Ontario’s youth unemployment: We must step up the economic growth agenda

Posted on September 15, 2011 in Delivery System

Source: — Authors:

TheGlobeandMail.com – news/opinions
Published Tuesday, Sep. 13, 2011.    Rafael Gomez

The plight of young workers in Ontario is certainly troubling.

With an unemployment rate (15.7 per cent) nearly double that of the average worker in the province, the number also masks the permanent effects that long-term high unemployment rates can bring. The list notably includes: (1) lower lifelong earnings than comparable labour market participants who enter the labour force during a boom; (2) the misallocation of talent that occurs when workers accept jobs they wouldn’t otherwise choose under better circumstances or are best suited for; and (3) the psychological toll that ends up hurting not only the young workers themselves but their families and friends. So we should all be concerned about high youth unemployment even if we aren’t part of this demographic group.

ndeed, if only out of self-interest, we should be mindful that countries with large numbers of out-of-work youth are susceptible to the kind of social dislocation seen recently in London and Athens. To paraphrase economist David Foot, young people without opportunities either leave the counties they reside in, or tear them apart. The 2005 riots in Paris, attributed at the time to France’s frayed race relations, were in large measure a consequence of the significant numbers of French youth (who also happened to be first-generation immigrants) who had never had any experience with France’s formal labour market.

What can be done? The short answer: Grow faster. Our economy is stalled and has been since the fall of 2008. Young workers are the proverbial canaries in the coal mine, acutely experiencing the consequences of record low levels of economic activity and consequent lack of new job creation. If companies stop hiring, as a first response to a downturn in sales or available financing (as was the case in 2008), they inevitably stop hiring new labour market entrants.

Workers 16 to 25 are not alone in this regard. Try asking an immigrant who’s just landed in Ontario how easy it is to find a job (the unemployment rate for immigrants “landed five years or less” is 16.7 per cent, slightly higher than the youth rate). Or ask the person who’s accompanied their relocated spouse to Toronto. Or the recently laid off middle-aged worker. Or the mother who’s decided to return to the labour force after an extended maternity leave. Pretty much anyone who’s either moved to Ontario from abroad or re-entered the current labour market has suffered.

So the focus on youth unemployment is certainly warranted, but the rhetoric needs to be extended on several fronts. First, we need to recognize that the underlying variable that high youth unemployment is truly measuring is the difficulty any new labour market entrant is facing in finding a job. Second, that the cause of this latest uptick in youth unemployment has its origins in a set of macro-economic problems and is not a function of micro-economic tweaks to training programs for the young, tax credits for employers or better job-matching efforts. Third, we need to be thinking about a bold new growth agenda that reverses our macro-economic malaise, an agenda that takes advantage of historically low public borrowing rates to build on long-term investments and is environmentally sustainable and tailored to Ontario’s older, more urbanized society.

Ontario has a history of taking such a bold path. While the global economy was mired in stagflation during the 1970s, Ontario outperformed almost every jurisdiction in North America, and its unemployment rate remained at or below 6 per cent (12 per cent for youth). The reason was simple. Between the end of the Second World War and the early 1970s, the province responded to urgent new needs – prompted by the baby boom and by earlier shortfalls related to war and the Great Depression – with the creation of an almost three-decade-long infrastructure boom that effectively created the core of Ontario’s current public infrastructure. Most of the elementary and secondary schools still in use, 11 new universities and a new community college system, the two main lines of the Toronto subway system, key portions of the 400-series highway network, and much of our health care infrastructure were all part of this investment.

Sadly, that era of visionary investment ended in the 1980s. From 1980 to 1999, the average growth of per capita net public stock (including all our roads, schools, hospitals, transmission lines etc.,) was negative, meaning we allowed our public investments to depreciate at an alarming rate. These decades of neglect significantly eroded Ontario’s capacity to meet the economic and social needs of the 21st century.

The global growth slowdown is only unmasking what’s been at the root of our collective woes for nearly three decades. This threat to our long-term economic competitiveness and standard of living is most acutely being felt by our new labour market entrants. To reverse that stubbornly high rate of unemployment for our young, we need to step up the growth agenda and leave aside any talk of micro-economic miracles.

Rafael Gomez is an associate professor in employment relations at the Centre for Industrial Relations and Human Resources at the University of Toronto.

< http://www.theglobeandmail.com/news/opinions/ontarios-youth-unemployment-we-must-step-up-the-economic-growth-agenda/article2163391/ >

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