Canada’s changing ‘age pyramid’ boon for economy

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Canada’s rapid population growth over the past few years brought headaches over housing and public services, but there is a bright side.

According to CIBC deputy chief economist Benjamin Tal, because of this influx, the country’s population is much younger than it was four years ago and in the long run that could prove to be a major asset.

Canada’s population has grown by 3.2 million people or 8.4 per cent since mid-2021. Since late 2015, it expanded by 5.6 million or 15.7 per cent.

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However, unlike the baby boom era, over 95 per cent of that growth came from people coming from abroad, many aged 15-24 and much younger than the rest of the population.

“Simply put, the Canadian population (and labour force) was much younger in 2024 than it was in 2021, as a result of the distinctly younger profile of international migration,” said Tal.

“Never before have we seen such a dramatic change in the age pyramid in such a short period of time.”

The population boom, however, led to concerns about public services, housing and other infrastructure and last year the federal government cut immigration targets and clamped down on temporary residents.

The problem was the population expanded too quickly, said Tal.  Half the population growth in the past decade and even more than that since 2021 was not forecasted or planned for, putting pressure on governments to provide public services.

“With the sheer scale of the population/capital mismatch in Canada, the public backlash was both predictable and inevitable,” he said.

Productivity also suffered because a large share of the new arrivals were non-permanent residents, many of them working fewer hours for lower wages.  Without this surge in temporary residents overall gross domestic product growth would have been lower, but GDP per capita would have been higher, said Tal.

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The pace of non-permanent residents is expected to slow in coming years, but not as much as the government predicts, he said.

“Policymakers and analysts cannot assume that the over one million current temporary residents in Canada with expired visas will simply leave the country over the next two years,” he said. “In other words, the demographic change of the past few years is not about to reverse.”

Which is not a bad thing. Canada has been left with a “youth dividend” unique to OECD countries where aging populations are viewed as a drag on productivity.

Tal says retaining and integrating immigrants and non-permanent residents will eventually boost growth and productivity as they get jobs suited to their training and add new skills.

“The youth dividend Canada is currently enjoying (as opposed to many other OECD countries) might, in time, prove to be a major asset,” he said.

“If as a society we manage to create the conditions for better integration of NPRs in the labour market over time, we should be able to reverse the negative trajectory in productivity growth of the past few years.”

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U.S. President Donald Trump snubbed Canada with the world watching last week when he said at the World Economic Forum in Davos, Switzerland that “We don’t need their oil and gas.” Maybe, but for a country that says it doesn’t need Canadian crude, it is taking record amounts of it.

According to the Energy Information Administration, U.S. crude oil imports from Canada are currently at an all-time high, having risen to a record 4.42 million barrels a day earlier this month.

Around 60 per cent of U.S. crude oil imports came from Canada in 2023. The Financial Post’s Meghan Potkins has more on how Canada’s oilpatch would like to call Trump’s bluff.

• Today’s Data: United States new home sales and building permits
• Earnings: AT&T Inc., Nucor Corp.

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If you incur expenses for which you aren’t reimbursed by your employer, including expenses for a home office, you may be able to claim a deduction on your return for them. But what if your expenses are so large that they exceed your employment income? Read Jamie Golombek’s column and find out how one taxpayer who incurred $59,500 in employment expenses had his appeal denied by the Canada Revenue Agency.

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Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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