The March Household Labour Force Survey is out, so time to update the prior results on youth unemployment. Recall that, back in February, I put up this little graph showing the residuals from a very very simple regression:
youth unemployment rate = constant + b1 * adult unemployment rate + residual
The residual tells us how far out any particular observation is from the trend line. So, if something weird starts happening to the youth unemployment rate RELATIVE to the adult rate, it'll show up in the residual of the regression. The data series goes back to 1986 and so includes a fair few prior recessions. Here's the updated series (noting of course that all points move a bit with the additional observation, attenuating results).
Again, the regression residual really starts spiking up at December quarter 2008. In all prior recessions, the residual never went past 2.7: in recessions, the youth unemployment rate gets hit harder than the adult rate. But, the adult unemployment rate this time round hasn't come close to touching what it had hit in the early 1990s, so we're not getting oddities solely due to a worse recession than usual. The residual spiked at 9.8 in December quarter 09; it's now at 8.5. If we take the prior period's maximum as being the biggest possible effect of a normal recession, then we have excess youth unemployment of 5.8 percentage points. As there were 161,600 workers in the 15-19 age bracket, we have about 9400 young workers currently unemployed who would have been employed had the pre-2008 relationship continued. In December quarter, that figure was about 12,000.
I still say the best first cut explanation is the elimination of the differential youth minimum wage. It's encouraging that more kids are finding work and that the residual is dropping (as we'd expect in the recovery). But excess youth unemployment due to high minimum wages has negative effects on lifetime earnings. I expect that few of those adversely affected will figure out that they ought to pin the blame on Labour for eliminating the youth minimum wage and on National for voting down Sir Roger Douglas's attempt to fix things.
Again, this is just a very simple regression. But it's a shame that National didn't at least ask Treasury (best I'm aware) to do something a bit more substantive rather than just asking the pollsters.