Stephen Poloz, Governor of The Bank of Canada, referred to discouraged young workers several times at a speech and press conference in Toronto on Monday and in the House of Commons on Tuesday. Following is a transcript of those comments:
Monday's press conference
Q: We heard about the impact this recession has had on the labour market, youth unemployment and under-employment. Just curious as to your assessment about the long-term impacts of that trend with less experience coming out of school and gaps in resumes, that kind of thing.
Mr. Poloz: Yes, I'm very cognizant of that. It's why we're bringing to bear this more diverse view of the labour market indicators, to capture exactly that kind of thing. And it's why we say, for instance, that the unemployment rate as it is today over-states the amount of improvement that we've actually had because in the background, there are discouraged worker effects and, of course, worker effects such as the youth who may not even be answering the phone when the survey takes place.
So we estimate around 200,000 of those. And the problem, of course, is the longer this takes, then the more likely it is that a brand new graduate is more attractive to an employer and the folks that have been taking this thing hard and have not been able to engage in the workforce are scarred by it. And that makes it harder for them to engage with a good match where they're most productive.
So we know that the labour market does not deliver its fulsome outcomes with a high efficiency, the high productivity matching until it's actually running pretty hot. When it's running cold like it is, it doesn't.
So we have to be patient for that. And when I bump into youths, they ask me, you know, "What am I supposed to do in a situation?" I say, look, having something unpaid on your CV is very worth it because that's the one thing you can do to counteract this scarring effect. Get some real life experience even though you're discouraged, even if it's for free. If your parents are letting you live in the basement, you might as well go out and do something for free to put the experience on your CV.
But anyway, our belief is that, over time, as the growth happens, there's sort of a natural draw for those kids to get those new jobs. The vast majority of those jobs that new recruits get are in new companies, young companies. And we're just beginning, I think, to have the right environment to get that.
So we have to be patient.
Tuesday's House of Commons testimony
Hon. Scott Brison: Thank you.
In a speech yesterday, you spoke to the weak job creation rate in Canada, less than 1%. You said “well below what one would expect from an economy that's recovering”. You also spoke at some length about the issue around youth under-employment and unemployment referring to that there are around 200,000 youth under-employed and referring to adult children living at home with their parents in the basement.
Can you comment on the long-term economic cost to what some refer to including TD Economics as the scarring effect on the Canadian economy, the scarring effect of sustained youth under-employment and unemployment?
Mr. Poloz: Yes, it's very hard to be concrete about that. We all acknowledge that if you come out of school and you spend a year or two failing to get something, that each year there's another crop of new graduates coming out and competing for the new job that is created. So the scarring effect can last for some time. Our belief is that over the next two years, we will manage to close up that gap and use that excess capacity. So we're hopeful that it does not last a really long time.
We have to acknowledge that it exists and that's why when I was asked yesterday, I suggested as I have privately, to young folks that ask me “well what should we be doing in this job environment”? My answer is volunteer to do something which is at least somewhere related to your expertise so that it's clear that you are gaining some learning experience during that period. That's not the same as advocating very aggressive apprenticeship programs or so on. What I mean is having experience on the CV so the scarring effect is minimized.
Mr. Brison: Do you acknowledge though for instance in what you're suggesting even unpaid internships and getting that experience does contribute to income inequality as wealthier families of children from younger or wealthier families can afford to take those kinds of positions whereas those in low income families simply need to get work at any pay?
Mr.Poloz: I acknowledge that there are issues like the ones you're raising. I wasn't trying to go deeply into this. It's not a monetary policy matter but I still think that when there are those opportunities, one should grab them because it will reduce the scarring effect all other things equal.Report Typo/Error
Follow us on Twitter: