In a significant shift for Canada’s labor market, workers across the country may finally see their paychecks grow more substantially as the federal government’s recent immigration slowdown begins to take effect, according to a new analysis from the Conference Board of Canada.
After years of stagnant wage growth that barely kept pace with inflation, Canadian workers are positioned to gain increased bargaining power as employers face a tightening labor pool. The Conference Board’s quarterly economic forecast projects that average hourly wages could rise between 4.2% and 4.8% annually over the next two years, compared to the modest 2.7% average growth seen from 2019 to 2023.
“We’re witnessing the natural market correction that occurs when labor supply constraints meet persistent demand,” said Dr. Sonya Gulati, chief economist at the Conference Board. “With fewer new immigrants entering the workforce, employers will need to compete more aggressively for available talent, particularly in high-demand sectors.”
The federal government’s decision to reduce immigration targets from over 500,000 new permanent residents annually to approximately 380,000 for 2025 represents a strategic pivot that aims to address housing affordability challenges while creating more favorable conditions for existing workers. This policy adjustment follows mounting pressure from economists who argued that Canada’s aggressive immigration targets were suppressing wage growth while exacerbating the housing crisis.
Finance Minister Chrystia Freeland acknowledged the rebalancing act during a press conference in Ottawa. “Our government is committed to managing immigration levels in a way that supports economic growth while ensuring the benefits are widely shared among Canadians,” Freeland stated. “Sustainable wage growth is essential for middle-class prosperity.”
The wage acceleration is expected to be most pronounced in sectors already facing labor shortages, including healthcare, construction, and information technology. In British Columbia’s construction sector, for example, employers report offering 15-20% wage premiums to secure skilled tradespeople for ongoing infrastructure projects.
However, economists caution that stronger wage growth could present challenges for Canada’s inflation targets. The Bank of Canada, which has maintained its policy interest rate at 3.75% following several cuts earlier this year, will closely monitor wage trends as it balances employment objectives against price stability.
“While improved compensation for workers is undoubtedly positive, the central bank remains vigilant about potential wage-price spirals,” noted Pedro Antunes, former Chief Economist at the Conference Board. “Productivity improvements will be critical to ensure that higher wages don’t simply translate to higher consumer prices.”
For small business owners like Mariam Siddiqui, who operates a growing technology consulting firm in Waterloo, the changing labor dynamics present both opportunities and challenges.
“We’re definitely feeling the pressure to increase our salary offerings,” Siddiqui explained. “On one hand, it’s becoming more expensive to hire, but on the other, our existing employees have more disposable income to spend in the broader economy, which could benefit many businesses long-term.”
The Conference Board’s analysis also highlights regional disparities, with Atlantic Canada and Quebec projected to see the most significant wage acceleration due to their aging demographics and heightened dependency on immigration for labor force growth.
As Canada navigates this economic transition, the fundamental question remains: can the country achieve a balanced labor market that delivers meaningful wage improvements for workers while maintaining international competitiveness and controlling inflation? The answer will likely shape economic policy debates well into the next federal election cycle.
