The Department of Labour has a new report out (PDF) on the impact of the Green Party initiated abolition of youth rates for the minimum wage.
The key findings of economists Dean Hyslop and Steven Stillman, who were commissioned to prepare the report, are:
The study finds some evidence that the proportion of 16 and 17 year olds unemployed increased in 2009 by 1.4–2.6 percentage points because of the minimum wage increase, but the negative impact on unemployment was not evident a year later in 2010.
The NE minimum wage appears to have encouraged more 16 and 17 year olds to stay at school or continue their education (this effect is in addition to an increase in studying due to the economic downturn). This may explain why the impact on unemployment had disappeared by 2010 and why the minimum wage increase was associated with lowering inactivity among 16 and 17 year olds.
Despite the scaremongering from right wingers such as Don Brash and David Farrar, the research shows there was no causal relationship between the disturbing increase in youth unemployment and the abolition of youth rates for the minimum wage.
Even more encouraging is that the report finds the abolition of youth rates for the minimum wage was associated with less inactivity among 16 and 17 year olds. The small decrease in availability of low wage jobs for young people encouraged them to continue their studies instead. Surely, that is the best outcome we could have.
The massive increase in youth unemployment over the last two years has other causes, most notably the failure of John Key’s government to do anything to stimulate the economy to create jobs.
The Green Party will be releasing a job creation package on Wednesday – addressing an issue where National has dismally failed.