Jobless rate for youth could rise: economist

When your clients complain that their adult children can’t hold down jobs, the problem might be the high youth unemployment rate, not a lack of conscientiousness.

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That’s because Canada has one of the highest youth unemployment rates in the developed world: 57% versus 41% on average for countries comprising the Organization for Economic Co-operation and Development, says Stéfane Marion, chief economist and strategist at National Bank, in an economics note.

Indeed, of all minimum wage employees in Canada, 61% are aged 15 to 24, reports StatsCan.

And the problem might get worse — at least for provinces that plan to raise the minimum wage. “Quebec is a case in point,” says Marion.

In the 1970s, that province raised it minimum wage to 54% of average hourly earnings (AHE) in manufacturing, Marion explains. The result: Quebec’s jobless rate for youth surged six percentage points to 19.5%, while Ontario’s remained about 13%.

“It was later established that in Quebec’s case, a ratio of minimum-wage-to-AHE of 48% should not be breached […] to maintain optimal employment conditions,” says Marion.

When Ontario raises its minimum wage to $14 per hour in January 2018, from the current $11.40, the province’s ratio of minimum-wage-to-AHE in manufacturing will be 54%, says Marion. Only time will tell if Ontario’s youth unemployment rate significantly rises as a result, as did that of Quebec in the 1970s.

Read: Ontario’s minimum wage to reach $15/hour by 2019, and more labour changes

The youth unemployment rate currently stands at 10.2% in Quebec and 11.9% in Ontario.

Earlier this year, the B.C. government said it too was planning to increase its minimum wage, to $15 per hour by 2021 from the current $10.85. (A 50-cent increase is set for Sept. 15, bringing the wage to $11.35 per hour.)

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