Canada faces a severe labour shortage by 2030 that will place significant strain on the country’s public and private pension system, according to a new global report by the World Economic Forum and Watson Wyatt Worldwide.

The report was released at the World Economic Forum’s Annual Meeting last week in Davos, Switzerland.

The report forecasts Canada’s labour supply to grow more slowly than the population beginning in the coming decade, eventually stagnating, and then to begin to shrink in the 2020s — thus creating a significant labour shortage. By 2030, Canada’s total dependency rate is predicted to rise by 26%, while old age dependency will increase by 93% from rates in 2000.

“This increased dependency burden will lead to an enormous strain on the Canadian pension system,” says Ian Markham, director, pension innovation for Watson Wyatt Canada. “In the coming decades, as the baby boom generation begins to retire and leave the workforce, Canada will need to determine how to support an aging population that produces fewer workers.”

One potential remedy to this situation is to adopt programs that promote greater workforce participation at all ages. The report shows that activity rates in Canada fall short of rates in the top-five OECD countries for every age and gender group — most noticeably among older age groups (55+). Watson Wyatt Canada says if Canada were to adopt measures to increase labour-force participation of older age groups to rates similar to those of the top-five OECD nations, it could significantly reduce its old age dependency rates.