Will uneven job market for youth improve in 2018?

Wage growth, job opportunities could pick up, says expert
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 03/01/2018

It was quite the year for the Canadian labour market.

In 2017, 423,000 jobs were created nationwide, marking the best year for job growth since 2002. And in December, the unemployment rate hit 5.7 per cent — its lowest mark in 40 years — according to Statistics Canada.

“It was a bit overdue,” said Matthew Stewart, director of national forecasting at the Conference Board of Canada in Ottawa. “We had a terrible employment picture for basically two years through 2015 and 2016.”

“It’s been a really impressive run on employment over the last year.”

Strong consumer spending and a scorching housing market helped drive economic success and employment growth, he said.

Achieving a 5.7 per cent unemployment rate was also significant, said Stewart.

“It’s basically the lowest unemployment rate since they redesigned the Labour Force Survey. It’s pretty impressive and did surprise a lot of economists.”

Young workers’ struggles

So, if Canada’s job numbers are the best in four decades, why do we keep hearing that young workers are struggling to find appropriate work?

The youth unemployment rate was 10.9 per cent in January, nearly double the national average.

But unemployment among workers ages 20 to 24 is more along the lines of 9.3 per cent — a “pretty good rate,” said Stewart.

Historically, the higher unemployment rate among youth is simply a natural pattern that comes with the transition into the labour market, said Paul Kershaw, associate professor at the University of British Columbia’s School of Population and Public Health in Vancouver.

But data reveals 39 per cent of university graduates ages 25 to 34 are overqualified for their jobs based on educational credentials, according to the latest Labour Market Assessment, completed by the federal government in October 2016.

“You can’t critique Canada for not having a pretty highly educated population,” said Kershaw. “One could question whether or not we’ve got the right balance between trades and art degrees.”

Post-secondary degrees no longer mean what they used to, he said. “If you have a bachelor’s degree today, so does two-thirds of the workforce — and they have way more experience… It’s not giving you the wage bump that it did some decades ago.”

The gig economy, heightened organizational competition, globalization and technological change are also playing a role when it comes to jobs for youth, said economist Linda Nazareth, senior fellow at the MacDonald Laurier Institute in Ottawa.

Hiring contract workers provides an easier pathway for employers to show good quarterly results, she said.

“If you can’t get rid of people quickly, you may not show the best results. So you have to be able to change your costs as you need to, and workers are part of that.”

Compared to 40 years ago, young workers are getting paid thousands of dollars less for their work, said Kershaw.

“It does seem like it’s harder to land full-time work, so you’ve got more and more people taking on contracts in employment settings that are not giving them extended benefits, access to a pension, dental health, etcetera, in comparison with the past,” he said.

“Jobs are not what they used to be. That is absolutely true.”

In the past, wages were better sheltered from globalization factors, said Kershaw.

The lingering effects of the 2008 global financial crisis are not helping young workers either, he said, especially as the wages of older earners remained protected, specifically in unionized environments.

Advances in automation and machine learning are also a factor, providing a hit to earnings for the blue-collar workforce, he said.

A skills mismatch is evident in terms of the post-secondary graduates entering the workforce, said Stewart.

“People are coming out of university, perhaps with not the right skill set for the new jobs that are being hired for.”

And while there is clearly a need for more job-ready skills, especially in the technological space, employers remain reluctant to spend on programming such as on-the-job training, said Nazareth.

“There’s not a lot of leeway for companies to be spending time and money on training,” she said. “They want to slot in exactly who they need.”

“It’s hard to get data on that one but, absolutely, there’s not a training culture in most of North America. Generally speaking, you bring people on and you’re not sure how long they’ll stick around. So there’s a disincentive to hire people for the professional work they want and pay them the way they want.”

Better times ahead?

Job growth will weaken this year as a result of tighter labour market conditions and the country’s aging population, said Stewart.

A drop of 88,000 jobs was already recorded by Statistics Canada in January, though the majority of positions removed were part-time.

Wage growth should accelerate to a rate of 3.1 per cent, he said.

“Wage growth has been terrible the last couple of years, and it was terrible through most of 2017 really, because there was still excess supply in the labour market,” said Stewart. “There was still a lot of workers looking for work through a lot of 2017, so that really kept wages down.”

A shortage of skilled labour should lead to an environment where workers can find more appropriate work and negotiate higher salaries, he said.

The federal government has already made a move to ease the effects of the aging workforce, announcing an ambitious three-year immigration plan that aims to boost levels to one per cent of the country’s population by 2020.

In 2016, employees aged 55 and up made up more than one-third (36 per cent) of the working-age population, according to Statistics Canada, a figure that is only expected to grow through the coming decade.

Better times may just be on the horizon for younger workers, said Stewart.

“Employment’s going to slow through 2018, in terms of growth. There’s no excess supply of labour through 2018. We’ve got more and more people retiring because the baby boomers are hitting the retirement age, and there’s just not enough labour to sustain this pace,” he said.

“That should make a lot of opportunities for people that are not yet in the labour market, just because there’s so many people exiting. If there are people that have been out of the labour market for some time, 2018 should be a very good year.”

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