Canada’s aging population could take basic economic growth potential from 3% to less than 2% by 2030, although major, widespread structural changes could avert the danger, a new report says.

The aging population will staunch growth of the Canadian labour force “substantially”, says the report by Eric Lascelles, an economist with TD Bank. “This will feed directly into slower overall real economic growth, although the precise rate of growth is subject to some debate.”

“Assuming that Canadian governments and businesses engage in some capital deepening, but otherwise continue with the status quo, it will result in Canada’s long-term potential real GDP growth rate falling from almost 3% annually today to under 2% by 2030,” he warns.

The paper says that this prospect “cannot be overemphasized”. It warns that this slowing in growth will directly affect Canadians, who will see their rate of prosperity growth shrink markedly relative to the past few years, back to the rates seen between 1977 and 1997. “Canada has enjoyed a robust pace of economic expansion over the last decade, but this looks likely to slow significantly unless a Herculean collaborative effort is made by government, industry, and individuals alike.”

On the upside, Lascelles says, “There is an alternative path that avoids reduced economic and prosperity growth for Canada. This path requires the triumvirate of government, individuals, and businesses to work together to unlock superior productivity gains from the Canadian economy.”

He notes that Canada’s current standard-of-living is less than 90% of that of the U.S. “We at TD Bank Financial Group think Canada could surpass the U.S. over the next 15 years,” he says. This will require labour productivity gains, which Lascalles explains result from three key drivers: a more skilled workforce, increasing investment in capital, and multi-factor productivity (other efficiencies gained through the interaction of existing labour and capital).

To get there, TD offer the following suggestions:

  • Canadian governments must make Canada’s overall tax structure more competitive;
  • Canada needs more comprehensive free trade agreements with areas outside of North America;
  • businesses and government need to work together to expand into high-skilled, high-technology industries that can yield substantial productivity gains;
  • Canadian businesses must increasingly invest in research and development;
  • governments must provide support for post-secondary education so that Canadian labour quality can continue to rise;
  • universities must better capitalize upon the patents and inventions they develop; governments and businesses must ensure better integration of recent immigrants into the Canadian workforce, and enact changes to encourage older workers to remain in the workforce; and
  • efficient social programs must also ensure adequate support for the poor without holding them down with high effective marginal tax rates on income.



“Should Canada successfully take several steps down the path just outlined, it will be possible to sustain future productivity gains substantially in excess of what our baseline forecast calls for. However, these improvements will be difficult to achieve. It is our sincerest hope that Canada is up to the challenge,” it concludes.