Canada’s youth unemployment rate — stuck above 14% for years now — has cost young adults $10.7 billion in lost wages since the downturn. But the full impact will be more than twice that. Over the next 18 years, this generation of young Canadians is expected to lose another $12.4 billion. That’s according to a report by TD Economics’ Martin Schwerdtfeger, a senior economist with the firm.
“The results in Canada are lower than for the eurozone as a whole or the U.K.,” Schwerdtfeger told me in an interview last week. “Although employment levels have not gone up to the level that they were prior to the recession for the youth population in Canada, there has been some recovery.”
Still, $23 billion is a big number. The ongoing impact is just as important as the immediate loss in wages. When young adults experience unemployment early in their careers, they often suffer something economists call “scarring.” “Economic research indicates that a period of unemployment at the time of entry into the labour market is associated with persistently lower wages many years thereafter,” wrote Schwerdtfeger.
Measured as a percentage of national gross domestic product, the 18-year effect in Canada is estimated to be 0.7%.
Not surprisingly, the European numbers are higher. Ireland’s result is 7.4% over the same time period. Spain is looking at a 4.8% hit; Greece at a 3.4% loss. Youth unemployment across the 17-country eurozone sits at about 24%.
Why have young people been hit so hard by this economic cycle? Schwerdtfeger told me that part of the problem is a move toward contract employment, which contributes to the emergence of a dual labour market. “Young workers have a higher likelihood of being employed under temporary contracts than older workers,” he said. “That means that it’s less costly for firms to lay them off whenever there is an economic downturn. That tends to create a disproportionate impact on those younger workers.”
The solution to all of this? Besides a healthier global economy, Schwerdtfeger points to professional training, continuing education and a willingness among young professionals to go wherever the work is.
There is a role for policymakers to play here, in support of young adults. Ultimately though, the onus will fall on the unemployed (and under-employed) themselves.
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