Why Young Workers Fall Behind for a Decade or More
Michelle Bucek thought she would be working full-time in her chosen career by now.
The 24-year-old from Brantford, Ontario, who has a degree in radio and television broadcasting from Ryerson University, recently returned from a one-year stint teaching English in South Korea.
She subscribes to five different job boards, checks social media, and sends out resumes for three to five postings each day.
“Over the next couple of months I’m going to do some volunteering and work some retail on the side to keep money coming in, keep pushing, sending out applications, making myself known, hoping something will come through,” Bucek said.
“A job you get straight out of university doesn’t really exist anymore, and I find that really frustrating.”
That’s not the only thing at stake, experts say.
When young people can’t break into the labour market, the risks range from social unrest to mass migration to a wage gap that can persist for a decade, or even longer.
Long-term unemployment, defined as joblessness that persists for a year or more, can scar young workers for the rest of their lives, the Organization for Economic Co-operation and Development warned Tuesday.
“It is imperative that governments use every possible means at their disposal to help jobseekers, especially young people, by removing barriers to job creation and investing in their education and skills. The young are at most risk of long-term damage to their careers and livelihoods,” said OECD Secretary-General Angel Gurría, presenting the report in Paris.
Across OECD countries, those ages 15 to 24 years old had an average unemployment rate of 16.1 per cent in April. That’s just over two times the rate for workers of all ages.
The U.S., in particular, has recorded an unprecedented increase in the share of long-term unemployed, from around 10 per cent in 2007, to around 30 per cent in the first quarter of 2012.
“These worrying figures emphasize that a growing number of people, the young in particular, are becoming disconnected from labour markets,” Gurria said. “We need to avoid the risk of a lost generation by all means.”
It’s not surprising that social unrest is taking hold in Greece, where youth unemployment is running as high as 50 per cent, said Charles Beach, economics professor at Queen’s University.
Frustrated young men in particular, who are unable to find gainful employment, “tend to get worked up about things and they have a lot of time on their hands,” Beach said.
Unemployed young people are missing out on opportunities to gain practical work experience to go along with their education. That combination is crucial for eventually moving up the career ladder.
“If youth aren’t getting that labour market experience, that has a scarring effect which can last a long time,” Beach said.
Multiply that by thousands of young people, and there are implications for the wider economy, Beach said. “In the economy as a whole, there’s less skill that’s built up. That will have a long-term negative impact on the collective knowledge base and GDP growth.”
Individuals who have lower income and not as many opportunities may delay marriage and starting a family. Many young people decide to go abroad to find jobs.
“They have no opportunities as they see it at home. They have to pay higher taxes, and it’s because of nothing they did. Why should they stick around and pay higher taxes on infrequent jobs?” Beach said.
In Canada, the rate for unemployed youth stands at about 15 per cent, just over twice the national average of 7.2 per cent.
Professor Philip Oreopoulos, associate professor of economics at the University of Toronto has studied the long-term consequences of youth unemployment.
Entry level wages tend to be about 10 to 15 per cent lower for a new graduate who finds a job during a recession rather than an economic boom, he said.
On average, the wage gap persists for about 10 years. But for some people, particularly those in low-paying positions, it never closes.
The most effective way to close the wage gap is job-hopping, moving from smaller firms to larger ones that offer more opportunities.
“The good jobs are not there in recessions but if you are patient and wait eventually they become available and if you can grab onto to them, the wages will catch up,” Oreopoulos said.
But that will likely take longer in the aftermath of the Great Recession, he said.
“To the extent that we are in a more prolonged recession and it’s taking longer for those good jobs to come back, that would imply a longer time period to catch up,” Oreopoulos said.