evidence on the impact of minimum wages is,
however, mixed.27
As in the past, the business cycle and labour
costs will heavily influence the demand side of
the teen labour market. On the other hand, the
structural changes that have taken place in some
sectors in Canada, such as retail, and the in-
creases in payroll taxes may permanently depress
both the demand and supply in the teen labour
market. While part of the rise in the school atten-
dance rate was cyclical, the structural increase
will still have a small permanent impact on the
overall participation rate. A recapture of at least 75
per cent of the drop in the teen participation rate
since 1989 should be possible as the economy
moves to full capacity. The BLS, on the other
hand, is projecting a decline of over 3 percentage
points for the 16-19 age group by 2006 in the
United States (Fullerton, 1997: Table 4).
Young adults: Ages 20 to 24
Although employment rates for young male
and female adults in both countries are just as cy-
clical as those for teens, their participation rates
have been considerably less cyclical, particularly
before the 1990s (Chart 10). The looser relation-
ship between employment and participation rates
of young adults relative to teenagers is because of
the much larger proportion of non-students in the
young adult group. Non-students have a greater
attachment to the labour force than do students.
The trends of participation rates for young
adults have been broadly similar in the two coun-
tries since the mid-1970s. In the late 1980s, male
participation rates weakened, while female rates
were rising strongly. Male employment rates, on
the other hand, were sufficiently weaker in Can-
ada than in the United States after the early 1980s
to raise questions about how long the Canadian
participation rate could continue to track the U.S.
rate. Female participation rates were significantly
higher in Canada than in the United States until
the 1990s, which was consistent with a higher
employment rate.
The absolute decline in the male participation
rate in Canada from 1989 to 1992 was much larger
than in the United States, resulting in the first di-
vergence in male rates in more than 10 years and
a convergence in female rates. (As the U.S. female
employment and participation rates have recov-
ered since 1994, they have moved above the Ca-
nadian rates for the first time since the mid-
1970s.) Since the rise in school attendance rates
apparently accounted for much of the weakness
in the U.S. participation rate and the decline in the
Canadian rate, other structural factor may not
have been important for this age group. In fact, an
examination of the developments in the move-
ments in the participation rates of students and
non-students, suggests cyclical factors played the
dominant role.
The job-seeking experience of Canadian stu-
dents aged 20-24 was relatively good in the 1990s.
Their employment rate remained close to its 1990
peak level, which may explain the small rise in
their participation rate. Nevertheless, that rise in
the student participation rate in the 1990s pales in
comparison with what took place in the 1980s,
when their participation rate rose along with their
school attendance rate. The rise in the participa-
tion rate for students in the 1980s can be attrib-
uted to the upward trend of tuition fees and the
downward trend in government support in the
form of grants. The persistence of these trends in
the 1990s should have spelled further increases in
the participation rate for students. The flattening
that occurred indicates a deterioration of job op-
portunities for older students in the 1990s com-
pared with the 1980s, even though their job-
search experience was more successful than that
of teenagers and slightly better than that of the
core labour force. The contrasting performance of
the summer participation rate in the 1980s and
1990s for young adults is further evidence of that
deterioration (Chart 9).
In contrast with the experience of Canadian
students, the participation rate for young adults
who are not in school fell in the 1990s. Most of
this decline appears to be cyclical. The fact that
part-time employment has become more com-
mon among these non-students suggests the de-
cline was the result of a deterioration in labour
market conditions for this group (Statistics Can-
ada, 1997).28 Although the participation rate has
begun to recover recently, in 1997 it was still 1.6
percentage points below its 1989 peak.
The participation rates of the 20-24 age group
followed employment rates more closely in the
1990-91 than in the 1980-81 recession, in both
countries, particularly for women, Since about
1994, only the participation rate for U.S. men has
been at odds with the employment rate perform-
ance. This development may be because of the
higher percentage of students, with weaker at-
10
Canadian Business Economics
Summer 1999