Bad employers get May day bonus

It is ironic that the legislation re-introducing youth rates into New Zealand comes into play on a day normally associated internationally with workers celebrating their struggle for  better conditions.

From today mean spirited employers have an opportunity to push down rates for young workers.

One such employer actively cheerleading the re-introduction of youth rates is Pak and Save.

Pak n Save and its owners Foodstuffs have made themselves a target of those fighting the re-introduction of poor pay rates based on age due to Pak and Save’s active support for this policy.

Many other big firms have thankfully ruled out paying people doing the same job different rates of pay based on age.

The problem with youth rates is that it will see unscrupulous employers game the system. As well as being a really bad deal for young people it will also likely see older workers displaced as some employers look to maximise the opportunity this Government has given them to pay below the adult minimum wage.

This policy will not create jobs or job opportunities.  This is not a policy for a brighter future it is a policy of slashing wages and grinding workers down.


About Denise Roche 161 Articles

Green Party MP

24 Comments Posted

  1. My first IT job 12 years ago paid $11.30 per hour, not really long ago. I say people get paid darn well for flipping burgers.

    Typical Green\Labour way of thinking, always encouraging people to look for a handout.

  2. hemihua – in terms of passing cost onto consumers I think this effect is somewhat overstated, given that low wage earners are consumers as well.

    The more money in their pockets, the more they consume. Also, low wage earners spend proportionally more of their earnings on goods and services than high wage earners – there is only so much you can spend on groceries before the surplus becomes wealth.

  3. photonz1 – I was thinking more in terms of broad inflation as opposed to specific, but I get your drift of your analysis.

    With wages increases (generally) being less elastic but proportionally higher impacting at the lower end of the wage market (i.e. less likely to rise from $15 to $16.50 but 10% being a significant jump in return), it makes determining the overall inflationary effect difficult.

    It’s further complicated in that a rise in the minimum does not mean a commensurate rise in the near minimum, and certainly not of the same relative magnitude (i.e 10% at the bottom does not cascade up as 10% across the board).

  4. I wouldn’t expect the inflationary impact to be 1 to 1 or instantaneous – it depends on the proportion of labour costs to a business to other costs such as capital. If labour costs rise 5% and 50% of business expenses are labour you’d expect them to mark up their goods around 2.5%.

    But consider when it comes time to replace capital (or buy new capital to start a new business), as we drive the cost of labour up it will become more attractive to import capital from countries where it can be produced cheaper OR those costs will be passed in full to consumers.

  5. Gregor asks “The question is by what degree of minimum wage increase is a noticeable inflationary effect caused?”

    That can be estimated relatively reliably.

    Restaurant Brands has revenues of $312m for an after tax profit of $17m (5.5%). They employ 4500 people.

    If all wages went up say $1.25/hr (i.e. min wage lifted to $15), and staff worked on average 30 hrs week (that’s only a guess, I know), then $1.25 x 30hrs x 52 weeks x 4500 people = $8.775 million, or equal to half their profit.

    They serve around 20 million customers per year, so (divide that by the extra $8.775 needed for wages) the increase would have to be around 40-50 cents more per customer (i.e. perhaps a couple of bucks more on a family order.

    That’s assuming sales don’t go down because of higher prices (in which case the increases would have to be more).

  6. I don’t think anyone argues there are no consequences.
    That would be silly and impossible to prove.
    The question is by what degree of minimum wage increase is a noticeable inflationary effect caused?

  7. Empirical evidence is is chronically misused and misunderstood when it comes to economics.

    Another possible reason employment didn’t fall (and the more probable one imho) under previous minimum wage rises is because we were in the midst of a housing fuelled credit boom. When the bill arrived and the GFC hit THEN we saw the unemployment. I fail to see the logic that increasing the price of something, whether it be goods or labour, results in increased consumption (except perhaps certain luxury goods).

    If businesses DIDN’T pass on labour cost increases to consumers perhaps then we’d see increased consumption and economic benefits – up until the point it becomes unprofitable for the business to operate without passing on the costs. BUT a possible outcome of increased labour costs is an accelerated a shift to larger businesses/corporations where economies of scale can be achieved to absorb these extra costs of labour.

    Another consequence of minimum wages is the destruction of certain jobs when it becomes uneconomic for them to be done here as the goods that would have been produced here can be imported cheaper from countries with lower / no minimum wages.

    And yet another possible consequence is that when businesses pass on the costs it results in inflation. And those on the minimum wage find themselves back at square one. The minimum wage in 1997 (it’s introduction?) was $7.00. Now it is $13.75. If I use the Reserve Bank inflation calculator, apparently $7.00 in 1997 Q1 is now worth $10.01 in Q1 of 2013. Yet the minimum wage has risen to $13.75 and still some think it is too low.

    The conclusion of my long rant is don’t expect minimum wages (or any government intervention for that matter) to be free of consequence. If anyone here seriously thinks there are no consequences to increasing the minimum wage i’d love to hear your theories.

  8. After saying “Obviously the GFC had an effect on everyone”,

    – and showing a comparison how it has effected overall unemployment.

    – complete with a graph of how that should have impacted youth unemployment

    BJ then makes the bizarre claim that I “completely ignore” the global financial crisis.

  9. Photo. You believe an “economist” and a neo-liberal apologist at that, is a reliable source. You are in even more trouble than I thought!

    Note that that even treasury stats do not agree with you.

  10. My info came from Dr Eric Crampton who is a Senior Lecturer in Economics at the University of Canterbury.

    Photonz1 – worth noting that Crampton is a renowned free market libertarian idealogue. Just saying.

  11. Photonz it is astonishing to me how you can in one thread use the effects of the Global Financial Crisis to excuse every failed policy National has inflicted on this country and in the next completely you completely ignore it.

    You really accept only the planet Key versions of things. Enjoy the rose coloured filter while you have it.

  12. toad takes Green debate to new heights of intelligence and maturity… “Best you get your nose out of John Key’s bumcrack,”

    – Employment of 16 and 17 year olds fell from 61,400 to 39,500 between 2007 and 2010
    – Overall, this implies that the introduction of the NE minimum led to a loss of 4,500-9,000 jobs for 16 and 17 year olds
    – our analysis finds consistent evidence of adverse employment effects of the 2008 policy change for 16-17 year-olds.

    There’s the “actual evidence and analysis” you asked for (all direct quotes from YOUR link)

  13. Kerry says “Source. Unite. A far more credible one than Photo channeling Hooten.”

    Kerry – you actually tell people you use Unions as your info source, AND you expect to be taken seriously?

    My info came from Dr Eric Crampton who is a Senior Lecturer in Economics at the University of Canterbury.

  14. “Killing the youth rate fucked youth unemployment” is a lie.

    During the Labour Government’s term the adult minimum wage went from $7 an hour to $12 – an increase of 71%. The youth minimum wage went from $4.20 an hour for everyone from 16-19 years old in 1998 to $9.50 in March 2005 for 18 & 19 year olds and $7.60 for 16 and 17 year olds – an increase of 126% and 81% respectively. The youth rate for 16 and 17 year olds was largely abolished in 2008.
    Youth unemployment during that time kept falling to 11.8% by December 2005 – a level not seen since 1987. When Labour lost the election the youth unemployment rate of 17.9% was still below the level when they were elected 9 years before.
    A Treasury working paper in 2004 found that a 69 per cent increase in the minimum wage for 18 and 19-year-olds in 2001 and a 41 per cent increase in the minimum wage for 16 and 17-year-olds over a two year period had no adverse effects on youth employment or hours worked. In fact, hours of work increased for 16 and 17-year-olds relative to other age groups.””

    Source. Unite. A far more credible one than Photo channeling Hooten.

  15. Even treasury. That bunch of commos says that lower wages do not noticeably increase employment.

    It would of course be against their principles to admit the obvious. Higher wages increase employment and grow the economy.

    Employees are also customers.

  16. @photonz1 4:04 PM

    Co-relation is different from causation. When 19 and 20 year olds were finally paid the adult minimum wage (thanks to Alliance Minister Laila Harre, who is now a Green) youth employment rates actually improved.

    And the most recent study I am aware of shows:

    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.

    Best you get your nose out of John Key’s bumcrack, photonz1, and look at the actual evidence and analysis.

  17. The NBR article is misleading.

    As it says in teh Dominion from 2011

    “Some clues emerge by looking beyond unemployment rates to actual employment numbers. The
    number of unemployed 15‐19 year olds has risen slower between March 2008 and March 2011 than
    other age groups: by 56 percent compared to 80 percent. The unemployment rate has risen more
    quickly because it equals the number of unemployed as a proportion of a shrinking 15‐19 year old
    labour force. Over this period the 15‐19 year old labour force fell by 19,800. Many of these young
    people have gone back to school or into tertiary education. Secondary school rolls rose (contrary to
    Ministry of Education forecasts) as did 18‐19 year old participation rates in tertiary education. ”

  18. Just another example of this neo-liberal Govts. agenda; look after their mates (employers) & boot the back-sides of the rest of us !

    Surely they can see that cutting wages, is hardly going to encourage the youth to want to work.. for even less money. OH DEAR !!


  19. toad says “Nothing to do with the Global Financial Crisis, right? Only on Planet Key.”

    You decide – here’s the graph of what happened to unemployment rates because of the GFC, what happened to youth rates, and a black line when youth rates were abolished.

    Obviously the GFC had an effect on everyone, but even allowing for that (the green line) does not explain why youth unemployment went up five times faster than general unemployment.

  20. photonz1 – I think that says a lot more about the low-value, low-cost nature of our economy that adults are competing with kids for the same jobs.

  21. When Greens helped abolish the youth wage, youth unemployment DOUBLED within weeks and has been in the 25-30% range ever since.

    A foot in the door on a (temporarily) low wage is a better start in life than being on a benefit with little chance of a job.

    The Greens need to get some employer experience on board, then they’d realise that a pimply faced youth with no experience and no work record doesn’t stand a chance at getting a job when competing against hard working people with experience, references, and a good work record.

    Lets see if youth unemployment comes down in the next few quarters.

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