As AI cuts entry-level roles, youth unemployment climbs in Canada
Canada’s youth job market is under strain as artificial intelligence accelerates automation, erasing many entry-level opportunities. With unemployment among 15- to 24-year-olds at its highest since the pandemic, experts warn that AI’s rapid adoption could deepen long-term economic inequality unless Canada strengthens pathways for digital and AI-related skills.
As Canadian businesses embrace AI-first strategies, entry-level positions risk being squeezed out of the job market, posing significant economic challenges for youth, and, ultimately, threatening Canada’s long-term prosperity, warns the Future Skills Centre. / ISTOCK PHOTO
Canada’s youth job market is already under pressure — and artificial intelligence may be making it worse.
Young people have faced gruelling job prospects over the summer months, with the unemployment rate for those aged 15 to 24 rising to 17.9% in August, the highest since the pandemic, Statistics Canada data show.
The current level of youth unemployment is typically only seen during recessionary periods, Andrew Grantham, CIBC Executive Director and Senior Economist, wrote in a recent report. “The increase in youth unemployment in recent years has gone above and beyond what we would have expected to see given the broader economic backdrop.”
While the cause may partly stem from a surge in the student population, other factors also appear to be at work, Grantham said. For example, technological change, including AI, may be taking the place of part-time or entry-level jobs that have typically been filled by youth.
For example, young people often get jobs as grocery store clerks — a position that is becoming displaced by self-check outs, he said. While this has more to do with technology rather than “true AI,” young Canadians have also struggled to find jobs in business and support services, as well as professional and scientific services in recent years, “which could partly be attributable to the use of AI in executing research tasks.”
Prosperity at risk
As Canadian businesses embrace AI-first strategies, entry-level positions risk being squeezed out of the job market, posing significant economic challenges for youth, and, ultimately, threatening Canada’s long-term prosperity. That’s the warning from Sonia Boskov, Research and Evaluation Associate at Future Skills Centre, who says the Toronto-based research institute is already seeing early signs of “the impacts of AI on employment opportunities for youth.”
The Future Skills Centre’s research shows that as major Canadian firms implement AI-powered downsizing, junior positions are often the first to go. “It's making it harder for youth to get their foot in the door,” Boskov told Means & Ways.
Jobs that are both highly exposed and highly complementary to AI tend to be linked to higher-earning professional occupations requiring advanced education and demanding complex human judgement, according to a 2024 report from The Dais and the Future Skills Centre. But entry-level roles lack that protection, making them more vulnerable to automation.
Tim Lang, CEO of Youth Employment Services, says he worries about AI’s impact on youth unemployment over the long term.
Tim Lang, CEO of Youth Employment Services (YES), said the organization has not yet seen AI cause major job cuts, but the risk is looming. “So far, [we] have only seen a very minimal side effect of AI in cutting back jobs,” he said.
However, YES worries about AI’s impact on youth unemployment over the long term. “It's just starting to take effect,” he told Means & Ways. “In five years, will AI be so advanced that it, you know, knocks out 20% of young people in entry level jobs? We definitely worry about that.”
Grantham’s report notes that “early data for Canada does suggest a role for AI and other labour-substituting technologies in the disproportionate climb in youth unemployment” but it’s also a problem elsewhere.
Wider problem
“This is not just a Canadian phenomenon. We are seeing elevated levels of youth unemployment in other countries, for example parts of Europe and even in the U.S. where the overall labour market is actually quite strong. Obviously, those countries have not seen those big increases in student numbers, non-permanent residents, so there is something else at play here,” he told CTV News.
Dario Amodei, CEO of Anthropic, told Axios that AI could wipe out half of all entry-level white collar jobs in the U.S. over the next five years, including in “technology, finance, law, consulting and other white-collar professions, especially entry-level gigs.”
These cuts seem to have already begun. In July, AI led to over 10,000 job losses in the U.S., according to a CBS News report.
Canada’s AI adoption landscape
Though the future remains uncertain, Lang said AI has also been helpful for youth in YES.
“They've used it actually quite constructively,” he said. “They can help get better resume writing or cover letters or research — lots of helpful tools.”
YES is looking to include it in its programming and offer skills training for youth because “AI is great once it's in, but you still need people to set it up, oversee it, and manage it.”
The federal government has acknowledged that the Canadian labour market is increasingly shaped by digital tools. In his May 2025 mandate letter to ministers, Prime Minister Mark Carney said AI could create “opportunities for millions of Canadians to find new rewarding careers — provided they have timely access to the education and training they need.”
In July, Anna Gainey, Secretary of State for Children and Youth, highlighted that young people are tackling “important challenges and shifts that technologies are bringing to an increasingly digitally focused labour market.”
The speed of adoption is increasing in Canada. In the second quarter of 2025, 12.2% of businesses reported having used AI to produce or deliver services, a major increase from the previous year, according to Statistics Canada.
Some firms have already made dramatic moves. Earlier this year, Klue Labs Inc. laid off 40% of its workforce after its leadership decided to embed generative AI into all aspects of operations. Content writers and junior-level support were among the roles cut.
OpenText’s “AI-first strategy” led to the elimination of 1,600 jobs, while Shopify CEO Tobi Lütke has told staff that teams must “demonstrate why they cannot get what they want done using AI” before requesting new hires.
Other Canadian firms, including League, Alaya and Hopper, have also signalled they intend to grow revenues without growing staff, according to the Globe and Mail.
Some firms are attempting to strike a balance. KPMG, for instance, has more or less maintained its university hiring quotas, but has shifted criteria to prioritize AI fluency. “If you don’t adopt AI, you might not have a place at KPMG,” Stephanie Terrill, the firm’s digital managing partner, told The Logic.
Kevin Chan, vice-president of AI at Meta, said the right policies have to be in place for various industries and for certain stages of AI adoption and deployment.
“I don't think it's an either or of investing in adoption or investing in scale ups or investing in R&D, right? It's an all of the above situation,” he told attendees during a Canada 2020 panel discussion on the opportunities for AI.
He said different sectors of the economy will require different skills. If the government wants to spur AI adoption, not everyone needs a post-doctorate degree in machine learning. “You're going to need tens of thousands of graduates who are sufficiently trained — and that can be microcredentialsm, it could be under a year's worth of training — to know how to leverage AI's current capacity, identify use cases and deploy them in that specific industry.”
He said Canada needs to be “hyper precise” both in supporting R&D capacity and “putting the right policies in play to be able to spur on broad adoption across the country.”
“This is not just a Canadian phenomenon. We are seeing elevated levels of youth unemployment in other countries, for example parts of Europe and even in the U.S. where the overall labour market is actually quite strong. ”
Long term-impacts
Extended youth unemployment carries serious risks. “Youth that are unemployed for long periods of time — by the time they're 40, their income can be as much as 9% to 20% less than people that were employed,” said Lang. The broader economic impact could cost Canada up to $15 billion over a five-year period.
Beyond reducing lifetime earnings, extended youth unemployment can stunt long-term career progression and increase generational inequalities. “The longer-term impacts aren't just challenging for youth, but it also impacts Canada's overall prosperity, equality and competitiveness,” said Boskov.
She said that scaling back entry-level hiring can erode long-term talent pipelines, amplifying disparities in digital fluency, skills and social capital. “There is a potential risk if organizations prioritize AI adoption at the expense of developing future leaders,” said Boskov.
The path forward
Protecting youth from long-term job market instability will require coordinated action between the private and public sectors, focused on strategic hiring efforts and stronger workforce development systems, said Boskov.
Such public investment in youth employment would deliver high returns, said Lang. “For every dollar, funding returns three to the economy in terms of tax revenues and reduction in social services, improved mental health and long-term benefits to the economy,” he said.
The federal government has rolled out a suite of programs to shield young Canadians from labour market disruptions. The Canada Summer Jobs program added 6,000 jobs on top of the 70,000 already planned for employers participating in the annual program in June “to address the urgent needs youth are experiencing in the job market,” Jobs Minister Patty Hajdu said in a statement.
Gainey’s statement also highlighted that the government will “help Canada’s youth gain the skills they need to get good jobs,” with youth digital literacy and skilled trades development being “key to building the workforce of tomorrow.”
“Early data for Canada does suggest a role for AI and other labour-substituting technologies in the disproportionate climb in youth unemployment.”
— CIBC REPORT
Boskov suggested that such investments in digital literacy and skills could include AI literacy courses, access to labour market information and career guidance. But delivering those services requires long-term collaboration between service providers and the public sector.
Critically, Boskov added, Canada must move from reactive to proactive labour policies. “What we have seen historically are policy responses to unemployment and recessions that do not adequately address the long-term consequences of unemployment,” she said.
Investing in labour market data, skills pathways and AI education will help channel young people into resilient sectors, while helping the overall response of the Canadian economy “to the ever evolving and fast changing shifts in AI.”
As Chan also noted: “It's really those countries that do best at diffusing AI very rapidly across their economy that succeed, and those that mistake that R&D edge capacity means broad adoption are those that tend to then fail.”
Grantham says, however, there is good news. “The factors driving youth unemployment higher at present shouldn’t last forever,” he said. “While new technologies, including AI, may be limiting demand for some student and entry-level roles, that same demographic group is most likely to work in fields using that technology and unlocking productivity benefits from it in the future.”
He says technological advancements of the past — for example the personal computer and the internet — also had a negative impact on some roles, “but those were offset in the longer term as jobs were created or enhanced in other areas.”
This story is part of a series on the impacts of AI on the Canadian economy.
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