Youth Unemployment "Crisis" Overstated
Better schooling and flexible labour markets key to youth job prospects
Release Date: 4 February 1998
VANCOUVER, BC>>> Claims that Canada suffers from a youth unemployment problem are largely exaggerated, according to a study released today by the Fraser Institute.
The authors of Is There A Youth Unemployment Crisis? argue that Canada's youth unemployment rates are naturally higher than adult unemployment rates because of higher job turnover among youth who, as newcomers to the labour force, are more likely to be in and out of employment. An analysis of national unemployment rate data suggests that youth unemployment is not a significantly larger problem today than it was in the past.
"Contrary to the perception among policy makers and politicians that Canada has a youth unemployment 'crisis', there does not appear to be a general trend towards higher unemployment rates among Canadian youth," said Fazil Mihlar, co-author of the study and senior policy analyst at the Fraser Institute.
The study does reveal that employment rates and labour force participation rates for Canadian youth have been declining in recent years, but this is due largely to increases in school enrolment rates, i.e., more and more young Canadians are staying in school for longer durations. This is a positive development, according to the authors, since educated workers generally perform much better in terms of earnings and job security than less educated workers.
Is There A Youth Unemployment Crisis? reveals several important findings. Most notably, but not surprisingly, higher unemployment rates tend to be concentrated among youth with the lowest levels of education. In general, young people with a high school education or less are less likely to find and keep a job than those with more education.
"In an environment where the opportunities for unskilled workers are diminishing, the prospects for young workers with little education are bleak," noted Mihlar. "The real problem of youth unemployment is with those who have the lowest levels of education."
The authors argue that policy action aimed at remedying the "youth unemployment crisis" should be modest at best. This is because: (a) Canada does not have a significant youth unemployment problem; and (b) the real youth unemployment problem is focused on those with the lowest level of education.
At a micro-level, the solution is to improve the education system. Although school enrolment rates are on the rise, high school drop-out rates are higher in Canada than in most OECD countries. Hence, an important policy objective would be to ensure that young people stay in school. Evidence from the United States suggests that government-sponsored training initiatives are a poor remedy for this problem. This is because little can be done to compensate for neglecting the first 12 years of schooling.
According to Mr. Mihlar and co-author Marc Law, market-based reforms -- school vouchers or charter school initiatives -- likely would improve the match between educational supply and demand. This, in turn, would go a long way towards reducing the high school drop-out rate, and improving the labour market prospects of young Canadians.
At a macro-level, the best means to reducing youth unemployment include a strong macroeconomic climate -- which improves employment prospects for everyone -- and a flexible labour market, which opens the doors to more employment opportunities. Since young workers are the hardest hit by the adverse effects of a rigid labour market, it is only by the elimination of provincial minimum wage laws, the repeal of closed shop union privileges, and cuts to payroll taxes that employment prospects for young workers will improve, according to the report.
The authors also note that there is a strong regional dimension to the youth unemployment issue. Youth unemployment rates are generally much higher in the Maritime provinces than in Western and Central Canada. Similarly, youth employment rates and labour force participation rates are much higher in the West than in Central and Eastern Canada. Statistical analysis reveals that factors like high provincial minimum wages and differing economic conditions explain some of the gap in provincial employment and unemployment rates.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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