Youth rates [updated]

Update: Please do read the follow-up post here which presents rather stronger evidence than is here presented. Original post follows below.

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).

Friedman on Regulation

HOW DID WE GET INTO THIS MESS?

The financial crisis was a convulsion in the corpulent body of social democracy. “Social democracy” is the modern mandate that government solve social problems as they arise. Its body is the mass of laws that grow up over time — seemingly in inverse proportion to the ability of its brain to comprehend the causes of the underlying problems.

When voters demand “action,” and when legislators and regulators provide it, they are all naturally proceeding according to some theory of the cause of the problem they are trying to solve. If their theories are mistaken, the regulations may produce unintended consequences that, later on, in principle, could be recognized as mistakes and rectified. In practice, however, regulations are rarely repealed. Whatever made a mistaken regulation seem sensible to begin with will probably blind people to its unintended effects later on. Thus future regulators will tend to assume that the problem with which they are grappling is a new “excess of capitalism,” not an unintended consequence of an old mistake in the regulation of capitalism.

Jeff Friedman on the financial crisis in a new Cato Policy Report.

I always think of the old Three Stooges bit where they're trying to fix the plumbing in the basement. Every time Larry turns the monkey wrench on the pipe he's trying to fix, he bashes two other pipes, making more leaks.

A little economics goes a long way

Via Cafe Hayek, a nice (award winning!) video put together by some GMU undergrads on the corrupting effect that economics can have.



Sarah's friends complain that she's become intolerable since taking economics.

Sounds like what I often hear back in student evaluations:

• "I am now more irritating than ever, sparring with others not just on policy issues but general decision-making as well."
• "Awesome course, I wish I could take something like this next year :( It's helped provoke many arguments with my flatmates and annoyed my girlfriend when I start rambling on about some economic i..."
• "Learnt tonnes. Had many a-discussion with friends after lectures as what is taught is extremely interesting and 'fun' to think/argue about."
• "I have often found myself explaining the theories learnt in class to family and friends."

A GMU education is for folks who love economics. I'm glad I can spread that around a bit too down at the far end of the world. I'm particularly pleased that of the 11 students in this year's incoming honours cohort at Canterbury, 7 have taken my public choice class (a very high proportion for an elective). The Gnomes of Canterbury return.....

Olympic madness

I spoke to Charles, a bus driver, whose good cheer diminished when I asked him about the games. "I just can't believe I wanted this a year ago," he said. "I voted for it in the plebiscite. But now, yes. I'm disillusioned." This disillusion is developing as the financial burden of the Games becomes public.

The original cost estimate was $660 million in public money. It's now at an admitted $6 billion and steadily climbing. An early economic impact statement was that the games could bring in $10 billion. Price Waterhouse Coopers just released their own study showing that the total economic impact will be more like $1 billion. In addition, the Olympic Village came in $100 million over budget and had to be bailed out by the city.

Sports Illustrated on the upcoming Vancouver Olympics.

I really like it when voters get to see the connection between their choices and the consequences, for better or worse. I'd like to know more about who commissioned the early inflated economic impact statement and what fraction of revenues derived from shoddy multiplier estimates and the like.

Here's a good rule of thumb. If some guy in a flashy suit comes to your town trying to sell you a monorail, a new stadium, or the Olympics, give him the bum's rush. Certainly don't give him the chance to sing to the mob. By then, it's too late.

Stats NZ Maps

Stephen Hickson points me to these nifty Stats NZ maps. You can zoom in down to the census meshblock, but very limited information is available at that granularity (number of households and number of people only). At area unit, you get some population and income data and a link to additional stats.

We're in Meshblock 2556800, where we're one of 81 households and the median age is 34....

University Unions

What happens when the main university union combines faculty and general staff and when the general staff outnumber the faculty? The new collective agreement gets the union folks five weeks of annual leave, that's what. Like anybody on faculty actually ever takes their current four weeks, though we all have to sign a note saying we have so that accumulated leave doesn't roll over into full years off.

The concept of annual leave is pretty meaningless in academia. When are you not thinking about the stuff you're working on? And if your main job is thinking....

Google for President!

Techdirt points to a tongue-in-cheek reductio of the Supreme Court confirmation that corporations are people too (as far as free speech goes): Google for President.

I, for one, would welcome our Googly overlord. What might I expect of a Google Presidency?

• More government services to be funded by advertising
• A lot more decentralized policy experimentation
• Prediction markets
• Free health care, but only if they can run your DNA fingerprint and allow really targeted marketing campaigns.

Alas, Google will need to be at least thirty five years old before running. Stupid Article II Section 1...

Any other expectations of a Googly Presidency?