The effect of recession on youth unemployment rate : Canada and Nova Scotia

Abstract

Youth unemployment rates have increased greatly after the 1990-1992 recession and even more so after the 2007-2008 financial crisis. With youth education levels increasing, there is a strong reason to study why youth in the labour market were affected more in the recent crisis than in the 1990s. Youth are currently faced with unpaid internships, temporary contracts, lower wages and underemployment. Researchers are left wondering what the current youth are lacking to obtain the same economic opportunities that their parents with the same education levels had. To assess the impact of recession on youth unemployment rate, a general overview of the trends indicates a rise in youth unemployment rates during recession. After the latest recession of 2008-08, youth unemployment rate has not yet gone back to its pre-recession level. To isolate the impact of recession from that of other determinants of unemployment rate, a regression model is estimated with unemployment rate lagged by one year, GDP per capita, labour force participation rates of females and seniors and minimum wage rate. Cross section and time series annual data based on Labour Force Surveys and National Income Accounts are pooled for the period 1991-2014 for the ten provinces of Canada. Separate models are estimated for the overall youth in the labour force, for those who have acquired high school education and for those who have acquired post-secondary education. Estimates of the model indicate that while youth unemployment rates were affected by economic recessions nationally, there was no effect of recession on youth unemployment rate in Nova Scotia which may be due to the dominance of those industries in the provincial economy which are not affected significantly by economic cycles.