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Canada / High youth unemployment does not represent an alarming event says the Certified General Accountants Association of Canada

“Fuelled in part by fears that burdens of the recent recession have disproportionately fallen on youth, the issue of youth unemployment has rekindled significant unease with different levels of government, communities and the general public” write the Certified General Accountants Association of Canada  in Youth Unemployment in Canada: Challenging Conventional Thinking? (Freely adapted quotes to follow)

In addition to the most common consequences of unemployment such as financial hardship and emotional distress, joblessness may also result in the erosion of an individual’s skills and knowledge and increase uncertainty of future labour market prospects. For jobless youth, this aspect of unemployment may particularly be ‘scarring’ as skills and knowledge gained through the educational system may not have appropriate opportunity to crystalize into professional ability. At the aggregated economic level, such an erosion of skills may disadvantage business in their ability to expand and compete; particularly in an environment of increasing global competition.

However, the erosion of skills that may occur due to unemployment is only part of a broader range of factors that may impact the quality of the workforce. Underemployment may likewise negatively affect quality of labour as it does not allow individuals to utilize the full range of skills possessed. Contrary to the highly visible issue of youth unemployment, underemployment is seldom spoken of. Recognizing the importance of both of these phenomena, CGA-Canada sees it timely to critically examine the level of hardship associated with youth unemployment and the presence of youth underemployment in the Canadian economy.

A number of positive trends

The dynamic of youth unemployment demonstrates a number of positive trends; revealing themselves through the following facts:

The youth (15 to 24 years of age) unemployment rate trends downwards while expected demographic changes may further ease youth joblessness. The peak level of youth unemployment (15.2%) registered during the most recent recession was noticeably below that experienced in previous recessions when the youth unemployment rate swelled to 19.2% and 17.2% in 1983 and 1992 respectively. The magnitude of the surge in unemployment was also much more trivial for youth engaged in the labour market during the 2009 recession compared to those who were in the labour force during the two recessions prior. Specifically, the youth unemployment rate increased by only one third (from 11.6% to 15.2%) in 2009 but surged by more than one half in the 1980s and 1990s. The projected decline in the youth and young worker population which is expected to gradually unfold over the next 20 years may further improve the unemployment rate of youth.

Youth unemployment is largely short-lived. In 2011, nearly half (46.8%) of unemployed youth were able to find a job within 1 to 4 weeks after the beginning of an unemployment spell; among mature workers, only 27.0% enjoyed a similar positive outcome. In 2011, the average duration of unemployment experienced by youth did not exceed 11 weeks and was in fact twice shorter than that endured by mature workers. Youth likewise fared much better than other age groups in terms of long-term unemployment – only 5.4% of unemployed youth endured an unemployment status for one year or more; whereas young workers were twice more likely and mature workers three times more likely to experience such long-term unemployment over the 2011 period.

For the majority of youth, unemployment is a transitory state between school and the labour market. The prevailing activity of youth prior to unemployment was unrelated to the labour market as some 68.1% of unemployed youths did not participate in the labour force prior to experiencing joblessness. This differed markedly from the situation some 30 years ago when 55.5% of youth job searchers worked prior to becoming unemployed. Those attending school prior to unemployment represented 57.4% of all unemployed youth in 2011; a proportion more than twice higher compared to that observed in 1980. In turn, youth that became unemployed as a result of involuntary job loss accounted for only 14.8% of all unemployed youth; this proportion decreased by more than two fold over the past decades and was not seriously affected by the most recent recession.

Older workers do not evidently exacerbate youth unemployment. The overlap in occupational preferences of youth and older workers is present in only two occupational groups – clerical occupations and sales and service occupations. The level of youth unemployment in these occupations does not suggest a crowding out of youth by older workers: in 2011, the youth unemployment rate in these occupations was noticeably below the average and close to the levels observed prior to the most recent recession. Likewise, occupations where employment of older workers increases at a particularly strong pace do not register an increased rate of youth unemployment. Moreover, the growth in employment of older workers does not exceed the growth in this group’s population. As such, what may seem to be an assertive expansion of the older workers’ presence in the labour market is, in fact, a mere reflection of demographic changes.

The quality of youth jobs has been improving during the economic recovery. The job losses of youth during the recent recession were fairly equally distributed among lower, middle, and higher-wage occupations as each group’s participation shrank by some 8% between October 2008 and October 2009. In recovery, youth’s presence in higher-wage occupations interestingly grew at a much faster rate (19.2%) than those in middle and lower-wage occupations adding some 18,800 high-quality jobs between October 2009 and October 2011. Young workers also enjoyed favourable changes in the quality of jobs: this group increased its presence in higher-wage occupations by 5.1% between October 2008 and October 2009, and by another 2.3% between October 2009 and October 2011. For mature workers, the number employed in higher-wage occupations shrank by 0.7% in the aftermath of the recession. Wages earned by youth workers also present a positive trend. During the 2004-2008 period for example, the real median hourly wage of youth working full-time increased at an annual average rate of 3.2% – a rate three times higher than the growth rate experienced by young and mature workers. In 2009-2011, when real wages of most workers declined, youth continued to enjoy a 0.7% average annual increase in the real median hourly wage.

Underemployment of youth in Canada exists and is apparent through both underutilization of skills and labour; however, all age groups are susceptible to underemployment. The incidence of underutilization of youth labour has increased; however, the rise in the numbers of discouraged workers did not play an important role. During the most recent recession, incidence of involuntary part-time work increased among workers in all age groups; however, youth did experience the highest rate of involuntary part-time employment. In 2011, the economy was underutilizing the ability and willingness to work of some 4.0% of employed youth; in 2007, this proportion was almost twice smaller and stood at 2.2%. The proportion of discouraged youth workers went up by nearly two fold in the past 3 years; however, they continued to account for an insignificant proportion (0.21%) of the overall youth labour force in 2011.

Causes of underemployment are not well understood; a number of theoretical inferences suggest that underemployment may be induced by changes in supply and demand of workers having different levels of education, technological progress, and heterogeneity of workers. However, an extensive analysis of causes and consequences of underemployment in the Canadian context has not been undertaken. Concurrently, and consequentially, an information gap exists regarding the dynamic of underemployment over time. A number of factors may be thought of as indirectly contributing to underemployment such as the overall structure of the Canadian economy and industries, youth migration, and the efficiency of labour market information.

High youth unemployment does not represent an alarming event

Based on these findings, it is reasonable to reach certain conclusions. Firstly, although youth unemployment is relatively high – it does not represent an alarming event. Secondly, the conjecture that youth is disadvantaged within the labour market may not always be correct. Thirdly, while underemployment represents a significant issue for youth, it manifests itself through both underutilization of skills and underutilization of labour; however, the challenge of underemployment is not unique to youth but is experienced by workers in all age groups. And lastly, while the symptoms of underemployment are endured by individuals, their consequences may also spill over and affect businesses and the economy as a whole.

Chosen excerpts by Job Market Monitor. Read the whole story at 

Capture d’écran 2013-08-14 à 15.36.25

via Youth Unemployment in Canada: Challenging Conventional Thinking?

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