Today’s Friday graph is a guest blog by Kiwiblog‘s David Farrar, live from the Business Roundtable’s Dunes Symposium.
This graph from economist Eric Crampton (http://offsettingbehaviour.blogspot.com/) tells a very sad story. The blue line shows the adult unemployment rate and the red line the youth unemployment rate. As you can see up until 2008, the two rates were significantly linked.
The green line is the best fit line predicting the youth unemployment rate based on the adult unemployment rate. It shows based on the last 20 years of data, that youth unemployment should be around 18% not 28%.
In 2008 Parliament abolished the lower youth rate for the minimum wage. This meant it was illegal to hire a 16 or 17 year old for less than $12 an hour. You do not need to be a rocket scientist or an economist to conclude that the massive increase in youth unemployment is at least partially due to this law change. The best thing the Government could do to lower the youth unemployment rate from 28% is to have the minimum wage only apply to those aged 18 or older.