National announces cuts to minimum youth wage levels - a disastrous policy that will destroy jobs, not create them

National’s announcement today of cuts to the minimum wage for many young workers is yet another example of this Government’s determination to destroy jobs rather than create them.

Kate Wilkinson boldly states that the cut to 80% of the minimum wage for up to 40,000 young workers will "help get more New Zealanders into jobs in the wake of the Global Financial Crisis."

What a load of rubbish.

If employers do choose to take on young people at $10.80 an hour instead of the current minimum $13.50 per hour, the most likely outcome will be that people currently employed will be replaced by the cheaper workers on offer, leaving older folk on the scrapheap instead.

Bringing one worker in the door at lower wages while sending another out the back  to the unemployment queue does not create jobs.

Placing downward pressure on wages will also lower incomes, meaning less money in the economy, in turn resulting in further job losses.

As John Ryall of the Service and Food Workers Union says, the current minimum is already ‘too low for anyone to live on.’

To those readers who think meeting food, clothing, transport and accommodation costs at $10.80 an hour is not problematic, especially in a place like Auckland, I’d invite you to take a quick look around the supermarket or at the latest accommodation ads in our region.

This is not about new jobs. It is about pressing labour costs down as far as possible to maximise business profits.

Even worse is the fact that National is now extending the age of ‘youth’ up to 18 and 19 year-olds, not just  those aged 16 and 17.

I continue to fail to understand how any rational government can contend that a) it costs less to live if you’re aged 16 -19 (just think of the food bill alone); and b) that somehow young workers are worth less to an employer than older workers.

A few decades back New Zealand enacted laws which meant women were entitled to the same pay as men. I imagine no one would question that now.

Yet there is equally no justification whatsoever for the belief that somehow people aged 16 – 19 are worth less than older workers. In fact people in this age group are often fitter, stronger and  smarter than some of their elders.

National is even rolling back provisions of my successful 2007 member’s bill on youth wages so that even where young workers have already been in work, if they start a new job their employer will still  be able to pay them the reduced rate.

This flies in the face of any government contention that the new measures are aimed only at those currently unemployed.

All this comes at a time when job cuts are biting deep in to our manufacturing and public sectors.

The EPMU has called an urgent jobs summit for Friday this week.

Unions and workers know – even if the Government pretends it isn’t happening – that job losses at Kiwirail, Nuplex, Tiwai, Spring Creek, Huntly, in the courts … and elsewhere … will deeply affect not only the workers themselves, but their families and the communities around them.

Forcing youth wages down will not create a single job for a laid off miner in Greymouth or a court registrar in Warkworth. 

Nor will all Paula Bennett’s welfare reforms help create one new job, as Gareth Morgan so cogently points out in a recent article. As Mr Morgan says, ‘Forcing mechanical engineers to be bouncers is just a game of musical chairs replacing one bouncer with another. Unless the economy gets going you are not going to see fewer people on WINZ’s books.’

Today’s announcement is yet another quickstep in National’s game of musical chairs, the sad part being that it’s not a game, and it is peoples’ livelihoods – and lives - at stake.

I wish the EPMU and all involved all the best for their summit on Friday.

We need some sensible, creative thinking about not only how to keep some jobs in this country but also about how to create new ones - without expecting Australia to always be there to pick up the slack.

If the Australian economy continues to slow the pressure release it provides for New Zealanders seeking work will gradually tighten.

Put that together with downwards pressure on wages deliberately fostered by Government and mean welfare reforms which sanction and harass  those unfortunate enough to be unemployed, and the future looks pretty bleak.

As FIRST union pointed out on Sunday, it is decent jobs and security of employment that New Zealand workers need.

Without that, we are doomed to a vicious cycle of growing unemployment, a wider rich poor gap, and a deepening desperation among those whom the economy and state have cast aside.

Comments (10)

by Matthew Percival on October 09, 2012
Matthew Percival

You don't learn service or construction skills sitting in a classroom. Nor do you get a proven track record of reliability at school. These are just some of the reasons why older workers have an advantage over their youth counterparts.

A company is currently unable to make a worker redundant and replace them with another worker in exactly the same role. There are already laws to cover this as you are likely already aware. In any case why would a company let go a proven worker to take on a newbie to save $2.70 an hour for six months given the extensive training and non-productive time involved?

To suggest a 16-17 year old has similar expenses as an adult is distorting the truth. The vast majority will still be at home and those who aren't will likely be entitled to a living away from home supplement.

Yes a second employer could start a youth employee on the lower rate. The youth would have to leave their first job within a year and a half (if they started employment on their 16th birthday) or be on a benefit for 6+ months after leaving their first job. Circumstances so unlikely they are hardly worth discussing.

If this is a game of musical chairs then why did youth unemployment rise after the abolition of the youth rate?

You also claim this will lead to increased inequality. What will lead to increased inequality is youth who can't get their foot on the ladder. Youth who get left on the scrapheap because they don't have the skills to command a minimum wage. 

by Dave Kennedy on October 09, 2012
Dave Kennedy

It is through keeping wage costs down the Government is managing the high value of the dollar for businesses. I agree with you, Sue, that few new jobs will be created by this youth rate and I can imagine many older workers will be cast aside so that a few young ones can be employed at a lower rate.

Many private care providers are grateful for the government's support in keeping wages low and abolishing the Pay and Employment Equity Unit. This has allowed Ryman Healthcare (one of New Zealand's largest rest home providers) to record $84 million in profits last year, an increase of 17%. This wouldn't have been possible if they had to pay good wages.

Of course there are some doing very well under National and it is not working people or beneficiaries: 

by Richard Aston on October 10, 2012
Richard Aston

"Youth who get left on the scrapheap because they don't have the skills to command a minimum wage"

Matthew it depends on your definition of the scrap heap , $10 an hour is closed enough to scrap heap in my view. 

And your statement "why did youth unemployment rise after the abolition of the youth rate?" is misleading. This from a Dept of Labour report by economists Dean Hyslop and Steven Stillman ...

"The study finds some evidence that the proportion of 16 and 17 year olds unemployed increased in 2009 by 1.4–2.6 percentage points because of the minimum wage increase, but the negative impact on unemployment was not evident a year later in 2010.
The NE minimum wage appears to have encouraged more 16 and 17 year olds to stay at school or continue their education (this effect is in addition to an increase in studying due to the economic downturn). This may explain why the impact on unemployment had disappeared by 2010 and why the minimum wage increase was associated with lowering inactivity among 16 and 17 year olds."

ie a tiny short term effect that was not sustained.





by Richard Aston on October 10, 2012
Richard Aston

Perhaps its time to "out" those employers who will take advantage of these youth rates when they come in, eg Resturant Brands . Maybe we need a Fair Trade programme here in NZ .


by stuart munro on October 11, 2012
stuart munro

The youth rate is just away for the government to try to shift blame for the gross and unrelenting failure of their economic policies. It's really more important to stigmatize the poor, to silence their input into the local economic debate, than to address perennial economic issues squarely and make acredible attempt to solve them. But why?

A cynical person might think successive government's adherence to astonishingly unsuccessful economic policies through hell and high water represented a fully rational and entirely corrupt choice, instead of the blithering incompetence that we, in charity, generally attribute it to.

by Richard Aston on October 11, 2012
Richard Aston

Stuart , i think the line bewteen corruption and incompetence is a fine one.


by stuart munro on October 11, 2012
stuart munro

In the case of this government there seems to be a seamless transition from one to the other. We really need to work on our mechanisms for throwing scoundrels in prison; they're not working properly.

by Richard Aston on October 11, 2012
Richard Aston

Is it scoundrels or the politcal system itself ?

I have seen too many well meaning people go into politics and later descend into "scoundrels" .  To mis quote Hunter S Thompson parliment is "a long plastic hallway where thieves and pimps run free and good men die like dogs, for no good reason."

by Rosina Hauiti on October 12, 2012
Rosina Hauiti

Ae, he tautoko ana ahau ki to whakaaro Sue, Kei te tika koe.It's always the same, creating a competitive market a/k/a vulnerable environment for business to exploit. Whats the incentive for the youth workers?? Zilch excecpt that they will have opportunity to gain "valuable" skills at Burger King and ilk. They should be grateful for such opporunities to be exploited because when we were kids all we had available to us was bob a job.Not that there was anything wrong with that, except the world has changed. So has the example which is get as much as you can for as little as possible - the premise of unbridled capitalism.

by stuart munro on October 12, 2012
stuart munro

It's the scoundrels.

The system is not perfect, but with honest people committed to their constituents it can work. With scum sucking lowlifes like the present National Caucus, nothing works.

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