Herald on youth rates

October 11th, 2012 at 3:00 pm by David Farrar

The Herald editorial:

 Young people are particularly vulnerable to unemployment in times like the present. When the world economy is beset by problems and business everywhere is wary of taking on more commitments, older people cling to the jobs they have and vacancies are taken by applicants with a solid work record. …

The youth rate will be available for all 16- and 17-year-olds for their first six months with a new employer, but for 18- and 19-year-olds it will apply only to those who are coming off a benefit after more than six months, or are taking a recognised industry training course.

The legal minimum hourly rate for trainees of any age is already 80 per cent of the adult minimum. The youth rate, to be introduced in April, could reduce the present incentive for school leavers to take a job at the minimum adult rate rather than start a training course.

But mainly the rate is aimed at youth who are least likely to gain employment on the open market and less likely to seek some formal training. The youth rate will give them something to offer that might offset the record, maturity and reliability of their older competitors for the job.

If a temporary saving for employers can get the unskilled young taken on, they will get a chance to show their aptitude and know that after six months they have a right to a rise. It is a sensible step, approved at last year’s election. Let’s hope it works.

It is a sensible step. There is well documented evidence that the abolition of in 2007 led to a significant increase in youth unemployment. This is no surprise.

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20 Responses to “Herald on youth rates”

  1. Mighty_Kites (84 comments) says:

    So did the GFC…

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  2. seanmaitland (500 comments) says:

    out of interest Mighty_Kites, how did the GFC contribute to youth unemployment being so disproportionate with adult unemployment?

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  3. seanmaitland (500 comments) says:

    reading the comments on that Herald blog is depressing – I despair at the intelligence of those readers.

    Its all doom and gloom and despair and woe is me. Also looks like barely any of them have ever run a business before.

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  4. toad (3,674 comments) says:

    There is well documented evidence that the abolition of youth rates in 2007 led to a significant increase in youth unemployment.

    I would have thought if there were “well-documented evidence” of this, you would have linked to it. But there is not. There is a coincidence (the abolition of youth rates didn’t come into force until April 2008), which also just happens to coincide with the onset of the Global Financial Crisis.

    The latter is far more likely to be the cause of the increase in youth unemployment from 2008.

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  5. seanmaitland (500 comments) says:

    toad – you have a go at DPF for jumping to conclusions, then you do the exact same thing….

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  6. toad (3,674 comments) says:

    @seanmaitland 3:24 pm

    Fair cop, Sean. Here you go:

    Although we find no evidence of adverse employment effects immediately following the policy change in 2008, we conclude that it lowered the employment rate of 16-17 year-olds by 3-6 percentage points in the subsequent two years. Most of this employment loss was borne by students: in fact, the employment rate among non-students increased, there is no evidence of an increase in the percentage of 16-17 year-olds who were unemployed, and the overall inactivity rate of this age-group decreased following 2008.

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  7. Crampton (215 comments) says:

    Toad: Be very careful in the stats there. Hyslop and Stillman are looking at the number of unemployed as a fraction of total population, and are restricting their analysis to a relatively short window subsequent to the law change. If you use the unemployment rate, as in the percentage of those in the labour force who are unemployed, and if you extend the window a bit, you get different results. Have a look back through the time series and find me *ANY* quarter prior to the change in the youth minimum wage in which you combined 25% youth unemployment rates with adult unemployment rates (say 35-39 year olds) of less than 6%.

    Prior to 2008, the highest unemployment rate among 15-19 year olds was 1993Q2. Youth unemployment then hit 24.5%. The adult unemployment rate at the time? 7.5% for 35-39 year olds.

    From 2009Q2 through 2011Q4, youth unemployment rates were NEVER below 22.9% and averaged 25%. Adults? 35-39 year olds averaged 4.5%.

    Adult unemployment rates remained pretty low, all things considered, during the last recession. Not youths though.

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  8. Hamnida (905 comments) says:

    So let me try and understand you Neolibs correctly – 18 and 19 year olds are old enough to vote, fight for their country, buy alcohol and get married, but they aren’t old enough to earn the minimum wage?

    Do you see the flaws in your logic?

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  9. The Scorned (719 comments) says:

    Hamnida…you are the “big Government knows best” fan…..so you would be for getting it out of the economy and letting employers and employees deal with each other freely now?

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  10. Mark (1,488 comments) says:

    Youth unemployment is a not just a NZ issue. In Europe it is crippling and here it is simply unacceptable that the government sits by and does nothing. This is a step in the right direction

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  11. Johnboy (16,554 comments) says:

    Course if we only pay them $10.80 an hour Hamnida they won’t be able to afford grog or a wife and the wise one’s will go fight for Australia. :)

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  12. Nick K (1,244 comments) says:

    @Hamnida – the only flaw is with you. Who said 18-19yr olds aren’t old enough to earn the minimum wage?

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  13. OneTrack (3,104 comments) says:

    Hamnida – So let me understand you socialist and/or communists (aka “progressives”) correctly – you would rather inexperienced youth languished on the dole instead of giving potential employers an additional incentive to give them a chance and give hem some work experience.

    Is this because your ideology (aka religion) requires you to believe that everybody should be paid the same wage (by the state no doubt, but, first things first) no matter what you do or how good you are at it (for example the model the teachers unions profess) because everyone is “equal”. Except, of course, when some are deemed more equal than others.

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  14. SPC (5,619 comments) says:

    I would have thought it pretty obvious that those unemployed at the time the recession started would find jobs hard to come by. The largest group of these people are those leaving school or university.

    So youth unemploymnent rises everywhere when a recession occurs.

    Claiming that youth rates needs to be lower to prevent this is like saying – only if there is an incentive to fire older workers and hire younger ones will there be jobs open for them. And no not new jobs – just old ones with vacancies created by firing older workers.

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  15. SPC (5,619 comments) says:

    “the Education Ministry voiced serious concerns. First, that extending the starting wage beyond its current limits might cut students’ income when they are trying to pay their way through study. Second, that the proposal was at odds with the Government’s targets of increasing the proportion of people at school with NCEA level 2 and with level 4 in the 25-34 cohort.”

    http://www.stuff.co.nz/dominion-post/comment/columnists/vernon-small/7798762/More-jobs-better-than-youth-rate

    The fundamental proposition this bill puts up is that we need to pay people less to get them into their first job so that they can have an unskilled future. That is what this bill essentially will do to New Zealanders. We see a different future for New Zealanders. We want those young people to get into training and skills so that they are not talking about getting the lowest-paid job they possibly can, but instead are looking to get the best-paid job they possibly can. If we can achieve that, we can make the dynamic change in our economic base that will give New Zealand the growth potential we need.”

    David Bennett, National MP 2010 in parliament, on why the Douglas youth minimum wage bill should not proceed.

    I guess employers have been lobbying MP’s to change their minds ever since.

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  16. SPC (5,619 comments) says:

    It’s interesting what the ACT blog found as a reason to support this National version of the Douglas proposal (to ignore the human rights legislation supposedly in place to prevent discrimination against people over the age of 16 – this is the age it specifies) and have youth rates under 18.

    “Critics would say youth workers were stealing jobs off older people but ACT said young people were more likely to spend their money, leading to the creation of new jobs.”

    http://www.stuff.co.nz/dominion-post/news/politics/7796692/Youth-wage-divides-Govt-support-parties

    So this belief that young people spend their $10.80 an hour money whereas older workers do not spend their $13.50 an hour money, is the arguement for discrimination based on age from ACT and why they will support it?

    The argument is specious. All low wage workers – whether on $10. 80 or $13.50 an hour spend their money – now there is less earnt in wages to spend. And one suspects young people living at home with their parents are more likely to spend on alcopops than others.

    One hopes these people in ACT are not the ones in talks with the Libertarians, lest the contribution to economic debate from the right declines even further.

    And of course discrimination based on age is in breach of human rights legislation (and this specifies age 16). One law for all once again betrayed by those who shout for it loudest – the age for access to licensed premises for alcohol anybody?

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  17. Kevin (1,122 comments) says:

    If this is all true then it’s just downright embarrassing. The right in this country are just such downright rank amateurs it makes you want to go and put your head in the sand with the lefties and pretend we’re not on a one way gravy train to the third world.

    What ever happened to parties with principles? This is what happens when you are not prepared to stick up for your principles enough that you allow all the taxpayer funded institutions in this country to become outposts and mouthpieces of the far left gravy trainers who believe the world owes us a friggin living. News flash – it never did.

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  18. Luc Hansen (4,573 comments) says:

    Look, it’s a nothing policy aimed at low information (read: dumb) voters.

    I’ve run and owned businesses that employed school leavers on a regular basis – in the days, I should add, when the school leaving age was 15 – and youth rates were all the rage, with union approval.

    I learnt to ditch the youth rates. The young (admittedly the work was low skilled but still needed quite a lot of training) because their energy and eagerness to learn meant they actually outshone the experienced guys (the ladies always outshone the guys and were on a par with the young ones).

    But hey, it’s only six months and if an employer is such a fuckwit with so little confidence in his ability to train and to harness energy but a kid gets employed anyway, well, OK, let’s run with it and see what happens.

    And I take Toad’s point about the very convenient starting point for DPF’s precipitous decline in the employment of young people.

    DPF’s argument only works when times are tight.

    And the timing of the introduction is again convenient as hopefully we are over bailing out the rich by socialising their losses and the economy will improve in spite of the best efforts of the government by and for the 1%.

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  19. Tom Jackson (2,553 comments) says:

    If you offer young people less pay, it means that there is less incentive for them to try to find work. I think many will just stay at home and play video games rather than slave all week for such a pittance.

    Or do incentives only matter for other people?

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  20. Carlos (683 comments) says:

    I think they should get less pay and pay no tax. That would be fair and an incentive.

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