The Canadian economy is leaving many young people behind. Young adults today face unemployment rates reminiscent of a recession as well as a housing crisis that leaves many unable to afford necessities. Some 78 per cent of Canadians expect the next generation to be worse off than their parents. Growing wealth inequality has made young people even more pessimistic as they see mounting evidence that the economy is not working for them. They are earning less, saving less and face high barriers to owning assets unless they have help from family.
We also know that Canada’s taxes and benefits are skewed heavily towards serving older people. It is estimated that government spending on those 65-plus is three to four times greater than on those under 45. While Old Age Security (OAS) has become more generous over the last 50 years, government transfers to younger Canadians remain unchanged. At the same time, many seniors pay little or no tax thanks to overly generous tax exclusions, deductions and credits.
Last fall’s budget extended small amounts of funding to various youth employment programs, but the overall numbers don’t lie. The budget includes an increase of $28.3 billion in OAS spending by 2029, but less than $1 billion in new youth employment spending. As our policymakers grapple with how to structure a broad policy response to changes in global economics and geopolitics, we need to address problems with our taxes and benefits as well.
A youth employment supplement (YES) to the Canada Workers Benefit (CWB) would be a creative, scalable, cost-efficient way to motivate young people to get a job, as well as help those who are working but don’t make enough to save and invest. An early version of this model was proposed in a project by graduates Gabriel Blanc, Samuel De Grâce, Kiran Gill and Jacob Kates Rose from the Max Bell School of Public Policy at McGill University.
The Canada Workers Benefit
The CWB offers means-tested tax relief to lower-income working Canadians in the form of a refundable tax credit. All Canadians over 19, except those who are enrolled in post-secondary education or are incarcerated, become eligible for the benefit after the first $3,000 of employment income.
The refundable tax credit increases as income goes up. In 2025, it topped out at $1,633 for individuals and $2,813 for families. The CWB is gradually reduced once adjusted net income reaches a certain threshold. No benefit is received if net earnings are greater than $37,742 for individuals and $49,393 for families. Alberta, Quebec and Nunavut have different negotiated thresholds. Federal legislation allows provinces autonomy in how the CWB is structured.
The CWB, which grew out of a similar benefit introduced in 2007, has had support across the political spectrum and has encouraged people to work and helped reduce poverty (page 29) amongst those who are employed. However, young people are the group most likely to live in poverty and the workers benefit does not do enough for them.
How would a youth employment supplement work?
A youth employment supplement could be created through an amendment to the Income Tax Act that would double CWB payments for single workers between 19 and 29 years old to an additional maximum of $2,000. To ensure the YES were properly targeted, the supplement would be calculated using existing CWB phase-in and clawback rates. Based on 2024 tax data, the average YES benefit for singles would amount to $1,179.
The supplement would not place any administrative burden on recipients. The Canada Revenue Agency would be able to determine eligibility and disburse funds using existing tax data. Based on the current proportion of CWB recipients between the ages of 19 and 29, a YES could benefit close to two million Canadians. And, as the CRA expands automatic filing, even more young workers could seamlessly receive the benefit.
Expected impact
Young adults today face higher hurdles to economic security, home ownership and saving for retirement or emergencies than previous generations. And building assets requires disposable income to invest and save. A 2024 report from Statistics Canada found that 55 per cent of people between the ages of 25 and 44 had difficulty meeting day-to-day expenses. . And a rental survey last summer found that almost half of respondents between 18 and 24 were spending more than 50 per cent of their income on rent, while facing an increasingly insecure job market.
At the same time, young people are carrying growing debt that many are unable to pay off. These debts are increasingly to private credit services that charge extremely high interest rates. A YES would not only help young Canadians meet basic needs, but would also aid them in establishing a viable financial foundation.
Income support programs like this have been shown to improve post-secondary educational outcomes and workforce participation. Research also shows that programs like a YES encourage financial planning and help maintain a stable, consistent standard of living in the face of uncertain income patterns.
Canada is facing significant economic transformation driven by climate change, technology and a rupture in North American and global trading and security. Although the long-term trends are uncertain, we are already seeing reduced hiring, particularly for entry-level professional jobs. Our taxes and benefits need to provide more security and income support to younger workers.
Costing and potential funding sources
In the 2024 tax year, a YES for single adults, defined as those with no spouse or dependents, would cost $2.29 billion. This figure does not include the cost of any changes to the disability supplement (to the CWB) or a YES for couples. These would need to be designed differently and would have additional costs.
By encouraging young adults to work, the added supplement to the CWB would, over time, lead to workforce retention and increased employment rates. And due to its inherent flexibility, it could easily be scaled or altered. Additional income tax revenue from the YES would also offset some of the costs.
New targeted programs, such as a YES, could be funded by reforms to our taxes and benefits. Paul Kershaw, founder of and lead researcher at Generation Squeeze, estimates that modest changes to Old Age Security and age and pension income tax credits would save between $14 billion and $19 billion annually.
An agenda for young adults
Canada is overdue for a broader debate on intergenerational fairness and how our taxes and benefits support — and exclude —different age groups. We continue to live with programs designed by baby boomers to provide security to seniors — even if they are well off. Yet young adults in our country face challenges entering the labour market, securing stable employment and saving to build some measure of economic security in the face of rising costs in almost every sector.
There is almost no government agenda to address this growing disparity. We need policies designed to make the economy work for younger Canadians and to show that Ottawa is responding to their needs. A youth employment supplement could help rebuild financial security and allow younger adults to buy homes, finance education for themselves or their children and save for the future.
Editor’s note: The authors would like to acknowledge Jennifer Robson, Paul Kershaw and Gillian Petit for their insightful comments.
