Home > Social Issues, The Body Politic > The road to Youth Rates – Wrong way, Prime Minister, Wrong way!

The road to Youth Rates – Wrong way, Prime Minister, Wrong way!

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closing the wage gap with Australia as promised by John Key

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1. Backgrounder

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It was during the 2008 general election that the issue of the growing wage disparity with our Aussie cuzzies became an issue. Curiously, it was the then-Opposition Leader, John Key, capitalist; multi-millionaire; and currency trader, who was making some very odd comments.

Indeed, he was sounding positively socialist – at the time;

We think Kiwis deserve higher wages and lower taxes during their working lives, as well as a good retirement.” – John Key, 27 May 2007

Acknowledgement: John Key’s website – “National Tough On Crime”

One of National’s key goals, should we lead the next Government, will be to stem the flow of New Zealanders choosing to live and work overseas.  We want to make New Zealand an attractive place for our children and grandchildren to live – including those who are currently living in Australia, the UK, or elsewhere. To stem that flow so we must ensure Kiwis can receive competitive after-tax wages in New Zealand.  We must cut taxes and grow our economy, and National will have policies to ensure both occur.” – John Key, 6 September 2008

Acknowledgement: National Party – “Environment Policy Launch

We will also continue our work to increase the incomes New Zealanders earn. That is a fundamental objective of our plan to build a stronger economy.” – John Key, 8 February 2011

Acknowledgement: Government statement

We want to increase the level of earnings and the level of incomes of the average New Zealander and we think we have a quality product with which we can do that.” –  John Key, 19 April 2012

Acknowledgement: Dominion Post – Key wants a high-wage NZ

Which sounded all well and good…

Until reality set in. And we remembered that John Key was leader of the National Party – not Labour, Greens, Mana, or the Alliance.

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2. Present Day

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As this blogger wrote last year;

On 9 October (2012), Labour Minister Kate Wilkinson announced that National intended to introduce a new Youth Rate, to take effect in April (2013). The rate would be set at $10.80 an hour – compared to the minimum rate of $13.50 [soon to be $13.75]  an hour currently, and would include 16 to 19 year olds.

As Scoop.co.nz reported,

That equates to $10.80 an hour, or $432 before tax for a 40-hour week. From April next year, the ‘Starting Out Wage’ will apply to 16- and 17-year-olds in the first six months of a job, to 18- and 19-year-olds entering the workforce after spending more than six months on a benefit, or 16 to 19-year-olds in a recognised industry training course.”

Acknowledgement:  Scoop – NZ teens face $10.80 an hour youth wage rate

It is doubtful if National’s Youth Rates will actually create new jobs. More likely, a drop in youth wages will simply create more ‘churn’ in employment/unemployment numbers.

As David Lowe, Employment Services Manager for the Employers and Manufacturers Association, inadvertently revealed,

Without an incentive an employer with a choice between an experienced worker and an inexperienced worker will choose experience every time.”

Acknowledgement:  Scoop – Starting-out wage will help young people onto job ladder

So there’s no new job for the  younger worker – s/he is merely displacing an older worker. Which probably results in  older workers joining the migration to Australia.

End result; a loss of skill and experience for New Zealand, and a gain for our Aussie cuzzies.

Note: the above figures relate to the adult Minimum wage at $13.75 an hour. At the time  the above statements were written, the adult minimum wage was $13.50 an hour. National very generously raised it by 25 cents an hour, and will take effect on 1 April this year.  (Low income earners would celebrate by popping the corks on a few bottles of Wairarapa ‘champagne’ – but 25 cents an hour doesn’t quite cover it. Perhaps a bottle of fizzy will suffice.)

So what was the rationale for National to implement what, effectively, is a wage cut for 16-19 year olds?

Minister for [Cheap] Labour, Simon Bridges said on 21 March this year – and I reprint his statement in full;

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Starting out wage - youth rates - simon bridges - national government - minister for labour - cutting wages

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Acknowledgement: Government statement – Starting-out wage available from 1 May

Nowhere in that statement does Bridges state –  or even hint –  that cutting the wages of 16 to 19 year olds will create one single new job.

Contrast that to Kate Wilkinson’s statement on 18 July 2010, when National introduced the 90 Day Trial Employment Period,

“The Government is focused on growing a stronger economy and creating more jobs for New Zealand families,” says Ms Wilkinson.

“There are a lot of people looking for work and the changes announced today will help boost employer confidence and encourage them to take on more staff.”

[…]

“The evaluation showed that 40 percent of employers who had hired someone on a trial period said it was unlikely they would have taken on new employees without it.

Acknowledgement: Government statement – 90-Day Trial Period extended to all employers

Wilkinson assured the country that, in return for employees losing job protection for 90 days, that the counter-benefit would result in  “stronger economy and creating more jobs for New Zealand families.

So how did that work out?

Let’s check the stats, shall we? From mid-2010 to the latest data for this year,

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Unemployment Rate - july 2010 - march 2013

Acknowledgement: Trading Economics/Statistics NZ

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From July 2010, unemployment rose to January 2011; dropped to July 2011; and then began an inexorable climb to 7.3%.

Even the drop to 6.9% [highlighted in the red box] in January 2013 is illusory, as Statistics NZ reported on Radio NZ,

The numbers officially out of work eased back from a 13-year high at the end of 2012.

But the fall in the unemployment rate was due to more leaving the workforce than new jobs being created.

The numbers of those deemed officially unable to find a job fell by 10,000 to 163,000 in the final three months, figures released by Statistics New Zealand on Thursday morning show.

As a result, the unemployment rate fell from 7.3% of the workforce to 6.9%.

The Household Labour Force Survey shows that employment fell by 23,000, led by there being more women out of work.

It was the third consecutive quarterly fall, taking those employed as a proportion of the workforce to a 10-year low.

The unemployment rate fell only because even more people gave up looking for work than lost jobs.

In all, 33,000 people dropped out of the workforce in the final three months of 2012 – the highest number to do so on record.

Acknowledgement: Radio NZ – Unemployment rate falls as more give up job hunt

If we add those missing 33,000 people to the number who are unemployed, the figures become  jaw-droppingly ghastly,

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Unemployment persons - july 2010 - march 2013

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Acknowledgement: Trading Economics/Statistics NZ

It’s fairly obvious; the 90 Day Trial Period not only did not create new jobs – but unemployment has skyrocketed.

Quite clearly, there are other factors that create new jobs, and silly, ill-considered, simplistic,  neo-liberal gimmicks do not contribute to the mix.

This blogger predicts that precisely the same will happen when youth rates are implemented on 1 April,

  • No new jobs will be created
  • Employment numbers will remain high
  • Older workers will be displaced in favour of cheaper, younger workers
  • New Zealanders will continue to migrate, en masse, to Australia, where jobs and wages have not  been undermined by an ideologically-blinded government

Is reducing the wages bill for  businesses really the best that Dear Leader can come up with? Because, really, the only thing that a new Youth Rates will do is transfer employment to cheaper workers and drag down wages with it.

This is not a plan for wage growth, it is a plan for a low-wage economy, with those New Zealanders who can, escaping to Australia.

Let’s not forget that on 10 April, 2011, Bill English actually welcomed lower wages, on TVNZ’s Q+A,

GUYON Can I talk about the real economy for people?  They see the cost of living keep going up.  They see wages really not- if not quite keeping pace with that, certainly not outstripping it much.  I mean, you said at the weekend to the Australia New Zealand Leadership Forum that one of our advantages over Australia was that our wages were 30% cheaper.  I mean, is that an advantage now?

BILL Well, it’s a way of competing, isn’t it?  I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well.

GUYON So it’s part of our strategy to have wages 30% below Australia?
BILL Well, they are, and we need to get on with competing for Australia.  So if you take an area like tourism, we are competing with Australia.  We’re trying to get Australians here instead of spending their tourist dollar in Australia.

GUYON But is it a good thing?

BILL Well, it is a good thing if we can attract the capital, and the fact is Australians- Australian companies should be looking at bringing activities to New Zealand because we are so much more competitive than most of the Australian economy.

GUYON So let’s get this straight – it’s a good thing for New Zealand that our wages are 30% below Australia?

BILL No, it’s not a good thing, but it is a fact.  We want to close that gap up, and one way to close that gap up is to compete, just like our sports teams are doing.  This weekend we’ve had rugby league, netball, basketball teams, and rugby teams out there competing with Australia.  That’s lifting the standard.  They’re closing up the gap.

GUYON But you said it was an advantage, Minister.

BILL Well, at the moment, if I go to Australia and talk to Australians, I want to put to them a positive case for investment in New Zealand, because while we are saving more, we’re not saving more fast enough to get the capital that we need to close the gap with Australia.  So Australia already has 40 billion of investment in New Zealand.  If we could attract more Australian companies, activities here, that would help us create the jobs and lift incomes.

Acknowledgement:  TVNZ Q+A – Interview with Bill English

If the Nats think that the Australian government will sit idly by whilst Aussie businesses relocate to this country for cheaper wages, they are fooling themselves.  Australia will retaliate in some way – and it won’t be pleasant for us.

In last year’s May budget, the Nats decided to tax  the meagre wages of paper boys and girls (see: Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour).  Now Key and English are cutting their pay again.

If this is truly the best that the Right can come up with, then they are bankrupt of ideas.

New Zealanders should ponder one, simple question; is this what we really  want for our country and our kids?

Meanwhile, we can add Key’s pledge to raise wages to his growing record of other broken promises. It’s turning into quite a list.

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Previous related blogposts

John Key’s track record on raising wages: 6. Youth Rates (11 Nov 2012)

Johnny’s Report Card – National Standards Assessment – Employment/unemployment (9 Jan 2013)

References

Government statement: 90-Day Trial Period extended to all employers (18 July 2010)

NZ Herald: Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour (25 May 2012)

NZ Herald: Minimum wage to increase by 25c (26 Feb 2013)

Government statement: Starting-out wage available from 1 May (21 March 2013)

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= fs =

  1. mick
    23 March 2013 at 5:36 pm

    Key is a used car salesman …in Australia we had a name for his type…bullshit artist.

  2. di\
    24 March 2013 at 9:10 am

    And how will we raise wages once Bill’s new low wage capitalist’s have invested here? They will have the government’s ear (and other bits), and will fight hard to ‘protect’ the investment advantage of their low wage NZ operations. National is locking us into low wage slavery.

    The truly sad part is that so few of us vote, and too many of us vote poorly.

  3. Denny Weisz
    24 March 2013 at 10:10 am

    Just another mechanism for this lame government to use as Joyce is shit at his job in creating real employment. The young people become the “churn”. In and out of employment continuously on less than the minimum wage until they’re 18-19 and if you’re lucky to score a job that lasts longer than 6 months you’ll be on the minimum wage! But don’t change jobs because you then become a “New Worker” again and back to the youth rate! Oz is looking better for most of our youth. A responsible parent would be buying them a one-way ticket for their 16-18th birthday!

  4. K
    24 March 2013 at 11:21 am

    I hope my kids are smart enough to exploit their peers by being business owners who call the shots, rather than the suckers on yoouf rates.

  5. Denny Weisz
    24 March 2013 at 3:02 pm

    Is this why kiwi’s are missing out on jobs in Christchurch? This is what this lame arse government means by the “Free Market!” Employers & recruitment agents ripping off foriegn workers. Time to stop the importing of slave labour! http://www.stuff.co.nz/business/rebuilding-christchurch/8465471/Rebuild-jobs-scam-exposed

  6. Jasper
    24 March 2013 at 3:06 pm

    Remember folks… 1 hours work means you’re employed! That’s how 35,000 people were no longer recorded as unemployed, in receipt of a unemployment benefit.

  7. Robert
    24 March 2013 at 7:58 pm

    These are the children that we want to repay their student loan. It would be awfully helpful if they remain in the country after graduation so we can do that, but why would you when you are simultaneously hit by high accommodation, and competing with youth rate workers?

    They are smarter and more mobile than older people and they have options. We shouldn’t be surprised when they exercise them.

  8. Denny Weisz
    26 March 2013 at 11:35 am

    KEY: DOC OVERSTAFFED: In a statement this morning the Green Party said the proposal was to axe 140 jobs. And as PinoKeyo said on Monday morning TV. We’ve created 64,000 jobs over the past few years bla bla bla …… Hmm I remember a promise to create 170,000 Jobs! Oh that’s right, casual short-term unsustainable employment!!

  9. 26 March 2013 at 11:59 pm

    As a physical geographer I appreciate that cartoon. New Zealand is moving to different drum beats tectonically. Like our progress closing the gap with Australia, those east of the tectonic plate boundary (myself included), are heading southwest…

  10. 27 March 2013 at 12:50 am

    No wonder our kids are shooting through to Oz. Who in their right minds would put up with this kind of shit from a government that is doing thing contrary to what they promised? Really, this beggars belief.

    Frank, this ties in nicely with your blogpost at THE DAILY BLOG: http://thedailyblog.co.nz/2013/03/25/the-right-has-a-new-media-voice/

  11. Denny Weisz
    28 March 2013 at 9:09 am

    Hold on a minute? We don’t need anymore volunteers in New Zealand! Volunteers make up 67 per cent of not for profit workforce equal to 133,799 full time positions??WTF! New Zealanders are becoming slaves in their own country …. work for free for more than 49 million hours a year. I think I have solved the unemployment problem! 133,799 people can start been paid, as the volunteers are usually retired, unemployed or wealthy people that don’t get reimbursed for their costs for travel time, material the use. Time to stop this corporate profiteering!

  12. Denny Weisz
    28 March 2013 at 10:50 am

    SORRY FRANK … MORE JOB LOSSES TO ADD TO THE LIST! TELECOM 900 JOBS GONE TODAY! THAT’S ABOUT 3114 JOBS GONE FROM JAN 2013 TO NOW! WHAT CRISIS!http://media.nzherald.co.nz/webcontent/document/pdf/201313/telecom3.pdf

  13. Theodore
    28 March 2013 at 8:42 pm

    And they wonder why people are leaving the country in droves…….

  14. 30 March 2013 at 12:40 am

    Tellecom will be over 1200

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