Today's economy

Here’s what youth unemployment is costing us

By Kevin Press, BrighterLife.ca

Comments (5)

A young man is looking for work.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%.

Youth unemployment rates

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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Graham Roe (@roezone) on

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.
——————————————————————————–
Now reading the end of the article a little more carefully, I completely disagree with the conclusions of this post. There are seismic shifts underway in our economy, demographics, access to information and enhanced ability for our youth to connect and mobilize.

If governments do not address the barriers to opportunity that exist for our youth we will see more of the same that occurred in London. You cannot simply blame the victim as this blog post ends. That’s akin to sticking our head in the sand and perpetuating the status quo. Just because GenX and the boomers are unaffected now doesn’t mean it will stay that way.

Examples of barriers:
* A corporate world that is focussed on the next financial statement, so short sighted that many do not open their doors to mentoring our youth and provide them with meaningful employment and the opportunity to shape the world in which they live. I remember looking for work in the early to late nineties during co-op terms and after graduation and so many firms were looking for students who had skills that really only candidates with 10 years of experience would have.
* Governments that seek to silence the youth vote and all parties seek their best interests in attaining power and that means ensuring the youth are disenfranchised.
* An education system that still finds its roots in the industrial age that was modelled on pumping out factory workers and good consumers.

Our youth need to be embraced by enterprises and goverment and nurtured to be citizens and leaders of our future. Maybe we can avoid the turbulence and disruption of the 60s by harnessing their energy rather than trampling it.

Graham Roe (@roezone) on

Thanks for sharing. Some sobering statistics. What risks are we building in to our society (our economy) if we continue to build barriers to opportunity for our youth?

What do you think these barriers are? How can we overcome these?
What about disruption to our wealth models?

Don Tapscott presented a similar picture in 2011 – http://www.guardian.co.uk/commentisfree/2011/apr/04/unemployed-youth-revolution-generational-conflict

What is interesting is Don kind of predicted what would later happen in the summer of 2011 4 months later …. http://www.washingtonpost.com/opinions/whats-behind-britains-riots/2011/08/09/gIQARTu24I_story.html?hpid=z1

Daniel Workman on

Kevin,

A Jan. 15 TD-Environics survey found that 65% of the younger generation (so-called Millennials ages 14 to 31) believe they overspend, compared to 44% for Baby Boomers and 56% for Gen X.

Do you think that youth unemployment is also costing the Canadian economy because of easy access to credit, which persuades some younger people to live beyond their means and overspend on credit cards? What are the solutions to credit challenges from the younger generation’s perspective — or is this merely a matter of perception?

    Kevin Press on

    Thanks Daniel, that’s a great question.

    There is a connection between unemployment and personal debt of course. Martin Schwerdtfeger’s report doesn’t explore it, but it stands to reason that those not lucky enough to have a regular paycheque they can count on are going to have difficulty making ends meet. When it comes to dealing with personal debt, the same basic rules apply to adults of all ages. Budgeting is essential. Professional advice can be a big help. There are good moves that you can make, even if you do find yourself out of work. Young adults face unique challenges because they’re usually less established financially. The key is to develop a plan and stick to it.

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