And so it's time to update the estimate of how many kids aged 15-19 are currently unemployed because Labour, at the behest of the Greens, eliminated the differential lower youth minimum wage. And let's not forget that National, who opposed the abolition when Labour was doing it, decided that they liked pricing kids out of the labour market when they had a chance to change things.
The method is fully explained here. The .do and .dta files are also posted there. To update things for the current quarter, add in another line for March 2011, quarter number 101, with an adult unemployment rate of 5.63% (rate for all persons aged 20 and up), a youth unemployment rate of 27.5%, and a labour force population of 150.9 (thousands) for the group aged 15-19.
The model expects, given the current adult unemployment rate, that the youth unemployment rate would be 19.3% if the youth unemployment outcomes were no worse (relative to adult outcomes) than in the worst quarter from 1986 to 2008. As the actual youth unemployment rate is 27.5%, the rate is 8.2 percentage points higher than would have been expected under the prior trend. That translates to 12,350 kids who don't have work who we would have expected to be in work had the prior relationship between youth and adult unemployment rates continued.
Here's the table, updated with this quarter's results.
| Quarter | Adult unemployment rate | Expected youth unemployment rate | Actual youth unemployment rate | Excess youth unemployment, in thousands |
| Jun-08 | 2.9 | 15.8 | 15.4 | -0.7 |
| Sep-08 | 3.2 | 16.2 | 15.7 | -0.8 |
| Dec-08 | 3.3 | 16.2 | 17.9 | 3.0 |
| Mar-09 | 4.5 | 17.8 | 19.1 | 2.2 |
| Jun-09 | 4.5 | 17.8 | 22.9 | 8.2 |
| Sep-09 | 4.9 | 18.3 | 25.1 | 10.5 |
| Dec-09 | 5.3 | 18.8 | 26.5 | 13.2 |
| Mar-10 | 5.2 | 18.7 | 25.2 | 10.5 |
| Jun-10 | 5.4 | 19.0 | 24.7 | 8.7 |
| Sep-10 | 5.1 | 18.5 | 23.3 | 6.8 |
| Dec-10 | 5.3 | 18.8 | 25.5 | 10.4 |
| Mar-11 | 5.6 | 19.3 | 27.5 | 12.4 |
I'm less confident about this quarter's figures because all of this quarter's stats will have been jostled about by the February earthquake. If the earthquake differentially affected firms employing youths (compared with those employing adults), the residual for this quarter will be picking up that effect. It's not implausible that kids employed in retail were hit harder than folks whose jobs shifted location.
But it seems fairly safe to attribute five to eight points of youth unemployment to forcing employers to pay sixteen year olds as much as older workers. Hit the "minimum wage" tag for further background and responses to counterarguments.
I wasn't surprised to see Green MP Catherine Delahunty exclaiming surprise about the current high unemployment rate. But I'd be interested to hear from Green MP Gareth Hughes on it. Hughes is one of the more promising MPs in Parliament; he was excellent on the recent copyright bill.
Gareth, and the rest of the Greens, if you want everybody else to take the general consensus of academics working in a field as sufficient basis for policy, as in climate change, you're going to someday have to face up to that the general consensus of economists is that minimum wages are a really poor way of helping the folks you want to help. The theory behind economists' beliefs - basic price theory - is at least as well established in our field as the basic theory behind greenhouse gas effects on the overall climate. Price theory is kinda the basis for everything we do. And, as in climate science, most debate is about the relative magnitude of the effects. Some studies find no effects of minimum wage changes, others find large negative effects. It's often hard to isolate effects because states usually only increase minimum wages by any non-trivial amount when the labour market's doing well anyway. But it's also often hard to isolate the effect of year on year carbon emission changes on global temperatures. The Canadian study, linked above, showing that increases in minimum wages increase poverty rates I find fairly damning.
To dream the impossible dream: that politics someday stops being about rallying around stupid symbolic policies that often hurt those they're intended to help and instead gives choice among a few policy platforms, each of which would be the best means of achieving its proponents' desired and stated ends. It'll never happen.
