Young Canadians are facing an increasingly difficult job market, with a surge in youth unemployment rates compounded by the presence of a large influx of foreign workers, particularly in the restaurant and retail sectors. This situation is highlighting a critical disconnect within Canada’s labor market, intensifying the challenge for recent graduates and young people seeking entry-level positions. This report delves into the complex factors driving this trend, examining the role of international workers, the rise in youth unemployment, and the broader implications for Canada’s economy.
The current unemployment rate for young Canadians stands at 14.2 percent, a significant increase from approximately nine percent two years ago, representing the highest level in over a decade outside of the COVID-19 pandemic. This rise coincides with a substantial increase in the number of temporary foreign workers employed in key industries, primarily within the food and retail sectors. According to data analysis by Bloomberg News, the number of approved temporary foreign workers in these industries jumped 211 percent between 2019 and 2023, reaching roughly 240,000 in 2023. This influx has created a competitive environment, making it considerably harder for young Canadians to secure jobs in these sectors.
Several individuals have firsthand accounts of this struggle. Michelle Eze, a 22-year-old public-policy graduate, began her job search in October, seeking positions in teaching and restaurants, with the aim of supporting her family. Despite extensive effort and determination, she encountered no success, describing the experience as “demoralizing” and highlighting the difficulty of finding employment even with the right qualifications. Similarly, 17-year-old Alexander Clarke has spent months applying for jobs in grocery stores, fast-food restaurants, and clothing shops, stating that he primarily sees older individuals filling these positions, rather than young workers. This shift is particularly evident in Toronto, where over 120,000 unemployed young people aged 15-24 were recorded as of July, a 50 percent increase in two years.
The increased demand for immigration following the easing of pandemic travel restrictions has played a significant role in this trend. Many newcomers viewed temporary jobs as a stepping stone to obtaining permanent residency, and employers capitalized on this demand. However, this situation has exacerbated the existing challenges for young Canadians. Timothy Lang, CEO of Youth Employment Services, a Toronto-based organization assisting young job seekers, notes that “some companies will take people with more experience so they’re knocking some youths out”. This competition, combined with the influx of international workers, significantly reduces the opportunities available to young people seeking entry-level positions.
The government’s response to these concerns has been somewhat limited. While recognizing the problem, the current rules allow employers to continue bringing in temporary foreign workers, even in areas with high unemployment among young Canadians. This is partly due to the prolonged use of numbered companies, a system where employers can operate through shell corporations to circumvent regulations. Recent policy adjustments, including curbing the hours that international students can work and increased enforcement efforts, are intended to address the imbalances but haven’t yet substantially resolved the core issues. Despite these moves, the system allows for the continued employment of foreign workers in key industries, intensifying competition for young Canadians.
Economists, such as Christopher Worswick of Carleton University, argue that the situation reflects a fundamental flaw in the labor market: a reluctance of companies to raise wages to meet labor demand. “Labour shortages should be filled by wage increases,” Worswick stated. “Labour shortages should be filled by wage increases. The only thing stopping a wage increase is the profitability of the firm.” The prevailing system, he argues, subsidizes low-wage labor by allowing employers to import workers at lower rates than what they would have to pay local labor. This dynamic can suppress wages and makes it more difficult for young Canadians to enter the workforce.
Data analysis further reveals a shift in the types of temporary foreign workers employed. While agricultural workers comprise a significant portion, the number in this category decreased to 41 percent in 2023, from 54 percent in 2019, while the number of workers in restaurant and retail positions rose dramatically. This reflects the broader trend of leveraging temporary foreign workers for low-wage, service sector jobs. Large restaurant and retail chains are major users of the temporary foreign worker program, and a substantial proportion of these positions are operated through numbered companies, making it difficult to quantify the full impact. The use of this program is not only impacting youth unemployment but may also contribute to wage suppression for entry-level jobs. Ultimately, addressing this issue requires a more comprehensive solution that prioritizes fair wages and effectively manages labor market dynamics. With support from Jay Zhao-Murray, David Ingold and Amanda Cox, Bloomberg.com provided a valuable overview on the problem.
