
Baby-boomers exiting workforce from 2020 to 2040 will push up wages as businesses compete for skilled workers
As Canada gets ready to celebrate it’s 150th birthday, a recent study from the Conference Board of Canada shows growth returning to resource-rich provinces like Alberta, along with robust performances in the rest of the country, but only temporarily.
While the economy posted average annual growth of 2.7 per cent over the two decades leading up to the 2008/09 recession, over the next 20 years Canadians will have to adjust to a new normal with much more modest growth averaging 1.8 per cent, according to the new report by The Conference Board of Canada.
Chronically weak business investment will remain an ongoing concern in their long term forecast for the Canadian economy, according to Matthew Stewart, Associate Director, National Forecast, The Conference Board of Canada.

“Non-energy investment has declined $14 billion over the last four years. That’s the number one issue for the Canadian economy is the lack of business investment. Without a turnaround in business investment, we won’t see a tick up in non-energy exports. The economy is going to hit its full potential, and then we’re going to see much smaller growth going forward,” said Stewart.
Business investment fell by $43 billion over 2015 and 2016. Energy investment was responsible for almost 80 per cent of this decline, non-energy investment has also receded over the last two years.
Decline in energy investment was mostly due to drop in oil prices, but was realistically unsustainable, at $66 billion in 2014, representing 28 per cent of total investment in Canada, according to Stewart.
While oil and gas investment has dropped to 16.4 per cent of total investment, it’s expected to rise each year gradually, until peaking at 21 per cent by 2027 of total Canadian investment.
“My estimates from StatsCan data is oil and gas investment will be $30 billion now to 2020. It’s seen some turn around in the latest data. It’s nothing like we’ve seen before(2014 levels), but at least we’re seeing positive growth in the oil and gas sector. It’s below the level needed to maintain the capital stock, so we should see more growth going forward to maintain that capital investment,” said Stewart.
Stewart added that the forecast is built on oil prices recovering to just under $70 a barrel by 2021 and that accurately predicating oil prices in long term forecasts is almost impossible.
Canada’s Employment began to pick up over the second half of last year and job creation has remained strong in 2017. Labour markets across the country will gradually tighten over the next 20 years due to the aging of the population and the slowdown in labour force growth.
This could motivate some younger boomers to delay retirement by a few years and will help offset a small part of the negative downward pressure on the participation rate.
However, the anticipated wage increases, due to the tightening of the labour market, will allow working-age consumers to spend more.
Between 2022 and 2040, industries are expected to respond to labour shortages, wage increases, and greater international competition by substantially increasing their investment in productivity-enhancing equipment and innovation.