Eric Crampton of the economics department of the University of Canterbury is a fine economist. Some months ago he estimated conservatively that the abolition of the youth minimum wage has cost the country over 9000 jobs.
Eric noted that youth unemployment during the current recession, relative to adult unemployment in prior recessions, seemed very high.
More evidence on this point is shown in the graph below (taken from The Economist).
It indicates that New Zealand’s current youth unemployment rates are an outlier relative to other OECD countries.
Click to enlarge
The further north a country is, measured on the perpendicular from the ‘four times as high’ line, the worse youth unemployment is relative to adult unemployment. Only Sweden and Luxembourg have worse youth unemployment outcomes than New Zealand relative to adult rates.
That is former Green MP Sue Bradford’s legacy to New Zealand. We are talking here about the most marginal low-skilled young people. Firms will pay young workers the minimum wage or higher wages if their productivity warrants it. Indeed they will be forced to do so because of competition for labour by other firms. But they won’t if young workers’ productivity doesn’t warrant it – they will make losses if they hire such workers.
Sue Bradford may have been well intentioned but it is outcomes that matter. This outcome is tragic. How does she sleep at night?
The government’s Welfare Working Group will have failed if it turns a blind eye to this appalling situation.