It’s not unemployment, it’s underemployment

by Alex Paterson & Claude Dumulon-Lauziere. Posted August 30, 2013


There are a lot of different ways to describe the period after a young person graduates from their schooling, but increasingly in Canada, one word sticks out: underemployed.

That’s underemployed.

It’s a somewhat slippery concept, and an even harder one to prescribe policy around, but efforts have been made by various banks and other international bodies to track and measure underemployment. The OECD has assigned it a relatively formal taxonomy: visible underemployment, where an individual is working less than they would like; and invisible underemployment, where an individual is not working in a field or position that matches their capabilities or skills.

But the more compelling story goes like this: As short as 20 years ago, our combined attainment of education, work experience, and connections would place us, and many other young Canadians, on a secure career track that would allow us to pay back our loans, save for a house, and contribute to the overall productivity of this great country.

Today, that’s more or less not the case, and an increasing number of young Canadians are caught in a veritable limbo state: educated enough to work a skilled job given the opportunity, but either not working as much as they want, or nowhere close to the field that would exploit their full potential. The glibber among us call it the rise of the B.A.rista

Now typically when we talk about policies for youth, the conversation focuses on unemployment – on ensuring everyone at least has a job. And that’s understandable, if mostly unrealistic: new job numbers released last week by Statistics Canada tell us the youth unemployment rate sits at 13.9%, double the overall unemployment rate. Furthermore, job creation for Canadian youth is slowing to a halt, less than 1% of jobs created since 2009 were for this demographic. And while that’s nothing to be proud of, it is actually an improvement from other post-recession periods – where the unemployment rate stood at 19.2% in 1983, 17.2% in 1993.

We feel the more telling story lies elsewhere. In the pre-recession hey-day of 2005, the CGA Association of Canada found that 24.6% of young Canadians were underemployed. We must ask why.

This is not to say that youth unemployment is not a problem. It most certainly is. And it is also not to sound entitled, selfish, or declare a war on hard work – all criticisms routinely lobbed at millennials.  But we need to start asking better questions about the work today’s youth doing, and the skills they acquire: if you have a job, is it a good job that matches your skills? If you do not have a job, how can you get past survival and into the right job?

Concern about opportunity for Canadian youth is bubbling up in some form or another across the country:  individuals not yielding a sufficient enough return on their education, students caught in low-quality job traps, skilled graduates taking unpaid internships well into their twenties, firms coping with skilled labour shortages and mismatches, parents generally fretting their children will be unable to build a better life on their own, Gen-Yers feeling resentful towards older generations, and baby boomers looking on young generations as entitled and lazy.

As this mixture of tension and unease brews, real labour market problems are taking root. A young, underemployed Canadian will never make up for lost earnings and stunted career growth, will struggle to repay student debt, save for a house and prepare for retirement. That’s not to mention the impact on the Canadian economy of weaker consumer demand, loss of tax revenue and a slower housing market.

Although the policy options may not be very different to unemployment, we must make sure that they are inclusive of young Canadians facing underemployment.

A good place to start is focusing on tactics to better inform young people about the opportunities available to them. The U.S. has made some headway with President Obama’s new college scorecard initiative through which colleges must disclose information about value, affordability and career placements of different majors.

Second, employers must invest in young graduates that are stuck in the vicious cycle where they have no job because they have no experience because, again, they have no job. The Conference Board of Canada found that Canadian employers have reduced their investments in training by 40% since 1993. Higher education does not necessarily equate job readiness and employers are needed partners on the bridge from education to employment.

In the long run we must face the daunting task of restructuring our education system. Higher education institutions must be more in tune with the needs of students, employers and the labour market. When it was deemed Canada should embrace a “knowledge economy” in the 90’s, thousands of Canadians pursued higher education. Now the pendulum has swung the other way, with calls for Canadians to rush skills trades, most certainly flooding colleges and apprentice programs. Our policy approaches have been overly reactive, sewing consequences generations down the line.

Yes, many young Canadians can get a job – but do they have the right job? As young Canadians trying to succeed, to contribute, and be productive members of society, we do not think it sounds entitled to simply ask.