Rebuilding the Middle Class: Part 5: When Reality Bites

Rebuilding the Middle Class: Part 5: When Reality Bites

During his final year at the University of Ottawa, Justin Cantin had one goal for his first job after graduation: not to wear a uniform. Ideally, he hoped to put his undergraduate degree in history to work in a museum or doing research. But after graduating last December, in the aftermath of the most severe RECESSION in decades, reality hit. With $45,000 in loans, the 23-year-old moved back in with his mom in Mississauga, Ont., and started sending out resumés. He soon broadened his search to include part-time jobs, factory positions - "whatever would give me a paycheque," he says. Last week, he landed a warehouse gig in Waterloo, Ont. Though relocating for a manual labour job is not something he ever imagined he'd do, he says, "It's better than nothing."

As Cantin struggles to adjust his expectations, he can take comfort, however cold, in the knowledge that many of his peers are doing the same. Though it's been months since Canada's economy returned to growth, recessions have a way of bearing down hard on youth, even long after they're officially over. Predominantly employed in industries like retail and food service, which depend on consumer demand, or in unions where seniority rules, youth tend to be first on the chopping block when the economy goes south. This time was no different: since October 2008, more than 190,000 jobs for young people have disappeared; UNEMPLOYMENT among 15- to 24-year-olds rose to 16.3 per cent in August 2009, almost double the overall rate.

Although jobs are slowly coming back - as of February, youth unemployment had dropped to 15.2 per cent - what's on offer is hardly the stuff from which middle-class careers are made. Thanks to the disappearance of manufacturing jobs, hiring freezes and the delayed retirement of workers, for many the reality is a spell of unemployment or a low-paying gig - both of which can have lasting consequences, derailing careers for years to come. While it's impossible to know how much their future will be shaped by the Great Recession, one thing is clear: the generation raised to believe in the limitlessness of their own potential has just been dealt a very unlucky blow.

Strictly in terms of unemployment, this recession has not been as cruel to youth as other downturns. In August 1992, unemployment for those aged 15 to 24 shot up to 18.4 per cent; in the early '80s, it reached 20.6 per cent. But according to Armine Yalnizyan, an economist at the Canadian Centre for Policy Alternatives, it's the kind of jobs that were lost that's cause for concern. Whereas the recession in the early '80s replaced full-time jobs with part-time jobs, and the one in the '90s replaced traditional employment with self-employment, this downturn "seems to be replacing permanent jobs with temporary jobs," she says. "Where is the next generation of middle-class jobs going to come from?" she asks. "There's just nothing coming up on the menu."

The best way for youth to survive the hostile job market, say experts, is to wait it out by investing in school or volunteer positions. The trouble is that with median family incomes slipping, indebtedness at record highs and boomer parents struggling, many youth can't afford to delay working. To make matters worse, says David Green, an economist at the University of British Columbia, the social safety net is not what it once was. While 83 per cent of those who were unemployed at the beginning of the recession in the early '90s qualified for jobless benefits, this time only 43 per cent qualified. And incomes aren't what they used to be either: though new workers began to gain ground again in the mid-'90s, at the start of the recent recession, says Green, they were still facing real wages below those of their counterparts in the early '80s.

For youth who are unable, or unwilling, to prolong their entry into the job market, breaking in during a downturn is an uphill battle. When Amanda, who asked that Maclean's not use her last name, got her undergraduate degree in math last June, she wanted to get a job as an analyst. But after four months of unemployment, she took an entry-level position at a Toronto IT firm. While her friends who graduated with similar credentials just a few years earlier started out making about $40,000, she's earning $30,000.

In fact, most young people entering the job market now are making less than peers who found jobs two or three years ago. "And that lasts for quite a while," says Paul Beaudry, Canada Research Chair in Macroeconomics at UBC. A study of Canadian men who graduated with B.A.s over almost 20 years found that, on average, those who begin their careers in down times tend to do so at smaller firms that pay less, suffering an eight to nine per cent income hit. And it takes 10 years to catch up to those who graduated in boom times. Worse still, for those who graduated from less prestigious universities with degrees in lower-paying fields, the scarring effect on their earning potential "sort of remains permanent," says Phil Oreopoulos, a University of Toronto economics professor who co-authored the study.

The prospects are bleaker for those without post-secondary education. "Employers out there, they're asking for everything - the moon and the stars," says Joan Gardener, project administrator at the Mississauga, Ont.-based Youth Community Connections, a government-funded program that serves out-of-work young people. For those who do manage to secure employment, the erosion of high-paying, middle-class manufacturing jobs means it's tougher to get ahead. "Think about it as a career ladder with the rings in the middle all being missing," says Morley Gunderson, an economics professor at U of T. "You don't have a way to start at the bottom and move up anymore."

Coming of age in a time of economic uncertainty can also take an emotional toll. In the five months since Rajinder Ghoman was laid off from her customer service job with British Airways, the 27-year-old single mom, who is living with her parents in Brampton, Ont., has spent her days attending job fairs and scouring the Internet for openings. But after submitting more than 50 applications, she's only received three calls - none have ended in an offer. With her EMPLOYMENT INSURANCE set to expire in two months, she says her self-esteem is "not too good right now."

While most of the country's unemployed youth will eventually find jobs, studies suggest that these experiences can have lasting psychological effects, too. A recent article in The Atlantic cited a battery of disheartening findings: individuals who endure long bouts of unemployment in their teens and early 20s are more at risk of developing drinking problems; those who started their careers during Japan's "lost generation" now account for 60 per cent of employer-reported cases of depression and stress; and periods of unemployment, especially early on, literally shave years off of a person's life.

Academics have, understandably, been quick to reverse the rosy futures they once predicted for today's youth. Some have gone so far as to say that the "millennials," who were once described as an entitled generation with a poor work ethic, are at risk of becoming lost. Like the children of the Great Depression, the argument goes, these kids will have their ambitions thwarted by uncertain times, and hold on to their jobs - and pennies - for dear life.

But according to Beaudry, this is "an exaggerated kind of comparison." While the relative losses have been substantial, the fallout we're currently experiencing is nothing like what occurred in the 1930s. Today's kids are also much more affluent than they were back then. As Douglas Porter, deputy chief economist for the Bank of Montreal, points out, even with the recent setback, the markets are still higher than they were 20 years ago, and "when you look at the household balance sheet," he says, "a lot of the losses have been recouped." Add that to the fact that government has been focusing on job creation, and the outlook is more optimistic. "We can turn this thing around without doing lasting damage to the prospects of youth today."

To minimize the implications, says economist Yalnizyan, government should do more to improve access to Employment Insurance and social assistance. "We should be enhancing those automatic stabilizers that prevent the middle class from entering economic free fall," she says. At the same time, the downturn, she adds, is an opportunity to make tuitions more affordable and address the impending shortage of trained professionals in fields like medicine.

As for Cantin, he's looking at the warehouse job as a stopgap until he goes back to school - something he's been thinking about a lot in the past few months. He hopes a master's in history will be enough to land his dream job. But part of him wonders if he'll just be digging himself an even larger financial hole, only to get stonewalled again. "I try and stay optimistic. But for the most part," he says, "I just try not to think about it."

Maclean's April 12, 2010