Employment: Young people, an economic asset, but at what cost?

Ashleay: Welcome to iA Financial Group's “In Your Interest” podcast, where we aim to share with you the essentials of economic news and its impact on your finances. My name is Ashleay, and this week we discuss the challenges of the job market, demographics and the many effects and pressures on the school system. As always, I'm joined by Sébastien Mc Mahon, Chief Strategist and Senior Economist at iA Financial Group. Hi, Sébastien.

Sébastien: Hello, Ashleay.

Ashleay: It's nice to have you behind the microphone again. So, Sébastien, it seems to me that young people are working a lot more today than in the past, or at least more than when I was a teenager. Is that the mom in me who's more sensitive to the phenomenon, or do the numbers prove me right?

Sébastien: Kids or at least young folks—and we can define young folks here by, let's say, 16 and under—are way more represented in the labour market now. And what we're going to cover here is a typical case of how moving parts in the economy influence one another. The aging of the population means that we now have to rely more on younger and younger employees to get the economy working. And this is something that we've seen coming for decades. When I was a young economist at the Ministry of Finance in the province of Quebec in the early 2000s, we knew this was coming, we knew that there would be significant changes to the labour market that would result from the aging of the population into the public pension system. Well, now we have both feet in it. So here I'll be quoting stats from the province of Quebec and Canada, just to illustrate the point. The government of Quebec recently put laws in place to correctly frame the problem and make sure that we don't put too much pressure on the school system. And the reason they had to do that was because, in the province of Quebec, the population aged 15 plus has increased by 22% since 2000. So between 2000 and 2023, there’s a 22% larger population in working age (15 years plus). But the total employment increased by 32%, so 10% more. That means that we had to fill this gap with more workers. The gap was closed in large parts by an increased participation rate of women. And we've had the public child-care system here of in the province of Quebec, which was just extended to all of Canada. So this economic tailwind that we've had in the province of Quebec will spread across the country, which is a very good thing; it was a very good policy to put in place in the 1990s, here. But the arithmetic of demographics means that there are more and more seniors—and I’ll define senior by those 65 years plus (please don't stop this podcast or throw stones at us: we need to draw the line somewhere, which is why I'm using the Statistics Canada line)—every year in the population. And of course you want to retire at some point, meaning less seniors are working compared to other age groups. The result is that, to meet the economic strength that we have, we need to draw more intensely on other cohorts: 25 to 54 years old, 15 to 24, but also 14 years old and under.

Ashleay: Okay, so it wasn't just a feeling. But when you say people are working more, are we talking record levels?

Sébastien: Yes, we are. First let’s define the employment rate. Statcan calls people, they call households, they do surveys and they ask if you work or not. And if you say that you're a worker, then you are counted in the employment rate, which is the number of employed divided by the population of that age group. So, let's say since 2000, in the province of Quebec, the employment rate of 25 to 54 year-olds, which is the core of the working age population, went from 75% to about 90%. So it was three out of four that was working in 2000, now it's nine out of ten. In Canada, it went from 80 to 85%. As you can see, Quebec was behind Canada and now it's ahead. In the US it’s rather flat: it was 80% in 2000, now it's 81%. So, you see, Quebec had that growth rate that was very significant, and of course, the economic growth in the province of Quebec was stronger. The problem of youth working in the province of Quebec is a bit worse than other provinces. That's why we’ll focus on that here. Let’s take a look at youth: for 15 to 24 year-olds—again, this is the group that Statcan looks at, they don't look at 14 years and younger—in the province of Quebec, the employment rate was 50% in 2000. So, one out of two young people in the province was working. Now it's 65 percent. That’s a big jump. in Canada, it was 55, now it's 60 percent. So again, Quebec was behind and now it's ahead. With seniors, the employment rate was pretty low: about 2 to 3%. Now we're getting closer to 12% in the province of Quebec. So we see that seniors are leaning more and more toward working. But, you know, there's a drop off in the employment rate as you move towards the older end of the population. In short, the population is more and more in the senior category and this will continue for decades. The importance of this age group should continue to rise until 2050. And to make up for the number of workers that is missing, well, we need to work more as a group and put more of that weight on the shoulders of the young.

Ashleay: I see. And is this sustainable?

Sébastien: Well, I would say that it's risky. Is it sustainable? I don't know. But I think we'll have to live with it, because demography is a big boat: once it starts moving, it has a lot of momentum and it's hard to turn; it takes years and years and years to change. So we have more productivity gains now, but we still lack workers. In Quebec, again, seniors tend to work less than elsewhere in Canada, even if the gap is narrowing slightly. Maybe there is a cultural difference here, but you know, the usual solutions that we think about—maybe taxation, giving some tax breaks to seniors to keep them in the labour market, being sensitized, maybe the employers provide more flexible conditions to accommodate those that want to stay because, you know, we definitely need the wealth of knowledge that seniors have.

Ashleay: Absolutely.

Sébastien: But here again, if we move to the consequences for younger folks, well, we are creating a strong alternative to the education system: if you're in high school and you can easily find work—and it's very easy to find work now, my teenage daughters get job offers every single time they go shopping—you have an alternative or at least some competition to the education system. And think about the students in difficulty. My wife is a high school teacher and she always says that when they work with students that have difficulties, they always realize that they are temporary. But while you're experiencing those difficulties, you're more likely to drop out. That's the thing. The average dropout rate here in the province is 13.5%. That means that 13.5% of the students in Quebec that go to high school leave without a diploma. We can break it down by the number of hours per week that are worked: if the kids work between 11 and 15 hours per week, the 13.5% becomes a 20% dropout rate, and if they work 16 hours plus per week, it becomes 31%. So one out of three will eventually drop out. Juggling complex schedules is already a challenge for adults, now we’re bringing that to kids. There’s, you know, physical health risks, because we know that the rate of work accidents is higher for kids than for adults. But there are also mental health risks: you know, the depression risks, burnout risks and all that—well, if the kids work 20 hours more per week, there have been some studies that show that this rises pretty steeply. This is for the younger kids, but even in universities, we hear teachers, we hear researchers saying that there's also a challenge now because some students don’t return to complete their degree after they've had an internship, they’d rather accept early job offers. So, you know, you have a less skilled population. There are of course good things to having a healthy labour market, but let's see, in the long run, if it causes other issues through the school system.

Ashleay: I see. And what can we do?

Sébastien: Well, it’s up to every province to decide what they want to do. In the province of Quebec, they decided to legislate on 14 years and under: it’s now illegal in the province of Quebec to work if you're under 14. There are some exceptions like babysitting, homework help, day camps—YouTubers, funnily enough, they can do that—and, you know, if you work in a family business. Other than that, if you're between 14 and 16 years old, there's a maximum of 17 hours per week that can be worked during the school year. So those are just some decisions that were made locally here in the province of Quebec, and other provinces could come up with something else. But, you see, when you have such big challenges, usually putting a frame around it tends to work.

Ashleay: Right, asolutely. So. In conclusion, economics is really the study of communicating vessels. Meaning that demographic challenges have all kinds of effects, and the pressure on the school system is one of the neglected pieces of the puzzle.

Sébastien: Yeah, exactly.

Ashleay: I see. Well, thank you, Sébastien. Once again, very relevant. Great to hear from you. And to all listeners, thank you for being here. If you like this episode, we invite you to share it with your friends or give your opinion on the listening platforms Apple, Spotify or Google Podcasts. And we’ll see you next week. Love this podcast? Want to know more about economic news? Follow our “In Your Interest” podcast available on all platforms. Visit the Economic News page on ia.ca or follow us on social media.