After nearly five years of discouraging or even depressing prospects – what could be called a “youth jobless recovery” – the May job numbers in Canada provided welcome relief. Some 95,000 jobs were created in Canada in the month, and the vast majority – 54,000 – went to young workers. The Canadian youth unemployment rate fell by almost a full percentage point, to 13.6 per cent.
One month of data does not yet a trend make, but if the labour market for young workers in Canada has reached a positive turning point, it would be a further and welcome sign of a sustained growth recovery. Absorbing young workers into the workforce would help organizations to prepare for the next structural wave in labour markets: The growing number of baby boomers getting ready to retire.
One of the most tragic stories of the turbulent economic recovery since the 2008-09 recession has been the absence of employment opportunities for young people. Conditions are at a critical point in Europe. Southern Europe in particular is in crisis, with youth unemployment rates in countries such as Greece and Spain exceeding 40 and even 50 per cent, leading to growing fears of a huge “lost generation” of young people.
The United States has also experienced a painful pattern of dislocation for young workers. The U.S. unemployment rate for the 20-24 age category leaped from 7.2 per cent in 2007 to 13.2 per cent in May, 2013; the number of U.S. unemployed aged 20-24 has doubled over the same period, to more than 2 million.
Circumstances are only a little better in Canada. There was no net job creation for Canadian youth during the recovery. Employment for Canadians under 25 was 2.68 million in September, 2008, or an employment rate of 60.5 per cent, when the financial crisis exploded. At the end of 2012, youth employment had actually fallen by 250,000 to 2.43 million, an employment rate of 54.6 per cent. Official youth unemployment rates in Canada have hovered at 14 per cent or higher since the recession. Because many young people have ceased searching for employment (often by going back to school) and are, therefore, not counted in the labour force survey, the real level of youth unemployment is even higher.
Over the same 2008-2012 period, when the number of young Canadians employed was in decline, employers relied on temporary foreign workers (TFWs) to fill the holes in their workplace and to assist in restructuring their operations. The number of TFWs in Canada grew by more than 185,000 between 2007 and 2012 on a net basis. TFWs were heavily used in sectors such as accommodation and food services, where young people have traditionally found employment to build their work experience.
This seems like a poor trade-off for Canada's long-term economic and social prospects. Few would dispute that engaging young Canadians in the workforce should be a higher national priority than relying upon TFWs. A better public-policy choice would be to ensure that we are investing in the right skills and pathways for young people to enter and stay in the workforce successfully. TFWs should be part of the labour force tool kit available to Canadian employers, but under the right conditions and certainly not as a first resort.
The pressure across the industrial world to find ways to absorb young workers back into employment is taking place in the midst of another powerful demographic shift: The imminent retirement (or at least reduced workforce engagement) of a growing number of baby boomers. In its long-term economic forecast, the Conference Board of Canada estimates that the Canadian labour force participation rate will steadily decline over the coming decade. For some specific occupations and skills (for example, truck drivers or construction workers), the impact of an aging workforce is already being felt by employers.
Getting the balancing act right between retaining older and engaging younger workers will be one of the key labour market challenges ahead.
Glen Hodgson is senior vice-president and chief economist at the Conference Board of Canada.