Youth Unemployment: The Canary in the Coal Mine

Unemployment has remained stubbornly high in Canada, made worse by the consequences of Donald Trump’s tariffs and the lingering effects of high interest rates. As always, young people bear the heaviest burden of a weakening labour market. They are the last hired, and first fired – and hence rising unemployment is a danger sign of labour market turbulence ahead. Last summer had the highest unemployment among returning students since the turn of the century (save the COVID pandemic), and the coming summer job season shows no signs of substantial improvement.

As of end-2025, there were some 420,000 unemployed workers in Canada under age 25, and they faced an average unemployment rate of 13.3%. The 25-29 age cohort can also be defined as ‘youth’; there were almost 200,000 of them unemployed at year’s end. That makes a total of over 600,000 unemployed people under 30, for a combined unemployment rate of about 10%. Unemployment is worst for the youngest workers: 18% for those under 20.

That youngest age cohort (15-19) has also seen the biggest increase in the unemployment rate in the last two years. In addition, the participation rate for all youth cohorts has also dropped somewhat (again, especially for the youngest workers). Without that drop in labour force participation, the official youth unemployment rate would be even higher. Unemployment is worse for young men than for young women.

Conventionally measured youth unemployment (15-24) is typically around twice as high as average unemployment, and the relationship between the two did not substantially change in recent years: youth unemployment has been very high, but rose in step (2 points up for every 1 point rise in the national average rate) with the broader weakening of the labour market.

For that reason, a central focus of the solution to youth unemployment must be a commitment to reduce allunemployment – rather than imagining ways to essentially ‘redistribute’ unemployment, by helping more young people to get hired in the context of a labour market that remains underutilized. Strategies to strengthen overall job-creation include: stronger private and public investment, stronger support for public and caring services, industrial policy to strengthen Canada’s value-added industries, and shifting the emphasis of monetary policy to prioritize job-creation along with inflation-control.

This commitment to full employment at the macroeconomic level can be usefully supplemented by particular targeted supports for young workers. Examples of these measures could include expanded summer and post-graduation job programs, stronger on-the-job and apprenticeship training programs (with direct links to post-graduate job opportunities), and experiential working and learning opportunities (such as Canada’s Katimavik program, or the proposed Youth Climate Corps) that give young people both new skills and general life experience.

There are some strategies for sharing the burden of unemployment that could indeed help young workers who might otherwise be laid off, but in ways that are fair for older workers, too. Work-sharing programs in workplaces hit by downsizing help to preserve overall headcounts (and avoid the main burden of layoffs falling on young workers with less seniority). Early retirement incentives can encourage older workers to voluntarily leave work during a downturn (again preserving employment for young workers with less seniority).

Additional measures can improve pay and income security in jobs disproportionately filled by young people. This would include a commitment to higher minimum wages (since a large share of minimum wage workers are youth), and better regulation of non-standard employment arrangements (such as gig and platform work, where young workers are also disproportionately concentrated).

The general economic well-being of young people can be further improved with other measures such as lower costs for essential services that are used intensively by youth (like tuition fees and public transit), and a comprehensive strategy for addressing Canada’s housing crisis (young people have been hardest hit by the unaffordability of home ownership and especially rents).

A far-reaching proposal in this vein could include a basic income for young people (perhaps 18-25), that would provide baseline income supports to avoid poverty and facilitate young people to undertake education, start businesses, and successfully launch their working lives. Together with the existing Canada Child Benefit, the Guaranteed Income Supplement for low-income seniors, and the new Canada Disability Benefit, this would represent an important incremental step in creating a basic income floor for all Canadians.

Research has shown a ‘scarring’ effect for young workers who start their careers during a downturn, reducing their lifetime earnings trajectories by as much as 10% over their careers. That represents a lifetime loss (in real 2026 dollar terms of almost one-quarter million dollars! This income reduction results from both lost income during the initial years of unemployment, but more importantly from the reduced trajectory of earnings gains over a young worker’s subsequent years of work.

Centre for Future Work Economist and Director Jim Stanford recently spoke on the youth unemployment crisis, and how to support young workers, to the ‘Elbows Up T.O.’ assembly, organized by former Toronto Mayor John Sewell. A video of the full event is available through the ‘Elbows Up T.O.’ website.