Canada faces labour shortages and inflation risks as population ages, report warns

Canada’s aging population and falling immigration levels could slow economic growth, worsen labour shortages and push up prices, according to a new Bank of Canada analysis.

The report found that rapid population growth earlier this decade helped businesses fill job vacancies but also increased pressure on housing and public services.

Canada’s population growth slowed to 0.5 percent in 2025, its lowest rate in more than a century, following federal immigration cuts announced in 2024.

“In the coming years, fewer new immigrants will arrive. Canadians will also continue to get older. This will affect the size of our workforce, what we buy and how much the economy can produce,” the report said.

The central bank said reduced immigration could ease housing demand and potentially lower housing costs.

However, fewer newcomers would also mean fewer workers and weaker consumer spending, slowing economic activity.

Canada’s median age has risen from 26 in 1971 to more than 40 in 2026.

The report warned that an aging population could also place greater pressure on government healthcare spending and taxes.

The bank said these demographic changes would significantly affect Canada's workforce, spending patterns and future economic growth.