By Mike Chopowick, February 24, 2015
The issue of employment prospects for youth makes for great news headlines. It is regularly reported that youth (ages 15-24) face higher unemployment rates than adults. Most youth in the 15-24 age group work in part-time or temporary jobs, often at lower wages than adults. Youth employment is often considered a priority public policy, and politicians occasionally campaign on this very issue.
When we look at the causes and reasons for higher youth unemployment rates, we see several things. First, this is not a new issue: Going back to the 1960’s and 1970’s (and likely earlier) youth jobless rates have always been much higher than the overall unemployment rate. Secondly, there are several rational reasons why youth are unemployed more than adults, and few of the reasons have anything to do with economic or social policy.
Statistics Canada recently released a report1 analyzing youth unemployment. For landlords and property management executives this info is vital. Young adults are growing to be THE key demographic group for rental housing demand. Of all age groups, those in ages 15-24 and 25-34 show the highest likelihood to rent (Figure 1). With increasing home prices making it more difficult for young adults to buy a house, expect this trend to continue.
Figure 1: Young adults are most likely to rent their home
The historical difference between youth and adult unemployment rates is not unique to Canada. In 2011, youth in all member countries of the Organisation for Economic Co-operation and Development (OECD) posted higher unemployment rates than did adults. Countries such the U.S., Italy, the United Kingdom, France, Germany and Japan all reported higher youth unemployment rates than for adults.
Youth enter the workforce while they are still in school
A significant (and common sense) explanation for high youth unemployment is school. While young people attend secondary and post-secondary school full or part-time, many will have a lower prospect of also holding down a job. Young adults may be involved in a variety of demanding educational or training programs that make it difficult for them to maintain employment.
“It is worth noting that the labour force participation rate of youth is historically lower than that of adults, mainly because a majority of young people attend school.”
André Bernard, Statistics Canada
While it is unfortunate that this stage occurs while students face costly tuition fees, the good news is this is usually a temporary state. The period of full-time education or training eventually ends, and young adults emerge with education credentials that assist them in obtaining paid work. This is evidenced from the much lower unemployment rate of 5.8% for Ontarians ages 25 and over, compared to 13.5% for those 15-24 (2014).
The Youth Unemployment Paradox: Finding a job means not having a job
The time it takes to land that first job results in a necessary period of unemployment. Think of a college student who just finished their 3- or 4-year program, now focused on applying for relevant work in their chosen field. Though they are now technically entering the workforce, there is a process here that necessitates a time of unemployment.
“For these young people, unemployment is linked to seeking a first job and is not the result of the economic situation, unless their job search is prolonged.”
André Bernard, Statistics Canada
Unless one was lucky enough to have that dream job offer waiting the day after they graduated, they will enter a period, often several months, of not having a job. There is a process of researching opportunities, applying for vacant positions, interviews, waiting for offers and negotiating that first employment contract. During this time, many youth will be considered “unemployed”. But, again, this is temporary.
Positive for Rental Demand
Once over the age of 24, young adults are much more likely to find secure employment. And even better news, is that the unemployment rate for those over 24 has dropped five consecutive years, from 7.6% in 2009, to today’s rate of 5.8%. For rental housing demand, this is very positive. It likely means growth in household formation, and demand for quality rental apartments that more employed young adults can afford. Most importantly, it also means we shouldn’t despair about headlines of the “youth unemployment crisis”.