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A youth employment strategy would look like this

April 9, 2012

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 reoriented, 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% 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 psychological 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 Llyodminster 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 psychological 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, reorient, 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.

[Update, April 11th, 2012: The Globe and Mail reported that the federal government announced about $27 million funding for youth programs. “The $26.7-million, a mix of previously committed and new money, is earmarked for eight projects.”]

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6 Comments
  1. Tom Schweitzer permalink

    Bravo, Miles! I always enjoy read ing your blog. Also, I am glad that my files of economics journals went to a good home.

    Best regards,

    Tom Schweitzer.

  2. Luigi Rossetto permalink

    Throwing the baby out with … Katimavik; if I may add a word from one who was there before the birth, a change was certainly needed – and it may have needed such a vast revamping that killing it might have been the most merciful. If nothing else, it gives a chance for something really effective to take its place – and by effective, one should focus on giving young people actual skills and jobs at the end of their ‘service’. Which brings us to the core issue before us – one that is continuing in the article in question.

    ‘Service’ here is used deliberately.

    Several versions of Katimavik were under consideration before it was launched – one, perhaps, anachronistic, but more likely to actually achieve something – and one based on an example which had, at the least, achieved something, but which seems largely forgotten – was run by National Defence in the 50-60’s – the Boy Soldier Program. It may have had many faults; not least its association with militaristic ends (God forbid, they all should be provided clothing – even if it was needed — the spectre of a uniform – for people who think that Boy Scouts train soldiers).
    But it was uncompromising in one factor, the one and perhaps its only objective was to provide ‘practical’ – and by that one means ‘apprentice’ skills and qualifications.

    Without these two items, whatever amount of experience provided – training not being of the vocabulary nor is it possible in what became three-month stints – is a perfect programs for post-graduate symposiums – but an empty luch bag.

    Katimavik was kidnapped, word that is not too strong, by inside patronage – by Hebert and his ilk; Trudeau’s pals. Of note is that neither of principals ever really needed to work nor had any idea how most young men and women actually qualified and got a job; when daddy or the bond coupons could not fill the bills. And the approved program made sure the top managers came from the same fold – with appropriate wages.

    This brings us back to the basic structure that won – adding far too many ‘very important’ objectives; like exploring Canada and feeling part of the great national experience; travel and life in different communities; planting, caring and raising vegetables; apiaries; and everyone’s favorite – Geodesic domes. The archives offer interesting – even amusing reading; were it not all so sad.

    All this was to be achieved in six months or a year – but within that time, participants were expected to move about the country three or four times – free trips, convival atmosphere, a great time, social benefits galore – but not a single skill nor a job in sight – ever.

    One can just imagine three sets of people – one planting, another nurturing the sweet plants, and the third, obviously, available to just eat the lot.

    The plan did not have a single measurable objective – in terms of the jobs the young people would have later – generally the very same jobs they qualified for before the national boondogle.

    One may close with the thought that the tone of the published piece is of a like mind – likely to mistake the entire process with all sorts of social benefits which are totally and completely outside the objective. Chasing all the rabbits at once … and getting none.

    • Thank you for your post, which offers background on a program that has been ongoing for what I believe is 35 years and has certainly changed during that time.

      My focus on this program reflects an interest in the labour economics associated with unemployment.

      Generally unemployment is categorized into one of three types. The first is that due to “deficient demand”, the type of unemployment associated with business cycle downturns and that John Maynard Keynes originally drew to our attention. The sharp run-up in unemployment rates that Canadians experienced in late 2008 is associated with this type of unemployment. The second is “structural” unemployment, the type of unemployment associated with a longer term mismatch between the requirements of jobs and the characteristics of workers. A ‘skills’ mismatch is the most common type of structural unemployment. The third is “frictional” unemployment, a type of shorter term mismatch associated with finding a job for which one is qualified or moving to take it up.

      All three types of unemployment play an important role in understanding the current Canadian situation, but recently particular attention has been put on structural and frictional unemployment by the sharp regional divides in our labour market. There is excess demand for labour in Alberta and other provinces west of Ontario, but excess supply in the eastern provinces.

      We can simply let labour markets work. This will lead to higher wages in the west that will encourage people to move to take them up, or get the skills to qualify for them. This does not necessarily require government policies of any sort, but it may take longer than we imagine. Part of the reason for this is that moving costs, housing costs, and the psychological costs of moving may be significant and take time to overcome.

      As a labour economist I can easily imagine a program like Katimavik facilitating this process. If young people had experienced the country outside of their home province, the psychological costs of moving to take career jobs elsewhere would be considerably lowered and as a result the labour market would adjust more quickly. Frictional unemployment would in other words be lower. It seems to me this is of value in and of itself, notwithstanding what specific skills the program offers.

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