Tuesday 9th October 2012
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New Zealand teenagers face a lower wage rate than the rest of the workforce for their first six months in a job as the government seeks an antidote to high youth unemployment.
Labour Minister Kate Wilkinson will amend legislation to reintroduce a youth wage rate that's 80 percent of the minimum wage, she said in a statement today. 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.
"The new starting-out wage will help some of our youngest and most inexperienced workers get a much-needed foot in the door, in what is currently a tight labour market," Wilkinson said. "The starting-out wage was one of National's 2011 campaign promises, and designed to provide 16- to 19-year-olds with the opportunity to earn money, gain skills and get the work experience they need."
New Zealand's unemployment rate was at 6.8 percent across the whole workforce at the end of June, but 13.1 percent for people aged between 15 and 24.
The reintroduction of the youth rate was part of a wider announcement by the government to lift national productivity and encourage greater participation in skilled industries such as engineering and information technology.
In its Regulatory Impact Statement, the Department of Labour, now part of the Ministry of Business, Innovation and Employment, said the changes may create a substitution effect where 16- and 17-year-olds become more attractive for employers than their 18- and 19-year-old counterparts, though it wasn't able to predict the level of bias.
"The Ministry considers that on balance, in the current economic environment, the proposed starting out wage will have positive employment impacts for the targeted groups," it said. "The Ministry cannot be certain of the precise effects of the starting out wage policy because a policy change of this type has not been observed in New Zealand before."
If uptake for the new measure is 30 percent of 16- and 17-year-olds seeking work, the Ministry predicts they will substitute for jobs held by 18 and 19 year old workers, who would have 400 fewer jobs available to them. However, a 50 percent uptake would see a net addition of 1,100 jobs among 16 to 19 year olds.
The department only consulted with other government agencies. The Treasury said the 80 percent minimum wasn't necessary, while the Ministry of Education warned it may impact on students' ability to finance their current or future tertiary studies.
MBIE said the government may want to consider broadening the starting out wage to other groups of workers who face barriers to the labour market in the future.
Government officials are working with the Ministry of Justice to assess whether the legislation is consistent with the Bill of Rights Act relating to age and employment status, and flagged the proposal may be at odds with New Zealand's international obligations.
Opposition parties flayed the move, with Labour Party leader David Shearer saying a low wage future was "no future at all."
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