Corporate Canada needs to pony up to reduce youth unemployment

Posted on November 13, 2014 in Debates – ROB/Commentary/ROB Insight
Nov. 13 2014.   Andrew Jackson

One of the perks of the position of the Governor of the Bank of Canada, going back to at least the days of David Dodge, is that it provides a bully pulpit to weigh in on economic issues of wider public interest than monetary policy. This is appropriate given the broad context within which the bank operates, but, as Stephen Poloz now knows, the ability to gain widespread public attention comes with a downside.

Mr. Poloz was widely criticized for his suggestion that unemployed young people should volunteer or consider working for free in order to improve their longer-term prospects in a poor job market. Outraged youth rightly noted that it is only the children of the affluent who can afford to work for free, and that unpaid internships are often highly exploitative.

In fairness to Mr. Poloz, he was at least underscoring the very real problem that the economic recovery continues to largely bypass youth. As of October, 2014, the youth unemployment rate was still 12.6 per cent, more than double the adult rate, and the youth employment rate (the proportion of the age group 15 to 24 holding any kind of a job) was 56.5 per cent, still down a full three percentage points from 2008.

The bigger issue is underemployment. Far too many young people leaving the postsecondary educational system are finding work, but in low-paid and insecure jobs that fail to meet their qualifications and don’t provide a meaningful career experience. A 2012 report by Canada’s certified general accountants found that one in four university graduates aged 25 to 29 hold jobs that do not require a university degree.

Mr. Poloz’s tone-deaf remarks suggested that it is up to young people to make the best of a bad situation. But he could have used his bully pulpit to propose an entirely different approach, building on the recent challenge issued by the Broadbent Institute.

What Mr. Poloz could have said is something like this:

“As noted by my predecessor Governor Carney, Corporate Canada is sitting on over $600-billion of surplus cash or ‘dead money.’ Companies can afford to do the right thing, which is to step up to the plate and create more meaningful career opportunities for young people entering the labour market. I strongly urge them to do so.”

As Mr. Poloz said, long periods of unemployment and underemployment often lead to the loss of skills and permanent “scarring” effects. And, as he is well aware, we can ill afford this as a country given the fact that the baby boom generation will soon be leaving the work force in large numbers. The delay in retirement brought on by the recession is not going to last forever.

Between 2008 and 2013, the employment rate of persons age 60 to 64 rose to 50.0 per cent from 45.2 per cent, and that of persons age 65 to 69 to 24.4 per cent from 20.5 per cent. The baby boomers are working longer, creating a big part of the problem for young people in a slack economy, but there is still a big drop in employment rates after age 65.

Responsible employers recognize the need to give young people leaving the postsecondary educational system some on-the-job experience. Approximately 80,000 secondary and postsecondary students participate annually in co-operative education programs that provide a paid work experience, the quality of which is actively monitored by an educational institution. Employers also support some 85,000 new apprenticeships that combine on-the-job experience and classroom learning each year. Unfortunately, a significant minority of employers are taking advantage of the very slack job market for youth through exploitative unpaid internship positions that are generally illegal unless they are part of a formal academic program. And many more have greatly limited hiring of new graduates.

Government programs for youth make only a modest difference. The federal government spends some $270-million a year on its Youth Employment Strategy, but most funds are targeted to minimum-wage summer jobs created by not-for-profit employers and small businesses. For good reason, there are few subsidies to major private sector employers to create meaningful career opportunities for youth.

Corporate Canada can clearly afford to do more, and it is in their own best interests to do so since labour force growth will soon grind to a virtual halt and young workers with good qualifications and work experience will be widely sought after. Deploying even a small fraction of surplus corporate cash to new hiring would make a significant difference.

The message to large employers should be that they have a responsibility to create meaningful paid job opportunities for youth.

Andrew Jackson is the former Packer Professor at York University and senior policy adviser to the Broadbent Institute.

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