Canada now has the lowest jobless rate in its history.
Given the coronavirus pandemic, this may appear weird at first.
Given the massive demographic trends that were reshaping Canada’s workforce before to the pandemic, and that will continue to transform it over the next decade, there was little doubt the labour market would recover.
One of the most pressing problems in terms of immigration policy is how a recession will affect the labour market performance of immigrants who receive permanent residence during times of economic crisis. According to research, such immigrants’ labour market outcomes may be harmed throughout the rest of their careers in Canada.
This is concerning, given the severe economic shock experienced by Canada at the outset of the epidemic, as well as Canada’s desire to welcome the biggest levels of immigration in its history.
However, a closer examination reveals that the COVID recession is distinct, and immigrants who have recently arrived or will arrive in the near future are still well positioned in the Canadian labour market.
There are more retirees in Canada.
The first cause for this is the retirement of Canada’s baby boomers. This migration explains why, before to the COVID recession, Canada had its lowest jobless rate ever, and why, despite the pandemic’s continued impact on the Canadian and global economies, the unemployment rate has reached another historic low.
Canada has about 20 million workers, of whom about 9 million are baby boomers. All 9 million of these baby boomers will reach Canada’s retirement age of 65 within the next decade. More of them are retiring which is leaving a larger gap in the labour market. Historically, Canada has been able to fully replace retirees with young Canadian graduates completing their education and entering the workforce but this is no longer the case. Canada’s low birth rate means it must rely on other sources of talent to replace its retiring workers.
Replacing retiring workers is important to keep the economy going and ensure the tax base is large enough to support the services that residents of Canada are able to benefit from such as education and health care. This is even more important as the aging of the population will see Canada’s health care spending rise.
Other talent sources include under-utilized groups such as women, persons with disabilities, older workers, Indigenous peoples, and disengaged youth, among other groups. But adding more of them to the labour market would not fully compensate for all the retirees even if we lifted their employment participation rates to the national average.
This explains why immigration is so crucial to Canada’s economic success. Prior to the pandemic, they comprised up to 100% of Canada’s annual labour force growth on a few occasions, and this will become the norm over the next decade.
With so much experience and skill leaving the labour market, Canadian employers will need to turn to all the talent sources they can find to keep their operations going, which is precisely the phenomenon we are seeing now. The aging of the Canadian labour force is seeing the unemployment rate fall and wages rise, a phenomenon that is benefiting Canadian and immigrant workers alike. What we’re seeing now is likely to continue as more baby boomers retire.
We should also make note of the major immigration policy shifts over the past decade that are also having an impact on the labour market outcomes of newcomers.