Miles Corak is a professor of economics with the Graduate School of Public and International Affairs at the University of Ottawa. The full version of this post is available at milescorak.com.
Canada's youth are still waiting.
The 2012 federal budget not only missed the opportunity to create a youth employment strategy, it actually eliminated Katimavik, a program that could have been re-orientated, redefined and expanded to meet our labour market needs.
For every pessimist pointing out that the unemployment rate has yet to return to the 6 per cent prevailing before the onset of the recession, there are others quick to say that jobs go unfilled, that employers can’t find willing workers, and implicitly that there is something wrong with the unemployed – they are in the wrong place, with the wrong skills, or have unrealistic expectations.
In fact, it is a normal state of affairs for some job vacancies to go unfilled.
The labour market creates thousands upon thousands of jobs every month as new firms are born and existing firms expand; it also destroys thousands upon thousands as others die and contract. Statistics Canada recently reported that the economy created 80,000 jobs, but we should understand that to be the difference between a much larger number of gains and losses.
When things are in flux it is no surprise that at any point in time some vacancies are unfilled. Jobs are created and destroyed in an instant, but it takes time to find them, move between them, and adjust to the associated changes.
Even so this mismatch is somewhat exaggerated right now because both employers and the unemployed have unrealistic expectations.
Some employers are saying there are “shortages” of good workers willing to take available jobs. But there are two sides to every market, and for potential employees a 'shortage' is just another way of saying “the wage is too low”.
The first element of an employment strategy must surely be to let market forces work so that labour shortages are more strongly reflected in rising wage rates.
If we let markets work the expectations of employers and the unemployed will at some point find a balance. This is not to say that an equilibrium will be reached quickly, that all job ads will be filled, or that this balance may still imply elevated unemployment rates.
Sharp regional differences in growth rates, large distances to cross – both geographically and culturally – and lags in the availability of housing all imply that accepting a job involves significant monetary costs, but also significant psychic costs associated with leaving family and friends.
The wage expectations of the unemployed reflect all of these costs. The wage expectations of employers often ignore them.
What to do about the structural unemployment that results?
In the first instance focus on the most flexible sector of the labour market, the young, those who don't have to sell the house and uproot the kids. Moving from Bathurst to Lloydminster would still be a dramatic change, but policy makers should exploit the fact that the young are “networked”, and that these changes will be easier when done with peers, and friends, and mentors.
Put youth into a temporary program of internships that involves moving to a new province. Have them do this as a group, and provide housing. This will lower the monetary and psychic costs of moving from home.
This is what Katimavik has been doing for decades. Participants live with other young people while volunteering in a series of communities across the country over a period of six months or so. For them the country becomes smaller, geography more manageable, and expectations of future careers a little bit clearer and more realistic.
The recent federal budget was an opportunity to redefine, re-orientate, and yes expand this program by directing it toward labour market objectives. One important tweak would have been to add a conditional bonus payment to the $2 a day participants are currently paid.
Give them a rent subsidy for a year if they moved from their home province to take a job in another province within one year of completing the program.
But instead Budget 2012 canned the program, saying it made more sense to focus on others that apparently reach more individuals at lower cost; as if spending shouldn't be judged in terms of the effectiveness in reaching objectives.
And so where is Canada's youth employment strategy? Canada's youth are still waiting; waiting and occupying. Metaphorically this is just the opposite of what our labour market needs from the country's most dynamic group.
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