Three workforce trends defining Canadian cities in 2026

The “future of work” isn’t a theoretical concept discussed at conferences anymore. It is a daily operational reality for municipalities. As we approach 2026, local governments across Canada are navigating a perfect storm of demographic shifts, evolving worker expectations, and intense competition for skilled talent.

The traditional “post-and-pray” recruitment model – relying on the stability of a government pension to attract applicants – is no longer sufficient. Today’s municipal leaders must adapt to a rapidly changing labour market to ensure their communities continue to receive essential services.

Here are three critical workforce trends that every Canadian municipal leader needs to understand for the year ahead based on recent labour market data and emerging HR best practices.

Silver Tsunami is Now a Reality

The long-predicted wave of baby boomer retirements has crested, and its impact is being felt in every department – from public works to city planning – with 1 in 4 workers with retirement on their mind. This is not a regional issue; it is a national demographic shift reshaping the public sector.

The latest BC Labour Market Outlook projects that nearly 65 per cent of all job openings over the next decade will be to replace retiring workers, rather than to support economic growth. In Alberta’s key economic regions, like Calgary, employee replacement demand is projected to account for 52 per cent of the total job openings, overtaking expansion demand as the primary driver of hiring. Quebec faces a historic demographic crunch, with the dependency ratio (retirees to workers) projected to hit peaks not seen since the 1970s, placing immense strain on the public service workforce to maintain delivery levels, with a stagnating working-age population.

While overall employment is growing for Ontario and Atlantic Canada, gains are heavily skewed toward the public sector (healthcare, public administration) to fill gaps left by exits, masking softer private sector demand.

This replacement demand puts municipalities in a defensive posture nationwide, leaving them scrambling to just maintain the current service levels, rather than expanding them. The challenge is most acute in the “hollow middle” – the mid-level leadership and specialized technical roles. Experienced senior engineers, chief building officials, and water treatment managers are retiring, taking decades of institutional knowledge with them.

Flexibility is a Non-Negotiable

For decades, the public sector competed on stability. Today, it competes on flexibility.

Post pandemic, the definition of a “good job” has fundamentally shifted. Candidates, particularly Millennials and Gen Z workers, prioritize work-life balance and flexible arrangements, alongside the total amount of compensation.

While not every municipal role can be remote, municipalities are finding creative ways to offer flexibility. This includes:

• Hybrid work models – For administrative, planning, and finance roles, allowing partial remote work is now a standard expectation. Municipalities that mandate a full-time return to the office are seeing narrower applicant pools for these competitive positions.
• Flexible scheduling – For operational staff, compressed workweeks or flexible shift scheduling are becoming powerful retention tools.

Adopting these policies isn’t just a simple metric for employee satisfaction; it’s a strategic necessity to expand the candidate pool beyond the immediate geographic commuting radius.

Skills-Based Hiring Over Credentialism

As hiring competition tightens, forward-thinking municipalities are re-evaluating how they screen candidates. There is a growing shift toward skills-based hiring, which prioritizes a candidate’s practical abilities and transferrable skills over rigid formal credentials, or years of experience.

This trend is particularly relevant for hard-to-fill technical roles. Instead of automatically filtering out applicants who lack a specific degree, HR departments need to use practical assessments to verify if a candidate’s skills can be developed to do the job.

This approach widens the talent pool and better supports diversity, equity, inclusion, and accessibility.

The Path Forward

The challenges facing Canadian municipalities in 2026 are significant, but they are not insurmountable.

The talent gap is a signal to modernize. By acknowledging the demographic reality, embracing flexibility where possible, and adopting more inclusive, skills-focused hiring practices, municipal leaders can build resilient teams capable of meeting the complex needs of their communities.

The goal is no longer just to fill a seat; it is to build an agile, future-ready public service.  MW

Ria Dhillon is deputy CEO at destinationone consulting.