YOUTH UNEMPLOYMENT TRENDS
Kevin B. Kerr
TABLE OF CONTENTS
OBSERVATIONS AND KEY TRENDS
YOUTH UNEMPLOYMENT TRENDS
Youth unemployment has been, and continues
to be, a perennial problem for policy-makers in Canada and many other OECD countries. The
transition from school to work is difficult for many young people, as evidenced by the
relatively high rates of unemployment experienced by individuals 15 to 24 years of age,
the official age category defined as "youths" by Statistics Canada. The
school-to-work transition has become more difficult of late as a result of the low rate of
job growth following the 1990-91 recession. It has become particularly difficult for those
who do not possess the necessary education and skills demanded in todays labour
market. This paper provides an overview of youth unemployment trends during the period
1976 to 1996.
AND KEY TRENDS
Youth unemployment is relatively higher
than adult unemployment for several reasons, of which two are key. First, seniority in the
Canadian labour market is an important consideration for employers who decide to reduce
employment levels; thus, according to gross flow data, employed youth are more likely to
become unemployed than are adults. Throughout the period 1985 to 1994, it is estimated
that flows from employment to unemployment accounted for at least one-third of the gap
between youth and adult unemployment rates.(1) The other
main contributor is the higher tendency of young employed workers to leave the labour
force, thereby reducing the size of the youth labour force relative to the number of
unemployed youth. This weaker attachment to the labour force is estimated to be the most
significant gross flow contributor to the gap between youth and adult unemployment rates.
The youth unemployment problem in this
country is often discussed as if "youth" were a homogeneous group. In reality,
there are wide differences among 15 to 24 years olds. Chart 1 highlights some of these
differences for the year 1996. For example, teenagers typically have higher rates of
unemployment than youths aged 20 to 24. Between 1990 and 1996, the average annual
unemployment rate differential between these two age groups was 3.7 percentage points,
unchanged from the previous decade.
As is also evident from Chart 1, young
women tend to experience lower rates of unemployment than young men. The average annual
unemployment rate differential between young men and women during the period 1990 to 1996
was 4.1 percentage points. This was roughly 40% higher than the average annual
unemployment rate differential (2.9 percentage points) in the 1980s.
There are also substantial differences in
youth unemployment rates across the country. For example, in 1996 Newfoundlands
youth unemployment rate was 29% or 1.8 times the national rate for youth of 16.1%.
Saskatchewan and Alberta, on the other hand, registered the lowest regional rate of
unemployment in that year (12.2%), roughly three-quarters of the national rate.
Interestingly enough, these same rankings existed at the beginning of the 1980s, although
Ontario was registering the lowest differential by the end of the 1980s.
There is no
doubt that the seriousness of Canadas youth unemployment problem was diminishing
before the onset of the 1990-91 recession. Between the mid-1970s and the end of the 1980s,
labour market conditions among youths had improved relative to those of their adult
counterparts. This trend is presented in Chart 2, which displays two measures of relative
unemployment among youth: one expressing the youth unemployment rate as a ratio of the
adult rate, and one showing the gap between youth and adult unemployment rates. Both
measures, especially the former, show a downward trend for youth unemployment until the
1990-91 recession. The latter measure widened in response to the recessions in 1981-82 and
1990-91, making it clear that youth unemployment is more cyclically sensitive than adult
unemployment. As noted previously, firms heavily favour employees with seniority when
adjusting employment; as a result, youths tend to be laid off first and rehired last.
Youths share of total unemployment,
which in 1976, accounted for almost one-half of total unemployment, has also declined over
the years. Last year, their share of total unemployment was about 27%. However, when
measuring the incidence of youth unemployment it must be taken into account that the size
of the youth labour force also declined during this period. Chart 3 depicts a downward
trend in youths share of unemployment relative to their share of the labour force
after 1976 and until the 1990-91 recession, when the trend was reversed.
Today, many Canadians believe that
long-term job prospects for youths are declining and that todays young workers are
doing more poorly in the labour market than past generations. To some extent, this is
true, but the situation depends largely on the skills and education of young workers; the
impact of education on the transition from school to work cannot be overstated. Today,
proportionately more youths are pursuing higher levels of schooling than in the past: in
1989, the proportion of youths attending school was 51.9%; in 1996, it was 60.4%.
Moreover, despite the fact that the size of the youth population declined during this
period, the numbers enrolled in post-secondary education increased.(2) While this trend is due, in part, to poor labour market conditions, it
should also be noted that many young people today recognize the growing importance of
education and skills in the labour market. There is no doubt that the level of education
and training necessary to acquire the skills demanded in the labour market today are
higher, on average, than in the past. This trend is expected to continue in the future.
Chart 4 illustrates the importance of
education in the context of youth unemployment; it shows that youths with more schooling
consistently exhibit lower rates of unemployment than their less educated counterparts. In
fact, youths with a university degree appear to be as well off today as their counterparts
20 years ago. Despite the steady upward trend in the aggregate unemployment rate during
this period, the unemployment rate among young individuals with a university degree in
1996 was similar to that in 1976. The unemployment rate among youths with a university
degree declined relative to the overall youth unemployment rate between 1976 and 1996.
In contrast to the situation for highly
educated youths, however, unemployment among less educated youths has increased
dramatically in the last 20 years. As illustrated in Chart 4, the unemployment rates of
youths with grade school and some high school have increased by 9 percentage points in
The importance of education is also
reflected in young workers earnings. According to data from the National Graduate
Survey, real median full-time earnings of 1990 graduates with a bachelors degree
were $32,000 two years after graduation, slightly higher than the $31,900 reported for
1982 graduates in 1984. On the other hand, median real full-time earnings of youths
without a post-secondary degree or diploma declined from $23,900 to $22,600 over the same
time period.(3) Irrespective of educational attainment,
it should be noted that young workers have witnessed a decline in real earnings since the
beginning of the last decade; this is partly attributable to the increase in the
proportion of young people who work part-time. While recent research suggests that
proportionately fewer young workers are currently employed in the so called "good
job" sector than was the case a generation ago, it should be noted that, at least
until now, the extent of the concentration in the "bad job" sector has usually
weakened with age. In other words, many young workers appear able to make the transition
into the primary labour market as they progress through their 20s.(4)
Finally, Chart 5 shows the distribution of
youth unemployment by the duration of unemployment. In addition to the expected cyclical
nature of this distribution - that is, longer unemployment spells during periods of
economic weakness - these data suggest that, with the exception of long-duration spells of
unemployment, the length of unemployment is distributed among youths today in much the
same way as 20 years ago. In both 1976 and 1996, roughly two-thirds of all unemployed
youths had a spell of unemployment lasting less than 14 weeks. At the other end of
the distribution, in 1996 5% of all unemployed youths were unemployed for more than one
year, a proportion about three times higher than for 20 years earlier. The increase in the
proportion of long-term unemployed youths is undoubtedly partly linked to the structural
unemployment problems facing unskilled workers of all ages in todays labour market.
As indicated at the outset, youth
unemployment has been on the policy agenda of the federal government for a long time. Its
prominence today as a policy issue stems, in part, from the absence of job growth among
youths and the fact that their unemployment rate remains relatively high compared to that
of the nation as a whole. There is no question that the job prospects facing young workers
today are relatively worse than those prior to the 1990-91 recession.
The federal government has a long-standing
acquaintance with youth-specific labour market adjustment programs.(5) In addition to summer employment programs, unemployed youth aged 18 to
24 have an opportunity to gain work experience and job-related skills under the Youth
Service Canada program. In addition to weekly payments, participants who complete the
program receive a grant of at least $2,000, which can be used for job search, returning to
school, starting a business or paying off a student loan. The Youth Internship program is
intended to provide unemployed youths (normally under the age of 30) with opportunities
for work experience in partnership with the private sector, not-for-profit organizations
and community agencies. Work experience opportunities are created in many areas including,
for example, science and technology, the environment, international trade and
international development, and, most recently, the federal public service. In the Speech
from the Throne on 23 September 1997, the government promised to work in several ways to
help youths make a smoother transition from school to work. This initiative is expected to
include, for instance, extending and broadening internship programs, augmenting summer job
opportunities, participating in the development of a nation-wide mentorship program, and
developing and expanding community-based employment programs for disadvantaged youths (for
example, establishing multi-purpose Aboriginal youth centres).
There is no doubt that many youths are
experiencing serious difficulties in making the transition from school to work, a process
in which education plays a very vital role. While highly educated youths do not appear to
be worse off than in previous generations, their less educated counterparts do. Compared
to youths 20 years ago, less educated youths are experiencing much higher levels of
joblessness. Those in this group undeniably warrant the special attention of
policy-makers, since the labour market problems confronting them are primarily structural
in nature and may persist into adulthood if not properly addressed today.
Betcherman, Gordon and Norm Leckie. Youth
Employment and Education Trends in the 1980s and 1990s. Working Paper No. W03.
Canadian Policy Research Networks, February 1997.
Canadian Youth Foundation. Youth
Unemployment: Canadas Hidden Deficit. 1995.
Kerr, Kevin B. Youth Unemployment in
Canada. CIR 82-4E. Parliamentary Research Branch, Library of Parliament, Ottawa.
OECD. "Growing into Work: Youth and
the Labour Market over the 1980s and 1990s." Employment Outlook, Chapter 4,
Statistics Canada. "Youths and the Labour
Market." Labour Force Update, Spring 1997.
(1) Human Resources Development Canada, Applied Research Bulletin,
Vol. 2, No. 2, 1996, p. 4.
Statistics Canada, "Youths in the Labour Force," Labour Force Update,
Spring 1997, p. 14.
Resources Development Canada, "Youth Employment Diagnostique," unpublished.
Betcherman and N. Leckie, Youth Employment and Education Trends in the 1980s and 1990s,
Canadian Policy Research Networks, 1997, p. 24-5.
course, youths also have access to the initiatives available under Part II of the Employment