This article originally appeared in Canadian Affairs.
By Ryan Khurana, June 23, 2025
Artificial intelligence is driving economic anxiety about the future of work, particularly as youth unemployment rises.
In May, youth unemployment reached 14 per cent, while summer job postings plummeted 22 per cent compared to last year.
There is a way to flip this trend and advantage young job seekers. But Ottawa must use its unique position as Canada’s largest employer, biggest procurer and respected standard-setter to pioneer AI adoption that creates opportunity rather than eliminates it.
So far, the federal government’s response to youth unemployment has been more incremental funding.
In February, Ottawa announced an additional $23 million in youth employment funding — on top of the $370 million it had already committed through its Youth Employment and Skills Strategy.
In June, it announced a top-up to the Canada Summer Jobs program, saying it will create up to 76,000 positions this year.
In its 2024-2025 budget, Ottawa also pledged $2.4 billion for AI, most of it slated to develop technological infrastructure to attract investment. More recently, Prime Minister Mark Carney appointed Liberal MP Evan Solomon as Canada’s first minister of artificial intelligence and digital innovation, signaling a recognition that AI policy deserves dedicated federal focus.
These moves are a start. But they do not reflect a broad strategic vision, and they will do little to prepare Canadians for a rapidly changing job market. What’s needed is not Silicon Valley’s disruptive ethos, but something that is distinctly Canadian: coordinated action to ensure technological progress serves everyone.
First, Ottawa should rebalance tax incentives. Current policies favour capital investment over human development through mechanisms like accelerated capital cost allowance rates. This creates perverse incentives toward automation purely for cost reduction.
Canada should expand the Scientific Research and Experimental Development tax credit to include time spent integrating AI with human workflows and retraining employees for enhanced roles. When businesses can write off human-AI collaboration as readily as capital investments, they’ll choose augmentation over replacement.
Second, Ottawa should prioritize system-level AI integration in public procurement. Government contracts should require companies to demonstrate how AI solutions will enhance rather than eliminate human capabilities. Every federal AI procurement project should include plans for worker consultation, training and role evolution. This approach would ensure public investments create responsible AI adoption models that the private sector can follow.
Third, Ottawa should align workforce development with AI augmentation. Rather than training young people for jobs that may not exist, prepare them for AI-enhanced roles that leverage uniquely human capabilities. This means funding retraining programs that emphasize critical thinking, creativity and emotional intelligence — skills that complement rather than compete with AI systems.
For example, the U.K. government recently announced it was teaming up with Google, Microsoft and Amazon to train 7.5 million workers on AI skills. It also announced funding to foster tech abilities among secondary students.
The research is clear on AI’s potential when properly implemented. Customer service AI assistants boost productivity by 15 per cent on average, especially for lower-skilled workers. Coding assistants increase output for software engineers on average by 56 per cent.
Yet, in 2024, just six per cent of Canadian businesses were using AI to produce goods or services, leaving enormous potential unrealized while our economic competitors advance.
The government cannot wait for private markets to develop their own template for responsible adoption. By using its roles as policy-setter, procurer and employer, Ottawa can pioneer approaches that prove AI enhances — rather than threatens — human opportunity. Public sector success could create confidence for broader adoption while establishing Canadian leadership in human-centered AI development.
Young Canadians and experienced workers alike deserve leadership that harnesses AI’s potential for human flourishing. The tools exist: smart tax policy, strategic procurement and workforce development.
The moment for Canadian leadership is here. The question is whether we’ll seize it.
Ryan Khurana is an AI practitioner in Toronto, a senior fellow at the Foundation for American Innovation, and a contributor to the Macdonald-Laurier Institute
