Canada faces economic shifts amid shrinking workforce and demographic changes

Canada is facing a significant demographic transition characterized by an ageing population and a shrinking workforce. According to an analysis by the Bank of Canada, population growth slowed to 0.5 percent in 2025, marking its lowest rate in over a century. This shift is driven by the retirement of the baby-boom generation and recent policy changes that have led to declining immigration levels, including reductions in temporary residents.

The Bank suggests these trends may weaken economic growth, reduce demand, and lower productive capacity. While immigration has historically expanded the labour force, it has also increased pressure on housing and public services. To mitigate the impact of a smaller workforce, the focus is shifting toward technological investment to increase worker productivity.

On a social and political level, these economic pressures—specifically rising housing costs and weakened income growth—are contributing to generational tensions. Observations from recent political activity in Ontario highlight a perceived gap between younger Canadians facing economic hurdles and an older demographic that holds significant wealth and political influence.