Sir Roger Douglas links rising youth unemployment to the abolition of the youth minimum wage in early 2008. Of course, the overall unemployment rate also has risen considerably over the last couple of years - recessions do that. But it does look like youth unemployment rates have risen disproportionately this time around.
The blue line traces the youth unemployment rate according to the Household Labour Force Survey (easiest one for me to find that splits out youth and overall rates). The red line traces the overall unemployment rate, which includes the youth rate, mostly because I can't be bothered to figure out how to get the Stats website to spit out a rate for {all but 15-19 year olds}. The green line just takes the difference between the two. Note that the higher the youth unemployment rate rises relative to other groups, the greater will be the attenuation bias in this line since the youth rate then is doing more to pull up the overall rate.
The Minimum Wage (New Entrants) Amendment Bill came into force 1 April 2008. At that point, kids and adults became subject to the same minimum wage. I've drawn a vertical line in the graph above at the Second Quarter, 2008.
Prior to Q2.2008, the youth rate bounced around a lot but stayed about ten points higher than the overall rate. During the early 90s, it got almost up to 15 points higher - the last big recession. It's now almost 20 points higher.
The folks over at the "elasticity of labour demand denialist" parts of the blogosphere might say this is all because we elected a National government in 2008. But National was in office for most of the period in the 90s when the youth rate was stably sitting about 10 points higher than the overall rate. Would that group say that Shipley was that much better than Key? Note also that we then operated under the Employment Contracts Act.
It could of course be that this recession is just different from the recession in the early 90s in some way that disproportionately affects youths. It's possible. But I can't think of any reason why it should be the case. But I can look at that bright red line.
Is there any better plausible explanation of why the youth rate would be jumping so much relative to the increase in overall unemployment? If youths were a much larger fraction of the labour force in 1991 as compared to now, that would be an explanation. But if I plot youths versus another age group - 25-29 year olds (below) - I get the same pattern.
The difference between the youth and older groups' rates reached a maximum of 13 points in the early 90s. It's now at 19 points.
Of course, youth unemployment rates would have gone up absent the change in the minimum wage legislation. But it would pretty plausibly now be sitting about 6 points lower absent that change.
Again: can anybody come up with a better explanation than the abolition of youth minimum wages?
Update: Kiwiblog tread similar ground (apparantly before I did too).
