Why Canada’s Workforce Math Doesn’t Work Without Immigration

The decline wasn’t caused by falling birth rates alone. It was driven by two additional factors. First, the government deliberately reduced the number of temporary residents in Canada. In 2025, international students and foreign workers left Canada faster than new ones arrived. Second, permanent resident admissions fell by 18.6% from 2024 levels, the largest annual drop on record. Both were intended outcomes of a series of policy decisions designed to bring immigration back to what the government calls “sustainable levels.” 

It’s too early to see the full impact of these decisions on the labour market. Population movements take time to work through an economy. But the early indicators are not encouraging. Canada lost 84,000 jobs in February 2026 and the unemployment rate rose to 6.7%. That’s not the direction you’d expect if the only problem had been too many people.  

Clearly, IRCC’s policy decisions haven’t delivered a win yet. What they have done is slow workforce replenishment. And despite the political pressure to treat immigration as the source of the country’s economic challenges, the truth is that Canada’s workforce needs immigrants.

What Canada’s Workforce Looks Like Now

As of February 2026, Canada’s total population is approximately 41.5 million. Of these people, roughly 21 million are employed. The majority are in the core working age of 25 to 54, where the employment rate sits at 83.1%. People aged 55 to 64 continue to work, but at a lower rate of 64.7%. Once people cross 65, most have left the Canadian workforce. 

Immigrants and temporary workers are woven throughout. As of Q1 2026, there were 1,375,566 work permit holders in Canada, which comes out to approximately 6.4% of the labour force. Recent immigrants, those who have been in Canada for five years or less, accounted for approximately 4.8% of the total employed workforce, or roughly one in every 20 workers. Together, newcomers and temporary workers represent a meaningful share of the people keeping the economy running. 

But it’s not just about numbers. Canada’s immigration system also selects heavily for education and skills.  

According to the 2021 Census, 55% of recent immigrants held a bachelor’s degree or higher, compared with 33% of Canadian-born people in the same age group. Immigrants and temporary residents accounted for more than half of Canada’s working-age population with a PhD, a master’s degree, or a professional degree in medicine, dentistry, or veterinary medicine. 

In technology, healthcare, and science, they bring credentials and expertise that Canada needs. Domestic universities, on the other hand, are too slow to address these gaps. At the other end of the spectrum, in sectors like agriculture, food services, and long-term care, newcomers and foreign workers take on roles that are lower skill but persistently difficult to fill domestically. 

The Largest Retirement Wave in Canadian History 

Canada officially became a “super-aged” nation in 2026, with 15.7 million people aged 50 or older. That milestone, flagged by the National Institute on Ageing earlier this year, reflects a workforce that is aging faster than it can replace itself. 

The retirement pressure is already well underway. Of the 7.6 million Canadians aged 50 to 64, 70.6% are still in the workforce. This means, in the next 15 years, almost 5.4 million Canadians will retire. 

RBC Economics estimates that roughly 2.7 million boomers currently aged 60 to 64 are still working and quickly approaching retirement. The annual workforce exits will accelerate by the mid-2030s as the 50-to-54-year cohort is both larger and more likely to be working. 

Declining Birth Rates Mean a Smaller Future Workforce 

Canada’s total fertility rate hit 1.25 children per woman in 2024. This is a record low, and well below the 2.1 needed to replace the population naturally. Statistics Canada now classifies Canada as an ultra-low fertility country, a threshold it crossed for the first time in 2023. But Canada has been below that replacement threshold since 1971. 

The evidence is visible directly in Canada’s current population data. There are 2.25 million children currently aged 10 to 14, 2.14 million aged 5 to 9, and 1.87 million aged 0 to 4. Each successive group of future workforce entrants is smaller than the last, and the gap is widening. 

The children being born today won’t enter the workforce in a meaningful way until well into the 2040s. By then, Canada will have roughly 375,000 fewer potential workers entering the workforce every five years compared to the group entering right now. 

The domestic replenishment of the workforce is shrinking in absolute terms. There’s no short-term fix for this. 

Fewer Newcomers, at the Worst Possible Time 

Against this backdrop, Canada is admitting fewer permanent residents and actively reducing the number of temporary workers in the country. 

The current levels plan sets permanent resident admissions at 380,000 per year through 2028. That is down from a peak of 500,000 and represents a deliberate reduction. Not all these admissions translate directly into workers.  

Around 69% are in the working-age range of 20 to 54, and approximately 74.3% of those enter employment within a year of arrival. That works out to roughly 195,000 new workers per year from the permanent resident stream. 

On the temporary resident side, the government is targeting a reduction from roughly 1.4 million work permit holders today to around 1.07 million, a cut of approximately 310,000 workers. These are people who are already here, working, and filling roles in sectors ranging from agriculture to healthcare to technology. 

Without any further permanent resident or temporary worker intakes, Canada’s working-age workforce would shrink by over 194,000 people annually in 2026-2027. Following the exit of 310,000 work permit holders over the next two years, workforce shrinkage would increase each year, growing toward 150,000 per year by the 2050s as smaller birth groups fully replace the larger ones now reaching retirement age. 

A Growing Economy Needs a Growing Workforce 

Canada’s employed workforce grew from around 16.5 million in 2010 to roughly 20.7 million in 2024. That growth didn’t happen on its own. Across the 2010s, immigrant workers accounted for 84% of total labour force growth in Canada. 

Cutting immigration doesn’t make the workforce shrink overnight. Permanent resident and temporary worker numbers are declining but not disappearing. But the rate of growth is slowing when it needs to be accelerating. 

Why does that matter? Canada’s retired population is growing rapidly and will continue to do so for the next 15 years. Retirees draw on pensions, public healthcare, and social services. Those programs are funded by people who are working. The ratio of workers to retirees is what determines whether those systems remain effective. A workforce that grows too slowly relative to the retired population doesn’tjust mean fewer workers, it means fewer taxpayers supporting a larger number of dependants. 

Let’s look at an example: Japan’s working-age population began declining in 1995. The IMF has described what followed as “shrinkanomics.” With too few workers relative to retirees, Japan struggled to maintain current levels of economic activity. The share of the population in retirement grew while the number of people funding that retirement shrank. The age dependency ratio, or ratio of retirees and dependants to working-age people rose from 47% in 2000 to 70% in 2024, placing severe and sustained strain on public finances. Healthcare and pension costs climbed steadily while the tax base supporting them contracted. Japan has been trying to expand immigration since 2017, but the adjustment has been slow and difficult. 

The OECD’s 2025 Employment Outlook is direct on the broader trend: without immigration or encouraging older workers to stay in the workforce longer, GDP per capita growth will slow significantly across most member countries as aging reduces the share of people who are employed. The report puts Canada on the far end of the spectrum, where a high level of immigration is needed to keep the per capita GDP growth rate from slipping into negative. In a scenario where immigration drops to zero, OECD projects that Canada’s per capita GDP would decline by almost 0.2% per year. 

Canada’s Most Critical Sectors Face the Deepest Shortages 

Some sectors are far more dependent on immigrants and temporary workers. Ironically, these sectors are also the ones Canada needs the most to grow sustainably. 

Healthcare is the most consequential example. Around 6.5 million Canadians, roughly 22% of the adult population, do not have a regular family doctor. The country is projected to face a shortage of 78,000 doctors by 2031 and nearly 118,000 nurses by 2030. The government acknowledged this directly when creating new Express Entry categories for healthcare and physicians with Canadian experience. 

Despite the fact that immigrants and non-permanent residents are over-represented in the healthcare sector, the vacancy rate for health-related occupations has nearly tripled since 2016. Those who argue that immigrants put pressure on Canada’s healthcare system should also consider the fact that according to 2021 Census data, nearly half (44.8%) of all nurse aides, orderlies and patient service associates were immigrants and temporary residents. 

Agriculture, accommodation and food services, and transportation tell a similar story. Recent immigrants make up a disproportionate share of workers in all three sectors, well above their overall share of the employed workforce. Temporary foreign workers are even more concentrated in agriculture, where they fill roles that have seen Canadian-born participation decline for over a decade. 

Will Canada be Paying Long-Term for a Short-Term Fix? 

Immigration is Canada’s only source of workforce growth in the near future. Most newcomers arriving in Canada are in their core working years. Not only do they replenish the workforce, but they alsobring down the median age of Canada’s population, which stands at 40.6 years, as of July 2025.  

This makes immigration more critical now than ever given the aging population, falling fertility, and the current wave of retirements. Healthcare, pensions, public services, all depend on a working population large enough to fund them. 

While reducing permanent resident targets and temporary resident arrivals might address housing shortages and access to public services in the short-term, in the long run, it will lead to a faster aging population and more intense labour shortages.    

That said, an occasional, temporary recalibration isn’t irrational, especially in the face of the post-pandemic labour market softening. But the reality is that immigration didn’t create Canada’s workforce challenges. In fact, it has been solving problems created by Canada’s low birth rate and aging population.