Failure to Launch: The Economic and Social Costs of Youth Unemployment and their Long-term Impacts
- Emma Godwin
Youth are society’s future. However, getting their start is becoming increasingly difficult in Canada. In this context, The King’s Trust Canada engaged Deloitte to prepare a socio-economic impact analysis of youth
underemployment and unemployment. This report provides an overview of the current labour market and assesses the economic and social costs of youth unemployment. It also estimates the potential economic and fiscal benefit from addressing this issue, based on analysis using a structural macroeconomic model.
EXECUTIVE SUMMARY
Young workers aged between 15 and 24 are disproportionately represented in the ranks of the unemployed. In July 2024, the youth unemployment rate hit 14.2%, its highest level since September 2012, excluding the pandemic affected years of 2020 and 2021. What’s more, underemployment is becoming a growing issue. The number of youth working part-time involuntarily has been rising in recent months.
When unemployed, youth cannot develop and grow their skills and social networks. This results in short-term losses in wages and long-term reductions in their earning potential, referred to as wage scarring. What's more, unemployment has unequivocal negative consequences in terms of mental and physical health and numerous other social impacts. All said, these impacts result in much broader consequences for the economy and
governments must contend with lost tax revenues whilst paying more for health, welfare and other social services.
Many youths aged between 15 and 29 are neither employed nor engaged in education or training (NEET). This group of over 850,000 individuals is particularly vulnerable to poor and persistent economic, social and health
outcomes. Moreover, minority groups continue to face additional barriers including gaps in educational attainment, prejudice and a lack of support which prevent them from participating fully in the world of work.
Our analysis shows there is a tremendous economic opportunity in achieving higher levels of youth engagement in the workforce. Our estimates indicate that under the right conditions, overall real GDP could increase by $18.5
billion by 2034 – more than Canada’s entire arts, entertainment and recreation sector – and add an additional 228,000 jobs in the process. A significant windfall to our economy. What’s more, this is likely a conservative estimate as it does not include the societal benefits of youth development initiatives such as afterschool programs and youth mentoring.
There are many initiatives that can help Canada seize this opportunity. Collaboration between governments, businesses and non-government organizations will be critical. It will also require a holistic and comprehensive set of policies, ranging from education and skills development, to, employment services, subsidized employment, and entrepreneurial support. For maximum impact, interventions should be tailored to the specific needs of at-risk groups. Most importantly, however, it requires a mindset shift to realize that this is indeed an
important social and economic issue which if left unresolved can have material short- and long-term consequences.