Unemployment drops

February 5th, 2014 at 11:03 am by David Farrar

Stats NZ reports:

The labour market continues to grow and unemployment has fallen to 6.0 percent, Statistics New Zealand said today. There were 24,000 more people employed in the December 2013 quarter, following an additional 28,000 in the September quarter.

Over the December 2013 year, the number of people employed rose 3.0 percent in the Household Labour Force Survey (HLFS). Demand for workers from established businesses rose 1.9 percent in the Quarterly Employment Survey (QES).

“We’re seeing strength across the labour market, particularly in the industries that provide services,” industry and labour statistics manager Diane Ramsay said. “The unemployment rate has been falling and employment rising for the last 18 months, with both now at levels last seen in early 2009.”

The global financial crisis and recession devastated the NZ economy in 2008 and 2009. It’s great to see unemployment tracking down. NZ now has the 12th lowest unemployment rate out of 34 OECD countries, which is one place better than last quarter.

Some stats:

  • 24,000 more people in employment in the last quarter
  • Unemployment drops from 6.2% to 6.0%
  • The under 20 unemployment rate remains high at 24% (they’re priced out of the market) but the percentage of under 20s not in employment, education or training is 8.3%
  • The manufactured manufacturing crisis continues with an extra 6,100 jobs in the manufacturing sector
  • Average ordinary-time weekly earnings (by FTE) rose 2.8 percent from a year ago

 

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2013 Q3 HLFS

November 6th, 2013 at 12:00 pm by David Farrar

The third quarter Household Labour Force Survey is out. Some key data points:

  • Employment up 27,000
  • Unemployment down 4,000
  • Unemployment rate down 0.2% to 6.2%
  • Maori unemployment rate down 0.6% to 12.2%
  • Manufacturing jobs up 5,300 (recall the “crisis in manufacturing” claims of the opposition)
  • Total hours worked up 1.6% for the quarter and 3.8% for the year
  • NZ unemployment rate is 13th lowest of 34 OECD countries, which averages 7.9%

Also from other labour force surveys:

  • Salary/wage rates up 0.5% for the quarter and 1.7% for the year
  • Weekly gross earnings up 1.8% for the quarter and 5.3% for the year
  • Average FT salary for public sector is $69,837 and private sector is $51,934

 

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Labour market stats

August 7th, 2013 at 1:05 pm by David Farrar

Stats NZ has released:

The labour market is showing signs of improvement, Statistics New Zealand said today. Employment is growing slowly and unemployment is down from a year ago, but up slightly since the start of the year. Wage inflation continues to be restrained.

This is the first time Statistics NZ has released the full suite of quarterly labour market statistics on the same day. This is to give a more complete picture of the labour market.

It’s useful to have all three surveys out at the same time, so we do indeed get a more complete picture.

Employment continued to rise in the June 2013 quarter, following a positive March 2013 quarter. Over the June 2013 year, the number of people employed rose 0.7 percent in the Household Labour Force Survey (HLFS), while demand for workers from established businesses rose 1.9 percent in the Quarterly Employment Survey (QES).

And in the last quarter:

  • The number of people employed rose 0.4 percent, while filled jobs rose by 0.8 percent, after adjusting for usual seasonal patterns.
  • The seasonally adjusted unemployment rate was 6.4 percent, up from 6.2 percent in the March 2013 quarter. 
  • Annual wage inflation was 1.7 percent.
  • Average hourly ordinary time earnings were up 0.2 percent over the quarter.

The latest quarter saw 8,000 more people in work, but also 5,000 more unemployed, as the labour force grew by 13,000.

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Unemployment drops 0.6%

May 9th, 2013 at 12:30 pm by David Farrar

The latest quarterly Household Labour Force Survey is here. The number of people in work had the largest increase since the HLFS started in 1986. Key stats:

  • 2,234,000 people in work, up 38,000 from December.
  • Unemployed down from 161,000 to 146,000
  • Unemployment rate down from 6.8% to 6.2%
  • Under 20 unemployment rate down from 30.9% to 25.6%
  • Maori unemployment rate down from 14.8% to 13.9%
  • Manufacturing jobs up by 6,600 (recall the “crisis in manufacturing” manufactured by the left)
  • Total hours worked up 3.2% in the quarter
  • NZ’s unemployment rate now puts it in 11th= out of 34 OECD countries, so in the top third. the average rate is 8.0%

Now the HLFS does bounce around a lot, but the strength shown here is consistent with other data. It is very easy to focus on the high profile job losses, and miss all the areas where jobs are being created. An employer losing 100 jobs is a big story but 10 employers taking on 10 more staff each flies under the radar.

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Rodney says auction the unemployed on trade Me!

March 24th, 2013 at 9:00 am by David Farrar

Rodney Hide in NBR writes:

We have 50,000 people on the unemployment benefit and plenty of work that needs doing. The 50,000 represent 1000 years of work that doesn’t get done each and every week. The waste is horrific.

The waste follows from the failure to match the unemployed to the jobs that need doing at a price potential employers are willing to pay.

The matching part of the problem is a perfect job for the internet. And, sure enough, US techno whizz Morgan Warstler has the fix: match the jobs and the unemployed on eBay and pay them through Paypal.

In New Zealand our equivalent, Trade Me, is the perfect set-up linking Kiwis wanting to sell with those wanting to buy. It’s similarly perfect for matching those looking for work with those with jobs that need doing. Trade Me should be used to match jobseekers to jobs.

Under the Warstler scheme the unemployed would register on Trade Me to receive their benefit payment each Friday night.  At present, an unemployed 20-year-old receives a benefit payment of $190.84 gross a week.  Let’s make that $200.

Once an unemployed person is registered on Trade Me anyone wanting work done can bid for them to do it.  It’s the perfect way to match the jobs that need doing to those who can do them. 

So how would it work?

The unit of work on offer is a 40-hour week. And the bids start at $40 a week. That appears impossibly low but the government still pays the $200, so the least anyone gets paid for a week’s work is $240. 

The low starting bid ensures the market clears every week. Local retirement villages and community groups would be actively bidding to help the unemployed into work and to get work done.  Specialist contractors would move in to bid for the unemployed and to offer their work to the marketplace.

It’s hard to see the price staying at $40 a week. Especially for good workers.

The bids increase in $20 increments, with the government getting back $10 of each $20 hike. The worker gets to keep the other $10. For example, if the bid goes to $200 the worker keeps $320 and the government contributes $120 of his or her pay.

So basically the benefit abates.

Trade Me enables feedback possible both ways. Anyone familiar with the site knows how that works.

The good workers and the good employers would soon be identified. There would be no better CV than a string of positive comments on Trade Me. Those workers would get their wages bid up and would soon have a permanent job.

The impossibly lazy would also be identified. They could be followed up by government agents.

Likewise, the bad employers would be weeded out. They would be dealt to just as bad dealers are dealt to on Trade Me. The Warstler scheme provides total transparency.

You could trial this with the long-term unemployed – those who have been on the unemployment benefit for over six months.

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European Unemployment

March 5th, 2013 at 4:00 pm by David Farrar

The NY Times reports:

Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.

For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted.

Even though the EU is not that major a trading partner for us anymore, their woes will impact us. If Europeans are unemployed they are not spending money on imported goods from China. If the Chinese economy doesn’t grow as quickly as previously that impacts us both directly and via Australia.

The official stats say:

Compared with a year ago, the unemployment rate increased in nineteen Member States, fell in seven and
remained stable in Denmark. The largest decreases were observed in Estonia (11.1% to 9.9% between
December 2011 and December 2012), Latvia (15.5% to 14.4% between the fourth quarters of 2011 and 2012),
Romania (7.4% to 6.6%) and the United Kingdom (8.3% to 7.7% between November 2011 and November 2012).
The highest increases were registered in Greece (20.8% to 27.0% between November 2011 and November 2012),
Cyprus (9.9% to 14.7%), Portugal (14.7% to 17.6%) and Spain (23.6% to 26.2%).

The NZ unemployment rate is 6.9%. Too high, but better than most of Europe.

 

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HLFS Dec 2012

February 7th, 2013 at 4:00 pm by David Farrar

The December 2012 HLFS is out. Key points are:

  • Employment down 22,000 in quarter
  • Unenmployment also down 10,000 in quarter
  • Those not in labour force up 43,000
  • Unemployment rate down from 7.3% to 6.9%
  • Under 20 unemployment rate up to 30.9%
  • European unemployment rate up 0.1% to 5.5%
  • Maori unemployment rate down 0.3% to 14.8%
  • Pacific unemployment rate up 0.4% to 16.0%
  • Asian unemployment rate down 2.0% to 8.0%
  • Primary industry jobs down 10,400, manufacturing down only 800, construction up 4,500

Pretty weak data. The Government will face real challenges if the employment situation doesn’t improve in 2013. However worth noting that the 6.9% unemployment rate is 14th lowest of 34 in the OECD and lower than Canada, UK and US. The OECD average is 8.0%.

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Unemployment up

November 9th, 2012 at 12:00 pm by David Farrar

Stats NZ reports bad employment news:

  • Employment drops 8,000 in the quarter
  • Unemployment up 13,000 to 175,000

If employment data doesn’t improve in the next two years, the Government will struggle politically – to say the least.

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Job unfilled

May 27th, 2012 at 8:49 am by David Farrar

The HoS reports:

The country’s unemployment rate is the highest it has been since 1999, but some employers are struggling to find people willing to take on manual work.

Several employers desperately seeking reliable workers say it is as if people are unprepared for the workforce and don’t want to prove themselves.

The unemployment rate for the March quarter was 7.1 per cent, the highest it has been since June 1999, and the youth rate was 23.4 per cent.

Hayden Bootton, of HSB Builders in Northland, said finding unskilled workers was difficult, despite offering apprenticeships.

He was offering $16 an hour for temporary workers and the minimum wage for permanent work, pay rises every six months and the prospect of a full builder’s wage of about $20 an hour at the end of training. …

Northland’s unemployment rate is almost 9 per cent, one of the country’s highest.

Brenda, who does not want her surname used, said it was not only a Northland problem. Her Waikato business hires labourers. She said people had worked a couple of days before quitting, and others had walked out when faced with a drug test.

I recall after I left university deciding not to apply for a job because it paid only $11 an hour, and was for four months only while someone took a long overseas trip. Later that day I reconsidered and recovered the advert from the bin and applied for it. My rationale was better to be in work on not great wages for even four months, than not working at all.

Four years later I left the employer earning close to double what I started on. I was so glad I took that initial relatively low paid job with no job security.

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December 2011 HLFS

February 10th, 2012 at 11:00 am by David Farrar

The December 2011 Household Labour Force Survey found the following:

  • Seasonally adjusted employment up 4,000 for the quarter and 35,000 for the year
  • Seasonally adjusted unemployment down 7,000 for the quarter and 6,000 for the year
  • Seasonally adjusted labour force down 3,000 for the quarter but up 28,000 for the year
  • Seasonally adjusted unemployment rate down to 6.3%. Was 6.7% a year ago.
  • Under 20s unemployment rate up from 23.4% to 24.2%
  • Of 34 OECD countries, NZ unemployment rate is 12th lowest
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Youth Unemployment

May 5th, 2011 at 3:33 pm by David Farrar

The latest HLFS has some moderately good news in it.

  • 30,000 more jobs in the last quarter
  • 3,000 fewer unemployed
  • Unemployment rate drops to 6.6%
  • NZ unemployment rate now 11th lowest of 34 in the OECD

However unemployment amongst under 20 year olds remains high – up from 25.5% to 27.5%. 6,000 fewer teenagers were in employment.

jacinda Ardern has said:

“Youth unemployment has now hit 27 percent for those aged 15-19; more than four times the average unemployment rate. We’ve reached crisis point, with more young people looking for work now than we have ever seen on record before,” Jacinda Ardern said.

It is a crisis, but one created by Labour (and not changed by National). Labour made it illegal for a teenager to accept a job for less than the adult minimum wage. They abolished the lower minimum wage for youth.

A 16 year old generally has no skills, no experience and lives at home. They would love to be able to earn a bit of money for say $10/hour. But Labour has priced them off the market. If an employer has a choice of an experienced 25 year old or a novice 16 year old, of course they will not choose the 16 year old.

The fact that teenage unemployment levels are increasing, while the overall unemployment level is falling, shows that getting rid of the youth minimum wage was a disaster for our teenagers. They deserve the chance to gain employment, and National should pledge to reintroduce a lower minimum wage for youth.

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Fisking Andrew

February 4th, 2011 at 4:00 pm by David Farrar

Andrew Little was on Morning Report today. I can’t recall which of his hats he was on as, but anyway he was talking unemployment. He said the Government needs to invest mreo in infrastructure to create jobs, specifcally:

“It complains about debt, it doesn’t make a distinction between public debt and private debt, actually the Government does have the means to continue at least spending on infrastructure projects that are about building assets and that are about creating real work. It is the very role the Government should be playing at the time of an economic downturn and it appears to have stepped aside from playing that role.”

But this is exactly what the Government is doing. It has not put a lot of money into social spending programmes like in the US, but it has increased and acclerated its infrastructure programme. Specifically:

  • The Government has embarked on the single biggest infrastructure investment programme ever over the next five to seven years.
  • It is spending $7.5 billion through the Budget process over five years. In addition it has increased spending on State Highways to over a $1 billion a year and is spending more than ever before on upgrading the National Grid. All up the Government is spending about $6 billion a year and rising.

Without this unprecedented level of investment in infrastructure, the construction sector would be in a bad way.

Andrew is also quoted as saying by the presenter:

While John Key insists there is an improving economic picture, Andrew Little says there is little change on the horizon to a flat market for New Zealand’s products and he says that in the next few weeks between 200 and 250 will be made redundant from the manufacturing sector with employers reviewing other positions as well.

The manufacturing sector though is actually a growing sector. The HLFS has the total number of manufacturing jobs growing by around 12,000 in the last quarter and 17,000 in the last year.

The job losses are in the financial and education sectors, not manufacturing.

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Idiocy

February 4th, 2011 at 8:04 am by David Farrar

James Weir reporrts in the Dom Post:

Unions said there was a risk of a “jobless recovery”. Farmers enjoying high commodity prices may simply pay back debt, while consumers held off spending and firms avoided hiring, the National Distribution Union said. “Many jobs lost in the recession will not be replaced,” its general secretary, Robert Reid, said.

He called for a lift in the minimum wage to $15 an hour …

Oh yes putting the minimum wage up to $15 an hour will create jobs.

Why stop there. Let’s solve unemployment and put the minimum wage up to $30 an hour.

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Unemployment seesaws back up

February 3rd, 2011 at 12:12 pm by David Farrar

After falling last quarter, unemployment has risen again to 6.8%. This reinforces how the economy will be the biggest issue in election year, and the Government will not want to go into the election with unemployment this high.

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Q3 2010 HLFS

November 4th, 2010 at 2:13 pm by David Farrar

The third quarter Household Labour Force Survey is out. The headline is that unemployment is down 0.5% which is good news. But as always, the interesting stuff is beyond the headline.

  • 22,000 new jobs seasonally adjusted
  • 10,000 of the jobs are FT and 13,000 PT
  • 10,000 fewer unemployed
  • 5,000 re-enter the labour force
  • The number of under 20s in employment continues to decline – has shrunk 15,000 in nine months. This is a result of the stupidity of abolishing the youth minimum wage in 2008. By contrast those aged 20 – 24 have increased by5,000 in the same period.
  • Unemployment in Wellington down to 4.8% despite downsizing public service
  • Job growth is in agriculture, mining, manufacturing, utilities, retail, transport and ICT. Big drop in construction.
  • NZ is ranked 11th out of 33 OECD countries for lowest unemployment rate. The OECD average is 8.5%

So most of the stats are moving the right way, but the under 20s continue to be priced out of employment.

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Myths about greens jobs

September 3rd, 2010 at 11:00 am by David Farrar

The International Policy Network has published a paper exposing some myths about “green jobs”. The seven myths are:

Myth 1: Everyone understands what a “green job” is.

Fact 1: No standard definition of a “green job” exists.

Myth 2: Creating green jobs will boost productive employment.

Fact 2: Green jobs estimates in these oft-quoted studies include huge numbers of clerical, bureaucratic, and administrative positions that do not produce goods and services for consumption.

Myth 3: Green jobs forecasts are reliable.

Fact 3: The green jobs studies make estimates using poor economic models based on dubious assumptions.

Myth 4: Green jobs promote employment growth.

Fact 4: By promoting more jobs instead of more productivity, the green jobs described in the literature actually encourage low paying jobs in less desirable conditions. Economic growth cannot be ordered by national governments or by the United Nations (UN). Government interference in the economy – such as restricting successful technologies in favor of speculative technologies favored by special interests – will generate
stagnation.

Myth 5: The world economy can be remade by reducing trade and relying on local production and reduced consumption without dramatically decreasing our standard of living.

Fact 5: History shows that individual nations cannot produce everything that citizens need or want. People and countries have talents that allow specialization in products and services that make them ever more efficient, lower-cost producers, thereby enriching all people.

Myth 6: Government mandates are a substitute for free markets.

Fact 6: Companies react more swiftly and efficiently to the demands of their customers/markets, than to cumbersome government mandates.

Myth 7: Wishing for technological progress is sufficient.

Fact 7: Some technologies preferred by the green jobs studies are not capable of efficiently reaching the scale necessary to meet today’s demands.

The study is not based specifically on the NZ “green jobs” policies, but I suspect much of it is relevant.

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6.8% unemployment

August 5th, 2010 at 5:29 pm by David Farrar

Wow that is a big jump. I always thought the 6.1% figure last quarter was probably too optimistic (remember the HLFS is only a survey, albeit a large one) so I was expecting a small increase. But this is a large increase.

I tend to think one almost forgets the March 2010 quarter figure (as no one really thinks unemployment has risen by 0.7% in a quarter) and focus on that it has gone from 7.1% in Dec to just 6.8% in June 2010. That is not much at all.

Three thoughts:

  1. Stats NZ need to consider why such huge variations from one quarter to another quarter. This shakes confidence a bit in the HLFS.
  2. The Govt becomes far more vulnerable to opposition attacks, now they no longer have “the biggest quarterly employment growth” in history to rely on.
  3. It is becoming quite obvious the recovery is not that robust and needs to be stronger, and this puts pressure on the Government to consider further growth friendly policies – yes even those put out by the 2025 taskforce
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A great letter

June 2nd, 2010 at 3:30 pm by David Farrar

Eye2thelong run blogged this letter as a great example of the woeful state of reporting and repeaters:

Here’s a letter to the New York Times:

Dear Editor:

Suppose Uncle Sam orders you to raise by 41 percent the price you charge for subscriptions to your newspaper.  Would you be surprised to find a subsequent fall in the number of subscribers?  If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?

Unless you answered “yes” to this last question, I wonder why you published Mickey Meece’s report on today’s record high teenage unemployment rate (“Job Outlook for Teenagers Worsens,” June 1).  Between 2007 and 2009, Uncle Sam ordered teenage workers (who are mostly unskilled) to raise the price they charge for their labor services by 41 percent.  (That is, the federal minimum-wage rose from $5.15 per hour in 2007 to its current level of $7.25 in 2009 – a 41 percent increase.)

Does it not strike you as more than passing strange for your reporter – assigned to help explain why teenagers today have an increasingly difficult time finding jobs – to ignore the fact that these teenagers are ordered by government to raise significantly the wages that they charge their employers?

Sincerely,
Donald J. Boudreaux

How many stories that mention youth unemployment mention that it is now illegal for a teenager to offer to work for less than $12.75 an hour? Teenager workers have been priced off the market, hence the 25% youth unemployment rates.

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Glad we are not in Europe

June 2nd, 2010 at 10:32 am by David Farrar

Reuters reports:

Euro zone unemployment rose to its highest level in almost 12 years in April but a drop in the number of jobless in Germany in May signalled the labour market could be stabilising.

The European Union’s statistics office said 10.1 percent of the workforce, or 15.860 million people, were jobless in April in the 16 countries using the euro, up from 10.0 percent in March. Unemployment is now at the highest level since June 1998.

Just think, if we had spent more money on fiscal stimulus, we could also have the deficits, debt and unemployment of Europe.

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Unemployment drops to 6.0%

May 6th, 2010 at 12:30 pm by David Farrar

Unemployment has fallen from 7.1% in December (was 7.3% before adjusted) to 6.0% in March, which is welcome news.

Always important to look beyond the headlines, to see what makes this up:

  • Employment up 22,000 from 2,155,000 to 2,177,000
  • FT employment up 26,000 and PT employment down 3,000
  • Unemployment down 25,000 from 165,000 to 140,000
  • Labour force shrinks by 3,000 but participation rate constant at 68.1%
  • Unemployment rate goes from 7.1% to 6.0%
  • Maori unemployment drops from 15.4% to 14.2%
  • The jobless (includes those not looking or available for work) drops from 275,900 to 263,000
  • The number of hours worked in the quarter up 1.7% seasonally adjusted which is 2nd largest quarterly growth since Dec 2004
  • Underemployment (those wanting more hours) drops from 114,600 to 99,900

These can only be regarded as very good numbers. The fact it is FT job growth that has driven the drop is especially welcome. In fact checking through the HLFS data series, the increase in FT employment of 26,000 is the greatest (seasonally adjusted) quarterly increase in its history (started 1986).

Furthermore, the drop in both the number unemployed (25,000) and the unemployment rate (1.1%) are also both the greatest falls in the history of the HLFS.

I note youth unemployment remains very high at 25.2% for under 20 year olds. Again – the abolishment of youth rates has priced many teenagers out of jobs.

Now the HLFS is just a survey. A large one of 30,000 so with a small margin of error. It is quite possible this result is slightly exaggerated, and this may correct itself in June. But even with that in mind, it is still obviously a very good result.

Looking at the regional results, the rural regions seem to be doing best, but the industry results show the largest increase in employment has been in manufacturing, followed by wholesale trade.

A very good result as I say, but still a lot more work to be done. And let us remember that the Government can do its part to to help (or hinder) but primarily it is private sector employers who are responsible – they are the ones making the decisions to take on more staff, as they can afford to.

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And the winners are

February 23rd, 2010 at 12:27 pm by David Farrar
  1. Employment Relations (Workers’ Secret Ballot for Strikes) Amendment Bill – Tau Henare
  2. Smart Meters (Consumer Choice) Bill – David Clendon
  3. Minimum Wage (Mitigation of Youth Unemployment) Amendment Bill – Sir Roger Douglas

Tau’s bill requires all votes on strike action to be secret ballots. In theory almost all unions do this anyway, but there has been some dispute on the West Coast recently about whether this does always happen, so it will be good to have it a legal, not a voluntary, requirement to prevent intimidation.

David Clendon’s bill is inherited from Jeanette and regulates the use of smart meters. Not sure of all the details, but it looks to be worth supporting at first reading anyway so a select committee can look into pros and cons.

Sir Roger’s bill will allow the Government to set a different level of minimum wage for younger workers. I welcome it as there is pretty clear evidence that the huge increase in youth unemployment is bext explained by the scrapping of the youth rate for the minimum wage. National will be nervous about being seen to be “cutting wages” but I hope they will support it to select committee, so arguments can be heard about the linkage.

Rather than cut the minimum wage for any current workers, what I would do if I was the Government is just use it to increase the youth minimum wage more slowly than the adult minimum wage.

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Youth Rates and Youth Unemployment

February 9th, 2010 at 10:00 am by David Farrar

I’ve previously blogged on my belief that the massive rise in youth unemployment is due to Labour’s decision in 2008 to abolish youth rates for the minimum wage.

Eric Crampton has gone better than mere belief, and analysed the relationship between overall unemployment and youth unemployment.

The graph has (thanks Stephen Hickson!) the unemployment rate for those aged 15-19 and the unemployment rate for everyone else (aged 19 and up). It looks to me like the proper relationship is a combination of a level shift and a multiplicative effect. When the adult rate is very low – below four percent or so – the youth rate bounces around at a point about 10 to 12 points higher than the adult rate. When the adult rate is high, the youth rate exceeds that constant by a multiple of the adult rate. …

Both the constant and the adult rate come up highly significant. So, over the period 1986 to present, we can expect the youth rate to be 1.44 times the adult rate (the multiplicative effect – about 44% above the adult rate) plus a constant of 9 percentage points. So if the adult rate is 5, the youth rate should be 16.2. We’ve ruled out the “it’s just ratios” argument – there is a constant term in there; we’ve also ruled out that it’s just a level shift because the coefficient is significantly greater than 1.

So Eric has calculated the best fit of the data is that the youth unemployment rate will 9% higher than 1.44 times the adult unemployment rate.

He then plots the “residuals”, which is how much greater or smaller the youth unemployment rate has been, compared to what the formula predicts.

So that formula looks pretty good up until, umm well 2008. Eric continues:

If we look at the top graph, we see youth unemployment rates went up a lot during the recession of the early 1990s. But over that period, youth unemployment rates were never more than a couple of points above what the very simple model predicted (residuals graph, above). In recessions, it does look like the youth rate gets hit harder than the adult rate. But look at what happens starting around fourth quarter 2008. We now have residuals that blow up the model. Something really weird starts happening to the youth unemployment rate at the end of 2008. Youth unemployment is now about 10 points higher than we’d expect using the simple model.

And if one goes for different formulas:

I tried a few different variations allowing the constant and the slope to shift for high and for low levels of adult unemployment.  But none of that made any substantial difference.

So the conclusion:

The econometrics here are very simplistic and do nothing to account for differences in labour force participation rates or the obvious problem of serial correlation in the time series data.  But the simple model is still pretty telling.  If we allow youth unemployment rates to vary both as a level shift above the adult rate and as a multiple of the adult rate, which is what we’re doing when we run the simple regression with a constant term, we still have a jump in the current youth unemployment rate that is well above that seen in prior recessions.

My first cut explanation remains the abolition of the youth minimum wage.

Now this does not prove beyond doubt it was the abolition of youth rates that pushed youth unemployment up an extra 10%. But it is the most likely explanation.

The challenge for those who think abolishing youth rates did not contribute to the increase in youth unemployment, is to put up their own data and credible explanations to explain the massive gap between youth and adult unemployment.

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A 10 year high in unemployment

February 5th, 2010 at 9:17 am by David Farrar

The recession may technically be over, but it sure as hell has a nasty sting in the tail with the December quarter unemployment rate hitting 7.3%.

The worse case scenario is that we are barely out of recession at 0.2% quarterly growth, and unemployment may rise more in further quarters. That will add to the pressure on the Government to “create jobs”, even though in reality it is the private sector that creates job. The role of the Government is to have the economic environment optimised for job growth.

One can advocate the Government “creates” jobs by increasing spending. However when we are already borrowing $240 million a week just to keep current spending going, I don’t think greater borrowing is the answer. The answer is higher levels of economic growth.

Let’s look at the numbers for the quarter:

  • Total employed dropped by 2,000
  • Total unemployed increased by 18,000
  • Hence labour force increased by 16,000
  • Those not in labour force also increased by 4,000, so total working age population up 20,000
  • Unemployment rate up 0.8%
  • Under 20 unemployment rate up from 25.1% to 26.5%
  • Maori unemployment rate up from 14.2% to 15.4%
  • Job growth in primary production, mining, construction, wholesale trade, retail trade and IT/comms.
  • Job losses in manufacturing, utilities, and transport
  • Total jobless increases from 254,000 to 276,000 – this includes 86,000 not seeking work and 31,000 not available for work.
  • Underemployment (those seeking more hours) drops slightly from 122,000 to 115,000.

Now I want to look specifically at youth unemployment:

This graph shows unemployment rates for the two youngest age groups. Those aged 15 to 19 and those aged 20 to 24. Traditionally the 15 to 19 year old group does have higher unemployment, reflecting their lacks of skills and experience. But the brown line shows that the gap between the two age groups averaged 6% from 1985 to when youth rates were abolished in 2008.

But currently, the gap is a whopping 14%. And I do not think it is a coincidence. Young New Zealanders have been priced off the workforce. The impact of this recession on 20 to 24 year olds is much less severe than in 1991, but the impact on under 20s is more severe.

It is also common sense. A 15 year old or even 17 year old is often not worth $12.75 an hour (let alone $15 an hour). At that age what they most value is being to have a job at all, so they gain skills and experience. This is what will help lead them (along with education) into higher paying jobs.

Abolishing the youth rates for the minimum wage is not responsible for the overall level of unemployment – that is the lack of economic growth due to the recession from Jan 2008 to Mar 2009, and the weak growth since.

But I think there is a strong case for the abolition of youth rates is responsible for why under 20s have been hit so much harder by the recession than any other age group.

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Goff complains about unemployment

January 16th, 2010 at 4:16 pm by David Farrar

NZPA reports:

Closing the gap with Australia and stemming the trans-Tasman brain drain is one of the Government’s main long-term aims but Labour leader Phil Goff said the reverse was happening.

“Australian employment figures have soared for the fourth straight month and the jobless rate has fallen to 5.5 percent, a full percentage below New Zealand’s unemployment,” he said.

“For the first time in more than a decade, Australian unemployment levels over the past six months are lower than New Zealand, with Treasury forecasts that New Zealand’s unemployment will continue to grow.”

Now it is true that unemployment is now higher in New Zealand than Australia, and this is not good. Unemployment is a lose-lose. Having able bodied people not working means we don’t achieve as high economic growth as we could, and it is bad fiscally as it means less tax paid, and higher welfare payments.

But unemployment tends to rise when economic growth falls away. Not straight away but normally with a lag of six to 12 months or so. So let us look at economic growth between NZ and Australia.

So why does Australia now have lower unemployment? Because New Zealand went into recession, and Australia did not. And no this was not a post credit crisis recession. New Zealand’s economy started shrinking in the first quarter of 2008, and kept shrinking until the second quarter of 2009.

Now people may be wondering who was responsible for the economy in the first quarter of 2008. Well a Phil Goff was an Associate Minister of Finance. So when Phil wonders why Australia now has lower unemployment than NZ, he doesn’t have to go far to ask how come.

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Youth Unemployment

November 8th, 2009 at 2:34 pm by David Farrar

Labour MP Jacinda Ardern blogs her concern that the unemployment rate for under 20s has reached 25%. I share her concern.

I wonder if anyone else thinks that in hindsight maybe abolishing youth rates wasn’t the smartest move?

I know I only got some of my teenage employment because of youth rates. I started at $1.99 an hour.

The combination of ending youth rates and increasing the minimum wage to $12.50, has meant for some employers the cost of hiring teenagers has doubled.

Now when the economy was growing strongly, one could do these things without a big impact on youth employment. But this is the problem with so much of what Labour did – it was assumed businesses would always have money to burn.

The motivation behind increasing the minimum wage and abolishing youth rates was good. But as with most economic moves, there are almost always downsides to any initiative, and we are now seeing part of that.

The more expensive you force up the cost of labour, the less people in employment. Now that is not saying there should be no minimum wage, but a recognition that the more you increase it, the bigger the impact on jobs.

youthemploy

This is a graph of employment of both teenagers and 20 to 24 year olds. It is not seasonally adjusted so every December you see an increase due to holidays.

There has been a dramatic decrease in the number of jobs for under 20s, but relatively little for 20 to 24 year olds. From Sep 07 to Sep 09 the number of teenagers in employment fell 32,800 while for those aged 20 – 24, the fall was just 4,100.

Hence I think the abolishment of youth wages is a major factor. Otherwise you would expect the two age groups to be somewhat more aligned.

Incidentally the teenage unemployment rate has always been traditionally high. Only once in the HLFS history, has it been under 10% – in September 1987.

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