On the first of this month, a new minimum wage law came into effect. Sixteen and 17-year-olds can now work for as low as 80 per cent of the adult minimum wage. It’s in many ways a reversal of Labour’s 2008 abolition of youth rates.
Unsurprisingly, it’s a controversial policy, with unions staging protests around the country, using the slogan ‘equal work, equal pay’ to accuse the Government of discrimination against young people. Yet such assertions can only be believed if we are to accept over-simplifications of what is in reality a fairly complex economic issue. So let’s take a look at the true nature of minimum wage laws in New Zealand.
While opponents of youth rates protest the notion of paying 16-year-olds $11 per hour, they ignore what should be a much more shocking idea – currently people under the age of 16 are entitled no minimum wage at all.
When I was 10 or 11 I got a job delivering pamphlets around my neighbourhood. Anyone who’s ever done this will know that the pay is pretty poor by adult standards – in my experience it worked out as less than $5 an hour. But looking back on things, that was okay for the time. I wasn’t paying for rent, food, or anything, really.
The pamphlet run simply gave me a small lump of pocket money each week combined with a sense of pride and independence, as well as my first real work experience. Was I a victim of cruel, profit-driven discrimination? Surely not. My limited skills meant that the labour I provided was simply not worth the same as an adult’s, which relegated me to a low-paying job.
If some politician managed to pass a universal minimum wage forcing employers to pay me the same as an adult, it would have harmed, not helped me. In all likelihood the company organising the pamphlet runs would have ceased to be profitable, it would have cut my job and likely shut down entirely.
At the age of 13 I got my first wage-paid position, earning $8 an hour at a fish and chip shop. I remember being bloody excited. Sure enough, I ended up hating the job, but I kept the position for more than two years, and it meant that compared to my mates, I was practically rolling in cash.
Again, the wage wouldn’t have been enough to support a family, but it suited my needs at the time, and more importantly gave me valuable customer service skills and positive references which eventually managed to land me higher-paying jobs as a student. I was too young to be affected by minimum wage laws, which was a good thing. If my employers, struggling to make a profit as it was, were forced to pay me $13 an hour they would likely have cut my job, or at the very least truncated my hours.
Unionists wilfully ignore the current laws surrounding child labour because they know that offering an equal minimum wage to people younger than 16 would be rightly seen as economic insanity, and would reveal the inconsistency of the anti-youth rate argument.
The truth is, it’s a bad idea for the Government to set a high minimum wage for 16 to 17-year-olds largely for the same reasons that apply to younger people. In general terms, the less experience someone has, the less valuable they will be to an employer. If the minimum wage exceeds the value that someone can offer to an employer, then that person will not be employed. Full stop. Expecting young people to work for the same price as more experienced people is a denial of basic economics.
Most young people receive parental and/or governmental assistance so it is not a ‘living wage’ that they need so much as experience to add to their CV and increase their opportunities in the future. Enforcing higher wages will only serve to deny such opportunities to inexperienced workers, leading to long-term unemployment.
Australian politicians seem to have a greater understanding of these ideas than their New Zealand counterparts. While Australians are famed for their high wages and low unemployment rate, proponents of equal wage laws choose to forget that their youth wage is actually significantly lower than New Zealand’s – in Australia, 16-year-olds earn a minimum of $7.55 per hour, and 17-year-olds $9.22, with the rate continuing to scale up all the way to $15.59 for 20-year-olds.
In acknowledging the natural difference in value between inexperienced and experienced workers, Australia has historically achieved a markedly low rate of youth unemployment – currently about 20 per cent compared to New Zealand’s 30 per cent.
The link between youth rates and youth employment has been made clear by studies such as Canterbury University economist Eric Crampton’s analyses of employment rates, which indicate a major spike in youth unemployment directly following Labour’s abolition of separate youth rates in 2008, a policy which directly resulted in the loss of an estimated 12,350 youth jobs.
Meanwhile young people across the country, desperate for employment, are forced to seek ‘cash-in-hand’ jobs, in which they are forced to work illegally simply because they are willing to accept $10 or $11 per hour.
I say that it is time us young people got more bargaining power, more opportunities, and more rights to work for whatever price we agree to. Let’s take the chance to compete with the rest of the workforce and learn the skills that will secure us high-paying careers in the future.