High Minimum Wage Hurting NZ Youth
Hon Sir Roger Douglas, ACT New Zealand
Speech to Parliament on the Minimum Wage (Mitigation of Youth Unemployment) Amendment Bill
Wednesday, April 21 2010.

I move that the Minimum Wage (Mitigation Of Youth Unemployment) Amendment Bill be now read a first time.

This Bill is about two very simple things. The first thing it is about is jobs. The second is helping young people find their footing in the labour market.

Since the Labour-led Government abolished the youth minimum wage in 2008, youth unemployment has soared.

Since 2008, youth unemployment for 15-19 year olds has almost doubled. The number of unemployed youth has risen by more than 18,800 people. The recession has obviously had an impact – but the youth rate of unemployment is far higher than is usual during a recession. University of Canterbury economist Eric Crampton has demonstrated that there was a large rise in the youth unemployment rate relative to the adult rate when the youth minimum wage was raised to the adult level.

Youth unemployment today stands at 26.5 percent. The rate for Maori is worse still – 38.7 percent. Almost two out of five young Maori are unemployed or, to put it another way, there are only one and a half Maori youth in work for every one out of work. Yet, the Maori Party intends to vote for this situation to continue – they intend, as I understand, to vote against this Bill.

Why do we keep pretending that the abolition of youth minimum wage helped people, when it has stopped people from finding work?

It is Labour, and now National, who will tell you they care for youth. But do not be fooled. It is they who are responsible for the large number of youth that cannot find work – Labour, and now National, have forced thousands of young people to go without gainful employment.

Why does the youth minimum wage have this unintended consequence?

Businesses are not charities. They respond to prices, just like the rest of us. The abolition of youth minimum wage has priced youth out of the market. This has occurred because many young people are just starting out on their career path. They will be searching for their first job. Their lack of training and experience means that they have few skills. What we have forced them to do now is compete with adults. They are forced to compete with those people who have had a lot more time to gain experience and skills.

I find it odd that the National Government will not support this Bill when they have conceded that the abolition of the youth minimum wage has lead to unemployment.

Then again, the National Party has always been bold in opposition, but spineless in Government.

As Wayne Mapp said when debating this issue in 2006, ‘the problem is if one artificially boosts minimum wages to levels that are, frankly, too high, one ends up reducing profitability, reducing opportunity, and reducing the ability to put more money into improving skills.’

So, where’s Wayne Mapp now? He’s changed his mind apparently.
As National’s Kate Wilkinson said this year, the reason why they voted against the Bill to abolish youth rates was because they ‘were concerned that it would price young people off the job market, and that it might also be a perverse incentive for them to leave education..’

Or to quote her again:

‘What good does it do a young person to know that an employer must pay him or her the adult minimum wage, if the fact that he or she must be paid an amount is what is keeping him or her from getting a job in the first place?’

So, where does she stand on this issue now? Apparently, a few months and a stern word from John Key is all it takes before she adopts Labour’s policy.

When National’s in Government, they play the numbers game. Those thousands of young people out of work do not vote. They do not matter to the pollsters in the National Party. When in Government, the National Party are happy to help out the unions who want to erect higher and higher barriers for those that are out of work.

In Government, National clearly does not believe in principles or bold implementation. The only question John Key ever asks is ‘How do I stay in power?’

What is the alternative offered to unemployed youth? The law makes it illegal for that young person to be hired on anything less than $12.75, or $510 a week. In other words, unless they have a productive capacity of $510 a week, they will be unemployable.

This is what John Key, Phil Goff, and Pita Sharples – the people who say they care about youth – do to them. They say to the 16 year old who could earn $400 a week that he is not allowed to. That it is illegal for him to work at that rate.

John Key and the National Party care so much about their short-term image that they will stop young people with the capacity to earn $400 a week from doing so – that is, from having a job that pays them that amount. Instead, John Key and the National Party will force them to collect the benefit, at $160 a week. They care so much for the youth of this country that they make the unemployed worse off by $240 a week.

But even worse than that, the National Party, the Labour Party, the Green Party, and the Maori Party all say to the unemployed Maori 16 year old: no. No, you cannot accept that job paying $400 a week. You cannot get that first job. You cannot start developing skills. You cannot get work experience. We failed you with our education system and now we intend to continue with a labour market system which is guaranteed to fail you again.
Instead, accept this handout. Sleep in until eleven. Sit around playing PlayStation. And, if that $160 isn’t enough, then supplement your income in some other way – don’t get a legitimate job, as we won’t let you, but maybe go out and join a gang.

It is increasingly clear to those New Zealanders who are economically literate: if you want a Government that is genuinely different to the Labour Party, then don’t vote National. They may get things right when they’re in opposition, but they will always be weak in Government.

ENDS

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