Thursday, September 06, 2007

Youth rates will still exist April 1 next year

Sue Bradford's youth rates bill went through today. It's not the bill she put up, employers will still be able to pay 16-17 year olds less than the minimum wage for their first 200 hours, or three months (whichever is less.

I think that a training period is complete bullshit and would be prepared to go ten rounds with anyone on why. But I actually think the trial period is minor compared with the issues the bill didn't even try to address:

  1. There is still no minimum wage for workers under the age of 16. A fifteen year-old could be paid $5 an hour - or less. Some are.
  2. It is completely legal for an employer to discriminate in wages on grounds of age up until age 20. You can have a 19 year old and a 21 year old doing exactly the same job, and pay the 19 year old $2 an hour less just because of their age

11 comments:

  1. sweetd10:08 pm

    Capitalism Bad; Tree Pretty, I dont know how much you know about economics, but there is a great deal of evidence that minimum wages actually effect the people that they are trying to help; the low waged and unemployed.

    If, and I am assuming, in your ideal world all workers are paid the same, why, should I as an employer, employ a sixteen year old with limited life and socialisation skills when I could employ a twentyfive year old with a more stable life style?

    The impact of a minimum wage would actually increase unemployment in under 20's as there would be no desire to employ them when there are more desirable workers available, if we treat all workers as equal.

    I recommend reading "understanding the economic environment" by callander for further information.

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  2. SweetD - I recommend you read some actual research in the effect of youth minimum wage reform. Like this report from treasury (not known as a friend of the workers).

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  3. sweetd11:40 pm

    Maia

    maybe something that is not not 3 years out of date may help. BTW, genarally the govt. departments follow the advice of the minister of the time.

    Appologies for the length.

    The harmful effects of lifting minimum wage ' '
    750 words
    24 March 2006
    National Business Review
    English
    (c) 2006 The National Business Review
    March 24, 2006
    Venkat Raman
    Raising the minimum wage of workers may be politically rewarding but its economic effects would be
    adverse, an economist has warned.
    And contrary to popular opinion, every rise in the minimum wage contributes to unemployment,
    affecting other sectors of the economy.
    AUT senior economics lecturer Gail Pacheco said the current New Zealand minimum wage of $9.50 an
    hour is higher than the US federal minimum.
    Her thesis took into account the US rate of $US4.25 ($6.70) for adults prevalent in 1995, which was
    lower than the New Zealand minimum wage of $7.80 an hour payable to those in the 16-19 age group.
    Dallas-based National Centre for Policy Analysis, a US think-tank, said the US Congress increased the
    US minimum wage to $US4.75 ($7.48) in October 1996 and to $US5.15 ($8.12) in the following year.
    In October last year the UK government lifted the national minimum wage from £4.85 ($13.45) per hour
    to £5.05 ($13.98) and the youth rate for 18-21-year-olds from £4.10 ($11.35) to £4.25 ($11.77).
    But the rate for 16-17-year-old workers, introduced in 2004, remained at £3 ($8.30).
    UK trade and industry secretary Alan Johnson said since the national minimum wage came into force
    in 1999, over a million low-paid workers had benefited each year.
    "This means we have protected some of our most vulnerable members of society from exploitative
    employers," he said.
    Ms Pacheco will submit her thesis, "Minimum wages in New Zealand: An Empirical Inquiry," to the
    University of Auckland in June. She hopes it will raise interest in whether politicians and union leaders
    are doing low income earners more harm than good.
    She questioned the Labour government's commitment to strengthen the minimum code of employment
    rights by continually making annual adjustments to the minimum wage and raising it to $12 an hour
    over the next four years.
    "Such an increase, accounting for about 36%, surely warrants more public discussion on its perceived
    merits and demerits," she said in a chapter called "Why a higher minimum wage does not add up."
    Using economic indicators and comparative data, Ms Pacheco argues in her thesis that minimum wage
    increases are inversely proportional to employment potential and directly affect the unemployment rate.
    "Politicians fail to understand that raising the minimum wage displaces young people (especially those
    between 16 and 19 years) and unskilled workers from the employment market. It also influences the
    downward trend in the education sector."
    Ms Pacheco said the impact of such a trend among Maori and Pacific Islanders would be adverse
    Using economic indicators and comparative data, Ms Pacheco argues in her thesis that minimum wage
    increases are inversely proportional to employment potential and directly affect the unemployment rate.
    "Politicians fail to understand that raising the minimum wage displaces young people (especially those
    between 16 and 19 years) and unskilled workers from the employment market. It also influences the
    downward trend in the education sector."
    Ms Pacheco said the impact of such a trend among Maori and Pacific Islanders would be adverse,
    leading to a number of socio-economic problems.
    There was ample potential to "create a higher level of inactivity" among some segments of the society,
    which politicians and others seemed to ignore.
    She asks: "What exactly have the major political parties and interest groups such as Labour, New
    Zealand First and the Council of Trade Unions (CTU) assumed in their discussion of proposed increases
    in the minimum wage?
    "Are these claims supported by empirical evidence? Have they actually analysed the key issues and
    how the labour markets will respond to these increases?"
    2007 Factiva, Inc. All rights reserved.
    Ms Pacheco also questioned the CTU belief that "a low minimum wage entrenches a low-wage,
    low-skill, low-technology approach to employment, and this is not the direction New Zealand needs to be
    heading."
    She said CTU officials assumed that raising minimum wage was a step toward addressing skills
    shortage.
    "This of course ignores the human capital effect that a higher minimum wage increased the indirect
    costs of upskilling, reducing the incentive," she said.
    Ms Pacheco also used the Household Labour Force Survey and Income Survey data to counter a Green
    Party campaign claiming a higher minimum wage would help poor families.
    "Assuming the best possible outcome for increasing the minimum wage and also assuming no indirect
    effects of the higher minimum wage for those earning above the minimum wage and for non-workers
    as well, there was still just 0.46% decline in poverty rate."
    Her thesis is aimed at identifying groups most vulnerable to minimum wage increases, evaluation from
    an anti-poverty perspective, assessing effects on wage distribution and investigating employment effects
    on teenagers.
    Politicians fail to understand that raising the minimum wage displaces young people (especially those
    between 16 and 19 years) and unskilled workers from the employment market
    Document NATBR00020060323e23o00026

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  4. Well if it's in the NBR...

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  5. sweetd12:50 am

    Maia

    Based on your last posting are you printing a retraction?

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  6. That was my sarcastic voice.

    The treasury report was based on what actually did happen when the youth minimum wage was raised. Rather than some economists hypothesising

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  7. I wouldn't argue that raising minimum wage could make some jobs disappear. However, that does not mean we are being fair to poor people by leaving minimum wage very low. There is enough wealth in developed countries to bring everyone out of poverty, and we should distribute that wealth evenly. The solution involves more than just minimum wage requirements; it involves everyone caring about the poor in their countries.

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  8. Anonymous6:31 pm

    I possibly should know this, but is there a minimum age at which you're allowed to be paid? Or to work? And what counts as work?

    I'm just thinking back to my childhood, and getting "paid" to mow the lawn (2-3 hours a week in spring) and work on the farm (does that end?). Likewise, friends of mine have a teenage daughter who gets paid a really token amount for working on their market stall (by token I mean $2/hr or less).

    When i was a kid it seemed mildly unfair to me that I was doing work that a dolt would otherwise do and getting less than the dolt would (especially coz some was contract/piecework). But then once I turned 12 I got the adult rate so that was ok. But I still have a vague feeling that it was probably illegal, and wonder where the line is. I mean, I know that me driving on the farm was illegal until I was 12, but what about just paid work full stop?

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  9. At the moment what you describe is completely legal. There is no minimum wage for under 16 year olds, and no limits on how long you can be in paid work.

    However, most of what you describe is within the informal economy anyway (no taxes paid etc.) so it probably wouldn't change if the minimum wage laws did include under 16 year olds

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  10. Interesting article you link to - however I'd want more analysis around the fact that the unemployment levels of the control group decrease far more dramatically than the two analysis groups. Especially as that alone would tend to support the typical economist view that the 16-17 / 18-19 y.o. groups were employment of last resort and only exhibited positive outcomes because of an increasingly tight labour market.

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  11. anonymous - I'm sure if you were willing to pay your parents commercial rates for the care giving, food and board you have received they'll back pay your minimum wage for mowing the lawn

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