The cost of no youth minimum wage
September 19th, 2011 at 2:00 pm by David FarrarThe Department of Labour has published a report they commissioned on the impact of the decision by Parliament in 2008 to replace the youth minimum wage (set at 80% of adult minimum wage) for 16 and 17 year olds with a new entrants minimum wage that lasts for 200 hours only (5 weeks full-time).
They found:
This research found that this minimum wage increase accounted for approximately 20–40 percent of the fall in the proportion of 16 and 17 year olds in employment by 2010. Overall, this implies that the introduction of the NE minimum led to a loss of 4,500- 9,000 jobs for 16 and 17 year olds (employment of 16 and 17 year olds fell from 61,400 to 39,500 between 2007 and 2010).
I want readers to quote that figure to both Labour and National MPs and candidates if they ever talk about wanting more young people in jobs. Tell them you don’t want platitudes but will they reverse a decision that put up to 9.000 young people out of jobs.
The change did not just affect 16 and 17 year olds though. It also led to some people working fewer hours and earning less money than before the change.
The research also found that, relative to 20 and 21 year-olds, average hours worked by 16 and 17, and 18 and 19 year olds fell after 2008, as did their earnings and total incomes.
This study is based on the 100,000+ pieces of data collected in the Household Labour Force Survey over the last few years, so it is not just a “view point”, but a rigorous study based on extensive research.
I hope National has the guts to do the right thing, even if not the popular thing, and announce they will at a minimum reintroduce a youth minimum wage. They could even grandfather current rates in, so leave the current youth rate at $13/hr until it hits the floor of 80% of the adult rate which would take several years to occur, being $16.25 an hour.
Or they could be really ballsy and just announce that the minimum wage in future only applies to those aged 18 and older rather than 16 and older.
September 19th, 2011 at 2:19 pm
In other words 60-80% of the fall in employment was not caused by the abolition of youth rates. Maybe addressing that issue might be a better approach.
[DPF: Hmmn the global recession is responsible for 60% and the law change for 40%. Which one can the Govt influence?]
Vote:September 19th, 2011 at 2:19 pm
Any link to that report DPF?
Vote:September 19th, 2011 at 2:23 pm
here it is toad:
Vote:http://www.dol.govt.nz/publications/research/impact-2008-youth-minimum-wage-reform/impact-2008-ymwr.pdf
September 19th, 2011 at 2:24 pm
Is the fact that this drop coincides with the start of the global recession a big ol’ coincidence or is this yet another example of DPF not letting facts get in the way of a good story
Vote:September 19th, 2011 at 2:26 pm
Ah, found it.
Vote:September 19th, 2011 at 2:30 pm
Ah yes, amazing what a bit of selective quoting can do. The Exec Summary to the report also says:
Surely, reducing inactivity among 16 & 17 year olds is a good thing.
Vote:September 19th, 2011 at 2:31 pm
Mighty_Kites addresses eszett’s issue. Sorted. Now on with the real debate.
Vote:September 19th, 2011 at 2:33 pm
toad: if dpf linked to the report, then we’d be able to see how selective his quotations are.
Vote:September 19th, 2011 at 2:48 pm
toad and pete,
Your Gotcha! is a bit weak. The part you have quoted simply says that the fall in unemployment was due to people leaving the workforce. You might think that staying in school is better for them and that is certainly consistent with the lefty world view that you know better than other people about what they should be doing with themselves. However, these people showed that they would prefer to work, rather than train. That was their choice. The fact that they are now choosing their next prefered option doesnt mean a victory for the anti-youth minimum wagers.
Imagine an old misogynist claiming that a law reducing employment opportunities of females was a good thing because a year later the recorded unemployment rate for women was low. When the only reason recorded female unemployment was lower was because women stopped looking for work and stayed at home. He thinks its great because the women were doing what he thought they should be doing, but the women would probably still prefer to work, and would if given the option.
The government has 100% control over the existence of the minimum wage, while they probably have very little control of the other factors. Why work on those unknown 60-80% factors (and there might be 5 or 6 of them), when you may only affect it by 5%, when the one-tenth of the same effort on the single 20-40% factor would be 100% effective?
Vote:September 19th, 2011 at 2:53 pm
i never would have learnt early work ethics if the minimum wage were higher when I was a kid.
I reckon , under 18 is a time to learn work ethics rather than money.
Vote:September 19th, 2011 at 2:53 pm
The thing is, I don’t give a crap because I’m an adult now and I don’t care. I think it would be rather unfair to remove the minimum wage for youth when they can’t vote and thus can’t do anything about it. Happily, I don’t think National is going to do this in election year. Too controversial. They might the year after when they make all their unpopular decisions in the hope that people will forget about it by the time the next election comes round (like getting rid of interest-free student loans.)
Vote:September 19th, 2011 at 2:54 pm
Good staff are so difficult to find that any employer, having paid the cost of recruiting and training a young person, would quickly raise remuneration in order to retain a good employee. What is rarely pointed out is that this is a minimum wage. There is no limit on the maximum, whatever the age of the employee.
Vote:I am all in favour of removing as many barriers as possible to employment. Bad employers are a fact of life but there are remedies.
September 19th, 2011 at 4:06 pm
“What is rarely pointed out is that this is a minimum wage. There is no limit on the maximum,”
Oddly enough BeaB many of the left in favour of the former are also in favour of a limit on the later. Because, you see, they know best.
Vote:September 19th, 2011 at 4:23 pm
Spineless National is not known for bold measures. Inaction and more of the same are expected from Labour lite.
Vote:September 19th, 2011 at 4:56 pm
“Ah yes, amazing what a bit of selective quoting can do”
Lol…this from a member of the duplicitous Green party.
If anybody knows what selective quoting is all about it is Toad.
Vote:September 19th, 2011 at 5:58 pm
More to the point – scrap the minimum wage in its entirety and let the market decide the level of pay.
Vote:September 19th, 2011 at 7:14 pm
FYP
Vote:September 19th, 2011 at 7:23 pm
Hmm, are you saying that National doesn’t know how to tackle the recession?
Vote:September 19th, 2011 at 8:00 pm
Hmm, are you saying that anyone could use the resources of the government of a small South Pacific nation to “tackle” a global financial crisis and insulate that country’s citizens from all effects on their export dependent economy?
Vote:September 19th, 2011 at 8:42 pm
If we take the upper level of perhaps 9000 more unemployed, and an average pay difference of, say, $4 per hour and assume a 40 hr week, then we are saying that we are willing to consign those kids to the dole for only about $1.5m per year, spread over the entire economy.
This is entirely consistent with our child poverty problem in that it indicates how low a value we place on our kids.
And we wonder why so many scarper overseas as soon as they can!
This also shows the moral and fiscal bankruptcy of the righteous right – the best solution they can come up with is to screw the kids whenever they can.
Vote:September 19th, 2011 at 9:03 pm
Luc
The reason so many scarper overseas is not because of the righteous right, it is because of the liberal left.
The best and brightest know that to remain in NZ will sentence them to a lifetime of supporting other peoples kids, bludgers, DPB slappers and other assorted low life who have grown up with the mindset that the ‘govt’ will always keep giving them money.
Vote:September 19th, 2011 at 9:35 pm
That’s a fail from you, Big Bruv.
Most scarper to Aussieland, where tax is higher and the benefits system more comprehensive, as is the trade union coverage.
Go figure.
I do have a suggestion, though, to the youth rates advocates: let’s just provide a subsidy to employers that brings a youth wage up to the minimum wage.
After all, WFF is just a disguised subsidy; pollutors (eg farmers, miners) are widely subsidised; why not a little more for our kids?
Vote:September 19th, 2011 at 9:42 pm
“child poverty problem…”
Vote:(children living in poverty – defined as a household earning 60 per cent less than the median income.)
Meaningless political statement.
If you want to see child poverty, go to India or any African country.
There is NO child poverty in New Zealand.
Useless ‘parents’ yes, plenty.
September 19th, 2011 at 9:46 pm
No Luc, it is the truth.
Young people (my own stepson being one of them) see no future in NZ, he is already working overseas because he can see that there is nothing for him in NZ apart from supporting people who have more kids than they can afford, handing out vast sums of money to a group of people based on their race and the endless waste of his tax dollars by successive governments.
The ‘fail’ Luc is at the feet of people like you who think that we all have a duty to support those who have wasted their tax payer funded education and those who think that the rest of NZ owes them a living.
Vote:September 19th, 2011 at 9:47 pm
So those kids are unemployed for no good reason? Isnt that what we have been saying?
What the Left has effectively said, is that it is okay that those kids are unemployed, as long as the other kids are paid more. That was the choice YOU made when you got rid of the youth minimum wage. We told you it would mean more youth unemployment. You didnt care. You never care. Not really.
You dont care what the effect of your actions are, only that it will make you feel good for doing it.
And whats this “spread over the entire economy” bullshit?
If you want to help a kid, YOU hire them at the same wage as an adult. Why should anyone else fund your charity? Thats all it is, charity. You are giving money to those kids. Oh, but you dont beleive in charity, do you? Nothing forbib you would have to give up of your own treasure to “do whats right”. No, you think it would be better to force everyone else to pay for your grand ideas. If you are the one forcing people to give money, thats the same as giving money, right?
Lets just let them be paid an amount relevant to their value to the places they want to work, and stay out of the way. Lets allow them to gain experience instead of income. As the experience is much more valuable to them than $1.5m spread over 9,000 people.
What a ridiculous thing to say. Who wonders why our “kids” go overseas? They have been telling us for years. We all know why they do it. How is it that you dont? Is it because you havent bothered to listen to those people you “care” so much about?
“Kids” head overseas for the experience, the opportunities, and for better adult wages, not youth wages. And it isnt even “impoverished kids” that leave, either. It is more likely to be trained professionals. And it isnt even “kids”. Its adults. And they arent even going to places with better welfare or lower youth unemployment. They dont qualify for welfare most places they go (not that the young professionals need it).
I dont think you could have said anything stupider. Thats not a challenge, by the way.
Vote:September 19th, 2011 at 10:01 pm
“If we take the upper level of perhaps 9000 more unemployed, and an average pay difference of, say, $4 per hour and assume a 40 hr week, then we are saying that we are willing to consign those kids to the dole for only about $1.5m per year, spread over the entire economy.”
“…about $1.5m per year….”
$1.5m???
($4 X40) X 52 weeks = $ 8,320.00
Vote:$ 8, 320 X 9000 = $ 74,880,000.00 (A year!)
September 19th, 2011 at 10:05 pm
After all, WFF is just a disguised subsidy
WFF is just tax break for the poor bastards that work and have kids do you think dole bludgers pay tax. Not that I believe in taxing people just to give it back that is just dumb .The government just lose ten percent in the process.
polluters (eg farmers, miners) are widely subsidized
Vote:Not in New Zealand they are not and were do you think all the money comes from pixies. No farmers no New Zealand economy, bye bye dole ,bye bye dpb, bye bye useless bludgers as they all starve in their cardboard hovels
Mining is what makes Aussie so much richer than us but of course the stupid greens don’t want no mining because it might kill a snail or two
September 19th, 2011 at 10:22 pm
Wrong in principle and in fact! Good going Luc, you lefty clown!
Vote:September 19th, 2011 at 10:29 pm
Luc
big bruv is bang on when he says; “Young people (my own stepson being one of them) see no future in NZ” and he is right when he says;
Vote:September 19th, 2011 at 11:25 pm
Evaluation of papers on minimum wages
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961374
Scrap min wage & dole. Replace with guaranteed minimum income very limited in time (<5 years) over a persons lifetime.
http://en.wikipedia.org/wiki/Basic_income_guarantee
Vote:September 19th, 2011 at 11:35 pm
My bad. I meant per week and my point remains. It’s not a lot of money in the scheme of things.
PS Any “leftie” bias to my views is purely coincidental. I don’t do party politics, except for the odd tick or X.
Burt: reread my reply to BB and rebut me if you can.
My main evidence, aside from general knowledge, is from my son who works in Melbourne and is always banging on about how high tax and benefits are over there!
Vote:September 20th, 2011 at 1:43 am
Luc: high headline taxes with lots of loopholes aren’t really high taxes at all. As a percentage of the economy, taxes in Australia are lower. As you probably knew.
As for benefits, well, rich countries tend to have higher benefits than poor ones. Some on the left think that logically we should also pay high benefits, that will make us rich. Some on the right (correctly) suggest the causation runs the other way, and we should perhaps focus on getting wealthy before we focus on how to give that money away.
Of course, when it really comes down to it, most lefties will then say that “it isn’t about the money anyway” – which always makes me wonder why they want to tax people with money so much. Always had a laugh at the arts grads I went to uni with. At the time I was evil capitalist scum just focused on my earning potential instead of my cultural development. Now I earn more than them, and I should be taxed more and have my income redistributed to them. When they could have chosen to have a similar income to mine. Sorry, not buying.
Anyway, getting back to the kids. Many on the left seem to believe there are a fixed number of jobs. So when the kids get thrown out, adults get hired instead. The concept of employment being reduced when minimum wages are increased doesn’t compute. There was no actual problem that needed solving, the last govt changed the minimum wage rules and pushed a bunch of kids out of employment. Check out Eric Crampton’s blog for sound analysis of the economics. And then they professed to be surprised at the outcome – when blind Freddy could and did point out what was going to happen. Now you suggest subsidy to solve the problem. Of course.
As for WFF: happy for that to be removed. No argument to extend subsidy there, most on this site would happily agree that it was poor policy from the previous govt. As for subsidies for polluters – where? Are you talking about our choice not to impose carbon pricing on people emitting CO2, a substance that is arguably not pollution (given that life would cease without it), and that a price upon which would force the emissions offshore to somewhere less environmentally friendly than NZ? Or are you talking about something else?
Vote:September 20th, 2011 at 6:38 am
I’ve argued about minimum wages with a Labour supporter.
They refuse to accept that minimum wages have *any* impact on unemployment, and may even suggest that raising the minimum wage decreases unemployment. It’s an ideological debate for them. They won’t even admit that $1000/hour has a downside.
Our unemployment has skyrocketed. Yet, if you ask any Labour or Greens supporter why, they will say it is 100% because our economy shrank by a few percent and 0% because the wage price floor doubled since 2002. And then they will tell you that the number of jobs is fixed and deny that assuming a fixed number of jobs contradicts changes in unemployment.
I don’t think this report will get their heads out of the sand.
</rant>
Vote:September 20th, 2011 at 6:42 am
DPF, says: I hope National has the guts to do the right thing,
Good Luck with that line David.
Call me in 2020 and tell me if its happened.
You know as well as the rest of us that they ain’t got no guts to do anything right but appear to be happy as pigs in shit to retrospectively change other legislation because the Courts booted their collective arses for doing nothing about a faulty Law they were warned about 4 years ago.
Mind you I suppose if it takes a Court Ruling to get them to put stuff right maybe its long past time the Human Rights Lawyers went to Court over the Youth Rates.
Vote:If I had the know how and the time I would have by now.
Any takers amoung you lawyers. Do some really good stuff that will be of positive benefit to NZ Youth.?
September 20th, 2011 at 6:45 am
And of course I just luv watching LUC and Toad who, without young teenagers and having never had to find jobs for those not inclined to sit on their fat backsides at school, know all about the consequences of not employing young people.
Fountains of wisdom are those two giants of the Kiwiblog world.
Vote:September 20th, 2011 at 7:10 am
Does Luc realise that Australia, like many other countries, has Youth Rates of pay?
Labour also want to abolish the 90 day trial period, making employing young people even more of a financial risk. At a time of high youth unemploment, Labour want to make it HARDER for young people to have the opportunity to prove their worth to a prospective employer.
It beggars beleif.
Vote:September 20th, 2011 at 7:26 am
There are some sound economic argument against minimum wages at all, in that they interfere with market mechanisms for setting the price of labour.
It would be a mistake though, to focus on the youth minimum wage as a magic bullet for youth unemployment. Sure, one could abolish any statutory minimum wage and the number of unemployed youths will go up. But why stop there? Employment would also be boosted if we abolish other troublesome interferences. We could scrap the minimum school-leaving age, thus freeing up numbers of 12-15 year-olds who would be capable of working and are just wasting their time at school. We could abolish ACC, thus saving employer premiums and so lowering the cost of labour. Meddlesome health and safety laws could also go – no one is being forced to accept a dangerous job. Removing the Employment Tribunal and Employment Court would also lower costs, as would extending the ‘Hobbit law’ restrictions on collective bargaining to all sectors.
Naturally, with these measures we could dramatically lower the cost of labour. That in turn would allow us to reduce the benefit burden, by setting benefits at a new, lower, relativity to the average wage.
Vote:September 20th, 2011 at 7:55 am
@Viking2 6:45 am
Been there, done that, V2, including my stepson who was always “borrowing” money from me and his mum because he was in casualised youth minimum wage employment and simply didn’t earn enough to live on.
Vote:September 20th, 2011 at 8:06 am
mm – “We could scrap the minimum school-leaving age, thus freeing up numbers of 12-15 year-olds who would be capable of working and are just wasting their time at school.”
Not if I had my way. You wouldn’t graduate until you passed a minimum national standard. Yes, that would mean schools with 20 year olds. That way, kids don’t just mark time, but have an incentive to learn.
“We could abolish ACC, thus saving employer premiums and so lowering the cost of labour.”
Can’t see a downside to that, if government defines minimum compensation guidelines.
“Removing the Employment Tribunal and Employment Court”
This institution is needed for fair society IMO. Generic courts are not specialized enough.
In the end, the thing that really lowers the cost of labour, is efficiency brought about by automation and economies of scale. That is the nature of capitalism. Whilst the rest of the world is capitalist, we have no choice but to play the same game, or we will sink without a trace before the sea level rises to do the same thing.
If the whole world suddenly turned socialist, voluntarily, I’d be quite pleased. That is the only way socialism could work.
Vote:September 20th, 2011 at 8:24 am
Toad
“Been there, done that, V2, including my stepson who was always “borrowing” money from me and his mum because he was in casualised youth minimum wage employment and simply didn’t earn enough to live on.”
Yet you would rather consign thousands of other kids to a life of sitting at home on the dole than let them work for $10 an hour.
Even you must see the mistake in your thinking Toad.
Vote:September 20th, 2011 at 8:54 am
@big bruv 8:24 am
But the report shows the opposite happened. The rate of youth inactivity fell following the abolition of youth minimum wage rates – i.e. fewer kids are sitting at home on the dole.
Vote:September 20th, 2011 at 8:58 am
“i.e. fewer kids are sitting at home on the dole.”
Another blatant lie from Toad.
‘Yoof’ unemployment is at record levels Toad, we need to find way to get these kids into work.
Not that the Greens care about that at all, the Greens are the only party who actually want to harm our kids by legalising drugs.
Vote:September 20th, 2011 at 9:03 am
Sorry, my bad – careless with terminology. But it did show the rate of youth inactivity fell (not the numbers on the dole, who are presumably active in job search). It also showed there was no causal relationship between the abolition of youth rates and the increase in youth unemployment.
And the Greens do not want to legalise drugs. Stop peddling that lie.
Vote:September 20th, 2011 at 11:06 am
It showed no such thing.
You see what you want to see, nothing more.
Vote:September 20th, 2011 at 12:05 pm
The righteous right, LOL, I notice the righteous right all make sure they get an education at NZ taxpayer expense before wimping out on NZ.
Vote:The righteous right motto at eighteen, we are owed because we have done so much for NZ.
Maybe it is time for full user pay in further education, and they can get their fat loans at commercial bank rates.
September 20th, 2011 at 12:56 pm
If you are giving away money, dont compain when you go broke.
And “wimping out”? Really? Those pussified grads just cant handle NZ, with its lower pay and fewer opportunities, huh?
Vote:September 20th, 2011 at 5:41 pm
Eric Crampton: I really am not sure why Hyslop and Stillman chose to use the percent unemployed rather than the unemployment rate. They’re top notch guys and must have had a good reason for it. The two measures answer different questions. Their measure tells us “What is the effect of increasing the youth minimum wage on the percentage of sixteen and seventeen year olds who are unemployed?” My measure tells us “What is the effect of increasing the youth minimum wage on the percentage of sixteen and seventeen year olds who are unable to find work, among those who wish to be in work?” The latter tends, I would have thought, to be the more interesting question as the expectation of a higher potential wage will increase the number of kids (attenuate the decline in the number of kids) wishing to be in the labour force. The unemployment rate tells you the fraction of those whose wishes for employment are thwarted. The percent unemployed tells you the fraction of those in an age bracket who are unemployed, but without any measure of what portion of those in that cohort wish to be in employment.
http://offsettingbehaviour.blogspot.com/2011/09/hyslop-and-stillman.html
Vote: