertility rate was approximately 3.9 children per woman during the post-World War II baby boom. The shrinking working-age population is a significant factor in the labour shortage in Canada.

What Solutions Do We Have Available?

While there may not be a single solution to this complex issue, several strategies can help mitigate different aspects of the labour shortage in Canada.

?Increased Immigration

Canada has relied on immigration for years to combat population aging and labour shortages. With Baby Boomers retiring, the country is increasingly using immigration policies to bring in younger workers from abroad. Immigration is often seen as a key solution to offset the demographic shift, but it’s not a cure-all. About 15% of immigrants leave Canada within 20 years, taking valuable skills with them. Additionally, the Canadian government is now scaling back its Temporary Foreign Workers (TFW) policy.

Immigrants face significant challenges finding stable employment, with an unemployment rate of 11.6%—far above the national average of 6.4%. Youth unemployment is also at a 10-year high of 13.5%, showing that younger generations struggle to enter the workforce. The TFW program has rapidly expanded, growing from 15,817 workers in 2016 to over 83,000 in 2023, supporting sectors like food services, construction, and healthcare. However, the government is now reducing the number of TFWs to relieve pressure on the housing market, particularly in the affordable housing segment.

These factors make it clear that immigration alone won’t solve Canada’s labour shortage. High unemployment rates among immigrants, joblessness among youth, and a lack of affordable housing all point to deeper, systemic issues. For immigration to be an effective part of the solution, it must be supported by stronger job integration programs, better housing strategies, and targeted workforce development. Otherwise, immigration risks being a short-term solution to a long-term problem.

?Upskilling and Reskilling the Workforce

Investing in education and training programs to upskill and reskill Canadian workers can help fill job vacancies and can help retain current employees. Aligning training programs with industries facing shortages, such as manufacturing, food production, healthcare, and skilled trades, will better prepare the workforce to meet current labour demands. Initiatives that focus on affordable continuous learning, technical skills, and apprenticeships would enable more workers to transition into high-demand sectors.

Keep Baby Boomers Working

As older adults are staying healthier for longer and have longer life expectancy, staying employed could be a viable option for those who want or need to continue working. Flexible work options such as part-time schedules would allow them to contribute their skills and experience while maintaining a work-life balance that suits their semi-retirement lifestyle. While some Baby Boomers may choose to continue to work, unfortunately for some, working into the golden years may be required to survive. According to the Financial Post, 1 in 5 Canadian Baby Boomers haven't saved for retirement at all. And close to half have $5,000 or less in retirement savings. So for some retirement-age workers, staying employed may be their only option. By 2030, the youngest Baby Boomers will turn 65, signalling a critical point in the demographic challenges of Canadian workplaces.?

Takeaways

The ongoing labour shortage in Canada in key industries, driven by the mass retirement of Baby Boomers, is exacerbated by declining birth rates, changing workforce dynamics, and the unaffordability crisis. As Baby Boomers exit the workforce, there are not enough younger workers to fill their roles, particularly in sectors like manufacturing and skilled trades that require physical presence and offer less appeal to younger generations drawn to tech and flexible jobs. The rising cost of living, especially in major cities, further complicates recruitment and retention efforts. To address these challenges, Canadian businesses and policymakers can focus on immigration, investing in upskilling and reskilling programs, and finding ways to keep older workers engaged in the workforce. By implementing these strategies, businesses and policymakers can better navigate the Canadian labour shortage and ensure a more balanced workforce.

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