Stephen Poloz, unintended champion of jobless youth: Don Pittis

The furor set off by Bank of Canada governor Stephen Poloz this week may be the best thing to happen for the youth jobs issue in ages.

For the few who didn't notice, the governor of our central bank put his foot in it the other day, telling young people they should work for free.

Canada's latest jobs data from Statistics Canada Friday morning showed some improvement in the jobless rate for youth, but unemployment among young people is still nearly double that of everyone else.

Poor Stephen. You get the feeling he's not quite as media savvy as, say, his immediate predecessor. He likely didn't know what he was getting himself into. 

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The backlash was terrific, with his off-the-cuff remarks characterized by many as turning a blind eye to current employment standards. 

"Employers in the private sector can't employ interns and pay them zero dollars," said Claire Seaborn from the Canadian Interns Association on CBC's Radio's Metro Morning.

Although there is a patchwork of provincial rules, generally, she says, internships are restricted to those within a specific education program.

Otherwise, employers and unemployed people just aren't allowed to agree that work will be done for free.

Good intentions

"That would essentially be contracting out of the minimum wage," says Seaborn. "Interns can't agree to be paid $3 an hour or zero dollars an hour. It's simply against our employment standard."

Despite the way it played in Peoria, Poloz's intentions were good.

What he is, quite validly, worried about is something that has often been called "generation jobless." And it is phenomenon well-known to have a long-term effect on an entire economy.

Here's how it works.

Imagine you finish your degree in law or commerce during a boom. As you graduate, employers are anxious to snatch up the fresh talent, hiring you young and malleable.

Lucky you, you get on the professional job ladder early and work your way up.

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But if instead you complete the exact same qualification during an economic downturn, sometimes even the best graduates go begging.

Poor you, you get part-time work in retail, or worse, can't find a job at all. Even when the boom returns, your educational skills are stale and you are at the back of the line. 

Policy problems

If they were my kids, I'd give them the same advice Poloz offered. But then, I am not a high government official. And my saying it does not make it sound like policy. 

There are two obvious problems with encouraging free work as policy. One is that that even the smartest poor kids can't afford to work for free.

The other is that a supply of free workers completely destroys the motivation for employers to actually hire young people and pay them. In a profit-motivated world, lots of free workers make the youth unemployment problem even worse.

In the past, government youth hiring programs gave kids from all backgrounds a leg up. But the current urge by governments to slash the public service means the bottom rung of entry-level jobs is drying up.

Apart from waiting for the economy to kick back into gear, the private sector solution is not obvious. 

Government handouts for companies to hire young people are in danger of turning into just one more form of corporate welfare as profit-seeking employers hire the people they would have hired anyway, and simply pay them with taxpayers' money.

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I've reported in the past on the shortage of startup cash for young entrepreneurs.

But there are things governments can do. Employers are not currently pulling their weight when it comes to training the next wave of young people. They want their new workers to arrive fully formed. They each want someone else to do the training.

What about pre-trainees?

One technique might be for governments to make a rule that every employer hire some percentage of their workers as pre-trainees at minimum wage.

It would have no effect on workers who have skills or experience that commanded higher wages. And while employers would pay the cost, all would benefit equally.

The Poloz solution will not do as public policy.

But by his comments, our chief central banker has given the issue of youth unemployment a much higher profile than if he had spoken in platitudes. And as we begin a federal election year, he has done it at a perfect time.

As Poloz and today's jobless numbers remind us, youth unemployment is crucial issue, and not just for youth.

We should make federal parties realize it is the economic issue of our times.