There is a renewed push from the political right to reintroduce youth rates for the minimum wage. ACT’s Roger Douglas is trying to blame the Green Party sponsored legislation that removed the ability of Government to set a lower rate of minimum wage for young people for today’s high youth unemployment. ACT’s new Leader, Don Brash, cites National’s failure to reintroduce age discrimination in setting the minimum wage as the second of the reasons he resigned his National Party membership.
While National hasn’t yet signed up again to the Brash/Douglas prescription for discrimination against young workers, its No. 1 Cheerleader in the blogosphere, David Farrar, is also trying to push the line that that the abolition of youth rates is the cause of today’s high youth unemployment.
But it is all wrong from those on the right.
I looked up the statistics going back to 1993, the year before a youth minimum wage was first introduced. Before that, employers could pay workers under 20 whatever they chose, even as little as $1 an hour.
Here’s what I found (youth unemployment figures for the March quarter and youth minimum wage for the annual March – April adjustment) – left-click on graph for better resolution:
If the Douglas/Brash/Farrar line on the youth minimum wage had any credibility, I would have expected the transition in 1994 from no minimum wage for people under 20 to a minimum wage of $3.68 an hour to have caused a spike in youth unemployment. In fact, the opposite happened – the unemployment rate among those aged under 20 plummeted from 24% to 17.6% from March 1994 to March 1995.
Similarly, the substantial increase (69% for those aged 18 or 19) in the minimum wage for those aged under 20 in 2001 should have caused another spike in youth unemployment according to Douglas/Brash/Farrar. But it didn’t – youth unemployment rates continued to fall and hit a low for the period I researched in March 2004 of 13.5%.
With the same minimum wage applying to all workers over 16, the current unemployment percentage among people under 20 is in the mid 20’s. That is similar to what it was in 1993, and in several years before that, when no minimum wage at all applied to workers under 20.
Douglas, Brash and Farrar are misleading us. The evidence does not support their assertion that the removal of age discrimination in setting the minimum wage has had any impact on youth unemployment rates. They are not concerned about the inability of young people to get work at all.
They are just trying to spin it that way to reduce the wage bills of their political supporters and financiers.
The real cause of today’s youth unemployment is a National Government that ignored the Greens’ proposals and did nothing to stimulate the economy and promote employment in the face of the global financial crisis, just as it was in the early 1990s when there was no minimum wage for workers under 20.