Grads entering weak markets face long-term effects, lower earnings

Recent graduates entering the job market during high unemployment may see a lasting affect their earnings, especially for younger and inexperienced workers, according to a new report — but work-integrated learning program could improve job chances.

The TD Economics report published Thursday notes that Canada’s job market has started to slow down, with unemployment rate rising to 5.8% as of December, compared to 4.9% in July 2022. Amid layoffs and lower vacancies, recent graduates are finding themselves competing with people with more experience.

First jobs are an important rung in the career ladder, but those graduating into an economic downturn are likely to settle for less, the report said, causing long-term effects on skills and earnings.

“It’s no surprise then that graduating during a slowdown leaves lasting scars on lifetime earnings,” it says in the report, which was co-authored by Rannella Billy-Ochieng and Anusha Arif.

Graduates entering the workforce during economic downturns seem to earn around 9% less annually than their peers who graduated in better economic climates for about a decade, the report said.

Women and visible minorities tend to be affected the most when markets are lacking relevant jobs, it noted, adding to the obstacles they face in the labour market even in good times.

“People who start out behind are more prone to stay behind, and women are more at risk,” the report cautioned.

Almost one in two women have reported working jobs they’re overqualified for, while only 37% of men reported doing so, the report cited.

And for those with a bad start to working life, the likelihood of staying underemployed after five years in more than 60%.

The joblessness gap among racialized Canadians has widened in the last year, with unemployment among diverse workers ages 25 to 54 up 1.1 percentage points.

Economists say it is in part because the group includes a large portion of those who are newer to the country, with less social capital and less job-specific experience.

“As the unemployment rate likely continues to move toward 7% in the coming months, diverse Canadians are likely to suffer an outsized impact,” the report said.

TD Economics suggests work-integrated learning programs involving skills such as networking, problem-solving and data analysis can increase the likelihood of being hired for recent graduates and improve their earnings long term.

“This is most relevant for students as their first job after graduation can either become a solid ground or stumbling block for their career in the long run,” the report said.

TD economists say work-integrated learning also helps close wage and employment gaps faced by women and visible minority communities — traditionally associated with biases towards individual characteristics.