You might have heard- Roger Douglas plans to introduce a private member’s bill to bring back the youth minimum wage. After a bit of debate on twitter, I thought it was time for a bit of a chat on the subject that wasn’t constrained by a 140 character limit.
First a bit of history. Prior to 2001 the youth minimum wage applied to 16-19 year-olds and was set at 60% of the adult minimum. I remember those days, and so will a lot of people my age. The first big change was to lower the eligible age for the adult minimum wage from 20 to 18 years and raise the youth minimum wage in two annual steps to 80% of the adult minimum wage.
You might have heard the speculation then- that a change as significant as this would lead to fewer young people being employed. Treasury debunked that myth when in 2004 it concluded:
“We find no robust evidence of adverse effects on youth employment or hours worked. In fact, we find stronger evidence of positive employment responses to the changes for both groups of teenagers.”
So what of the complete abolition of the youth minimum wage, which happened a few years later via Sue Bradford’s private member’s bill. The Otago Management Graduate Review concluded that “the effect of minimum wage rises has been exaggerated in the literature, and that any effect of minimum wages is very hard to distinguish from other variables that could affect teenage employment.”
And there’s the crunch. How do you robustly separate out the variables? Well here’s my view. First and foremost, this is about fairness. We could easily argue that more elderly people would be employed if we made it legal to pay them less than everyone else solely because of their age, but that wouldn’t make it right. And secondly, whether differentiated wage rates has any impact on employment levels is a highly debateable point.
Rather than a bill paying our young people less, we should take a look at the real problem- that 1 in 5 young people are leaving school before they hit 16, and they are entering a job market where only 10% of new jobs are unskilled. There’s our problem. Now lets get onto the solution bit.