Bank of Canada Governor Stephen Poloz has sparked controversy by suggesting young people ought to consider unpaid work as a way to gain job experience.

"When I bump into youths, they ask me, you know, 'What am I supposed to do in a situation?' I say, look, having something unpaid on your CV is very worth it because that's the one thing you can do to counteract this scarring effect. Get some real-life experience even though you're discouraged, even if it's for free," Mr. Poloz told reporters Monday in Ottawa.

Testifying before the House of Commons Standing Committee on Finance on Tuesday, he doubled down on that view, saying his advice to young people in this tough job environment was to "volunteer to do something that is at least somewhat related to your expertise set, so it's clear that you are gaining some learning experience during that period."

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When asked during the hearing by Liberal MP Scott Brison whether unpaid internships contribute to income inequality – with kids from wealthier families more able to take advantage of those opportunities – Mr. Poloz acknowledged "there are issues like the ones you're raising … but I still think when there are those opportunities, one should grab them because it will reduce the scarring effect, all other things equal."

Canada's youth unemployment rate is 13.5 per cent, compared with the overall rate of 6.8 per cent, and the percentage of youth who are holding jobs has been little-improved since the recession. Mr. Poloz said the central bank estimates there are about 200,000 young people who are out of work, underemployed or trying to improve their job prospects by extending their education. "I bet almost everyone in this room knows at least one family with adult children living in the basement," he said in a speech Monday. "I'm pretty sure these kids have not taken early retirement."

His main point may have been on the importance of keeping skills up-to-date and gaining real-world experience to plug holes in resume gaps. But the suggestion of unpaid work prompted a scathing response.

"It's extremely frustrating," said Claire Seaborn, founder and president of the Canadian Intern Association. "It's a complete misunderstanding of our employment and workplace laws in Canada … and it shows a huge devaluing of young people and recent graduates' abilities in the workplace."

She's also concerned the comments "show a lack of understanding of the socio-economic issues associated with unpaid internships," that can see well-off young people able to do unpaid internships, which gives them better career opportunities, while the less wealthy get "essentially barred from entering certain industries that have made unpaid internships almost a requirement."

Unpaid internships have generated much public debate in the past year. There are no official statistics on numbers of unpaid interns in Canada, though labour lawyer Andrew Langille says estimates put the numbers around 100,000 a year, a level that has grown since the economic downturn.

Mr. Poloz's comments also prompted some scalding comments on social media. Some suggested Mr. Poloz, who earns more than $435,000 a year, give up his salary and try living in his parent's basement. Ivey Business School economist Mike Moffatt noted that unpaid internships are a "non-option" for low-income people.

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Several media companies, including Toronto Life and Walrus magazine, have come under fire in the past year over offering unpaid internships, with both the subject of a crackdown by Ontario's Minister of Labour in March.

Under labour laws, interns are entitled to at least minimum wage unless they are working under certain exemptions, such as through a student program. "Interns have to be paid, unless they're getting school credit," said Ms. Seaborn.