ONE of the most pressing policy puzzles of the mid-1990s is why it is so difficult for young Canadians to find jobs. Employment growth for those under 25 has been positive in only five of the past 15 years, and in only two of the past 10.

The positive job-growth numbers released last week were no exception: Those under 25 accounted for only 3,000 of the 61,000 jobs created. One reason is that more young people are staying in school longer. But youth unemployment, as measured against the labour force as a whole, has also been steadily increasing. And since the labour force does not include students, increased schooling reveals just a piece of the puzzle.

Thanks in part to recent welfare reforms in Alberta, we may have another clue. Both the easy availability of welfare and the incentive structure of welfare benefits may play a role in keeping Canadian youth from finding jobs.

Until 1993, Alberta’s youth-employment picture was similar to that of the country as a whole. In the decade ending in that year, positive job growth for those under age 25 occurred only once, in 1988, and even then youth employment grew by less than 1 per cent in an economy that expanded by more than 7 per cent. Youth unemployment also increased substantially in the early 1980s; despite falling late in that decade, the rate in 1993 was still nearly twice that of the pre-1980s recession experience.

Then, in 1993, Alberta began a radical overhaul of its welfare system, to make welfare a program of last resort. It did so by making welfare benefits extremely difficult to get for first-time, able-bodied applicants, and by reducing benefits to bring them in line with wages earned by low-income Albertans.

This tough-love approach worked. In the three years after the reforms, the province’s welfare caseload fell by nearly half. The proportion of Albertans dependent on welfare is now at a level not seen since before the recession in the early 1980s, and less than half that found in Quebec, Ontario or British Columbia.

Alberta succeeded primarily by slowing the inflow of new individuals onto the welfare rolls. In 1992, the last pre-reform year, more than 14,000 people with no history of welfare use came onto the rolls each quarter. By 1996, that number had stabilized at 3,500. And young, single and employable people made up a large portion of the consequent reductions: Nearly 16,000 fewer people under age 25 were on welfare, a decline of 64 per cent in three years.

Analysts have usually cited two factors to explain this reduction in Alberta’s welfare rolls: strong economic growth, and the migration of many of those refused welfare to B.C. to take advantage of that province’s more generous welfare programs.

The case for economic growth is suspect, however. During the 1980s, Alberta experienced longer and stronger periods of economic growth than it has since 1993, yet there was no effect on welfare use. True, welfare use fell in Quebec and B.C. during periods of economic growth in the 1980s; but it rose in Ontario, and it rose in all these provinces after the 1990s recession. Economic growth alone cannot provide a consistent story for these varied experiences.

The thesis that needy Albertans migrated to B.C. is also weak. Data on the province of origin of welfare recipients in B.C. fail to reveal a change in the proportion from Alberta, despite massive swings in Alberta’s welfare rolls. Indeed, both the level and the proportion of Albertans on welfare in B.C. seem remarkably impervious to changes in Alberta welfare use.

Where, then, did all those prospective welfare recipients go?

Many cycled through provincial and federal training and education programs, most of which (employment searches, three-month work terms, job placement programs, training in basic skills) are short-term. Since welfare use continued to decline through 1996, however, these short-term programs could not have been the sole reason for the decline in caseloads.

The more likely explanation is that would-be welfare recipients found work.

In 1994 and 1995, total employment growth in Alberta was the strongest that province had seen in more than 10 years. More important, employment growth for Albertans under 25 in each of those two years exceeded that of any year in the previous decade. Youth employment actually grew faster than the economy in 1994, and remained positive in 1995, with a total of 9,000 jobs created over the two years. Indeed, two-thirds of all new jobs created for Canadian youth in 1994 and 1995 were in Alberta, even though that province accounts for just 10 per cent of the youth labour force.

In Alberta, tougher rules on welfare eligibility and reforms to the incentive structure of welfare benefits appear to have helped remove a significant barrier to youth employment. In short, Alberta may have discovered a key clue to the youth employment mystery. Other provinces and their youths would benefit from a closer look at these reforms. Kenneth J. Boessenkool is a policy analyst at the C.D. Howe Institute. He is the author of Back to Work: Learning from the Alberta Welfare Experiment, released this week by the C.D. Howe Institute.