FRIDAY GRAPH: DAVID FARRAR ON MINIMUM WAGE

 

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.

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7 thoughts on “FRIDAY GRAPH: DAVID FARRAR ON MINIMUM WAGE

  1. Pingback: Guest Post on Roger’s blog | Kiwiblog

  2. And that graph only tells part of the story. It doesn’t tell us about the young people who for want of a better option have remained at school or gone into other education institutes, borrowed from the student loan pool and have been basically locked out of learning anything other than educational learning. Some of these kids are 19 and still at high School. Four years of on the job training denied and four years mostly wasted filling in their days with mindless stuff at the expense of both the taxpayer and the young person.
    One could surmise that this is basically designed for and by the Education Insutry to fund their empires and retain their jobs.
    We shudder to add up what it has cost NZ taxpayers to fund this education industry.
    And we are wondering why we are so far down the Productivity scale.

    So all in all an appalling tale and in MHO and attack on the rights of the young people of NZ by a bunch of elderly bureaucratic politicians and educationalists hell bent on saving their jobs for their own old age. Short sighted and foolish.

    Worse though is the entrenched attitude displayed by the National Party to changing this despite all the evidence. They remain mired in the Labour/Green dogma rather than upholding their own founding document.
    They remain more committed to appeasing political interests and in control than representing the people who don’t vote or helped vote them into power.
    That they could “whip” all their MP”s as a block to vote down (with the Greens, Maori’s Labour and UNied), ACT’s bill to revert to youth rates also tells us that Cabinet needs its power curbing by removing “whipping” and allowing MP’s to vote according to their electorate wishes.
    Extremely clear that this National Govt. lack any principles when it comes to peoples rights.

    National Party Founding Statement.
    (which now no longer shows on their website.)

    NZ National Party Founding Principles 1936
    “To promote good citizenship and self-reliance; to combat communism and socialism; to maintain freedom of contract; to encourage private enterprise; to safeguard individual rights and the privilege of ownership; to oppose interference by the State in business, and State control of industry”.

  3. 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.

    Nope –
    * cancel all minimum wages
    * cancel all benefits
    * cancel “Employment Relations Act”
    * cancel employment related sections of the Crimes Act.

    Only the ACT party, funnily enough – has these four planks of its policies for this election.

    It is certain that these four policies would eliminate all unemployment from NZ – overnight.

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