The Dim-Post

October 10, 2012

Labour market Bennetration

Filed under: economics,Politics — danylmc @ 8:02 am

I think the key plank in National’s ‘starting out’ wage is the one in bold. From Wilkinson’s press release:

“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.

“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.”

Three groups will be eligible unless they are training or supervising others:

  • 16- and 17-year-olds in their first six months of work with a new employer
  • 18- and 19-year-olds entering the workforce after more than six months on benefit

This creates interesting incentives for businesses employing these low skilled, entry-level workers. If you’re hiring cleaners or warehouse workers, say, and you have a choice between an eighteen year old beneficiary and a twenty year old beneficiary you’re going to pick the latter, ceteris parabis, but now you’ll probably go for the former because you can hire them for 20% less than the ‘minimum’ wage (which means that the crucial 15-19 year old ‘youth unemployment’ category goes down in the HLFS stats). Only for six months though, although – and here’s the beauty of it – along with the sub-minimum wage offer you can insist on a 90 day fire-at-will clause in their contract and they can’t refuse the job, because if they do they’ll lose their benefit. Which means you can sack that worker long before they’re eligible for a higher wage and employ another youth worker on the same terms (you have approximately 32,000 to choose from). Permanent 20% discount on your labour costs!


  1. I know your too smart to really believe what you just wrote. You’ve become a shill Danyl.

    Comment by swan — October 10, 2012 @ 8:06 am

  2. Permanent 20% discount on your labour costs!

    Yay, the dollar meal at Macca’s & BK are safe for another few years.$10 per hour, sheer luxury!

    Comment by andy (the other one) — October 10, 2012 @ 8:07 am

  3. Also, in the case of the 18 and 19y worker the employer get a special subsidy from WINZ who effectively pay the employer the dole money for six months. Subsidy icing on a low wage cake (shelf life of 89days), yummy..

    Comment by andy (the other one) — October 10, 2012 @ 8:11 am

  4. Let’s not be naive and think businesses won’t do this. We only have to look at companies like Wal-Mart, who get given inches and take miles when it comes to paying staff fairly. It is absolutely in a company’s interests to continue cycling through low skilled or young employees, but is it really going to help those young people who need stability, security and the possibility of advancement from their work?

    My view is that these changes will make it increasingly likely that marginalised youth will simply drop out of the system altogether. There are plenty of ways to make money if you are able to avoid being on the police’s radar, most of them ways which give a young person more dignity and status among their peers than working for less than minimum wage on a checkout.

    Comment by alex — October 10, 2012 @ 8:37 am

  5. Danyl, if you’ve ever hired or trained staff in your life, you surely must realise what utter bullshit your argument is. No employer wants to start over with a fresh workforce every 3 months. Even the most “unskilled” roles require an investment in recruitment and training time; no sane employer wants to go through that cycle 4 times a year.

    The 90 day trial has been in for about 2 years now hasn’t it? I don’t think we’ve seen any evidence of the wholesale abuse of the system and general falling-in of the sky that was predicted prior to the law change.

    Comment by Andy M — October 10, 2012 @ 8:42 am

  6. Danyl, if you’ve ever hired or trained staff in your life, you surely must realise what utter bullshit your argument is.

    I train people to work in a biochemistry lab, so I understand the overheads involved in training people to work in a complex environment. But back in the day when I was a student on the summer ’emergency dole’, most of the temporary jobs I got assigned to had zero training. You showed up to the warehouse – or wherever – and started stacking or unstacking. Worker turnover was extremely high, but hiring new workers simply consisted of the foreman calling WINZ and telling them to send someone down.

    Comment by danylmc — October 10, 2012 @ 8:53 am

  7. Andy M – Here was my training to work as a driver for a pizza store: Step 1, get T shirt. Step 2, get given bags with pizzas in them. Step 3, told to drive them to the address on the docket.

    Training complete! So many upskills!

    Comment by alex — October 10, 2012 @ 8:56 am

  8. Utter bullshit and a shill so far. Well done Danyl, resounding ring from nails hit squarely on head. If you were a woman you’d be a witch and a bitch.

    Comment by ak — October 10, 2012 @ 8:57 am

  9. Yup, it just turns into a temporary workforce. I did temping for a while when I was younger, its not hard for the employers, as long as you have basic skills. So it will easily be done by employers. Not to mention seasonal employers

    Comment by max — October 10, 2012 @ 8:57 am

  10. This also reminds me of a friend who moved from working as a journalist to being a press sec for the government. He was super-excited on his first day about being initiated into the secret techniques and dark strategies of PR, but his training consisted of being shown how to create folders in Microsoft Outlook.

    Comment by danylmc — October 10, 2012 @ 9:03 am

  11. “Danyl, if you’ve ever hired or trained staff in your life, you surely must realise what utter bullshit your argument is”

    You must be kidding! When I was 21 I applied, and got, a job at McCafe that promised full Barista training (just what I was looking for). How disappointed was I that the ‘training’ consisted of a half-hour watching someone else make coffee before being thrown on the machine myself…I had to retrain properly when I eventually got a better job at an independent cafe.

    Comment by PJ — October 10, 2012 @ 9:37 am

  12. There would ne time and energy costs in constantly replacing staff as well as the possibility of replacing people how are honest and reliable with an unknown quantity. Most sensible employers will want to keep good staff but not all employers are sensible.

    Comment by NeilM — October 10, 2012 @ 9:46 am

  13. In short Commerce has just been given a 20% discount on costs to at least the entry level employees. Pity it wasn’t a 20% boost to employees.

    Comment by xianmac — October 10, 2012 @ 9:47 am

  14. It was kind of interesting to hear someone (a supermarket or fast food corp) on the radio basically saying they hire a lot of first-time youth and this was a good thing. Suggests they were looking at the discount rather than anything else.

    Comment by lyndon — October 10, 2012 @ 9:53 am

  15. There’s the other thing, how important it is for young people to get jobs so they can be ‘taught the real value of work’ etc, they’ve been using that line – when I worked for $5 an hour or whatever at the supermarket after school it didn’t teach me the wonderful, intrinsic value of work, it just taught me that it spending my weekends stacking shelves getting yelled at by a boss with little-man syndrome sucked and wasn’t worth continuing with.

    Comment by Hobbes — October 10, 2012 @ 10:18 am

  16. Re “Benetration’ in the title…I heard yet another media reference to Paula Bennet as ‘Paula Benefit’ the other day. Nat Radio. Fixed instantly. Just the tiniest sliver of a giggle. Isn’t it great when the Truth catches on?

    Comment by Sunny — October 10, 2012 @ 10:54 am

  17. Danyl: “but his training consisted of being shown how to create folders in Microsoft Outlook.”

    So that’s where they hide things … just don’t tell the GCSB, SIS, CIA, etc.

    Comment by Loonybonkersmad — October 10, 2012 @ 11:20 am

  18. I really enjoy hearing Nats who believe that all beneficiaries are out to rort the system sternly maintaining that no employer ever would.

    Comment by Stephen J — October 10, 2012 @ 11:41 am

  19. What Danyl is predicting has happened before. My wife has the ultimate work ethic, but as teenager back in late 70s she got part time work in a dairy. She worked there for a couple of years, but on the day she turned 18 she got her notice. The boss had no problems with telling her it was because he now had to pay adult wage. Being a dedicated employee she was gutted and to this day it still hurts being treated like that.

    Don’t tell that in the unskilled market some bosses aren’t going to game the system

    Comment by Doug — October 10, 2012 @ 11:43 am

  20. @19 – In fact, it is exactly in the unskilled market that employers will game the system. The workers are much less likely to know their rights, and employers will be able to treat them like cattle.

    Comment by alex — October 10, 2012 @ 11:52 am

  21. Doug,

    The problem of course is the minimum wage itself

    Comment by Swan — October 10, 2012 @ 12:27 pm

  22. So if the minimum wage was removed what would your solution be to prevent employers taking advantage of the unskilled unemployed?

    Comment by Doug — October 10, 2012 @ 1:22 pm

  23. A minimum wage set at (or slightly below) the market clearing rate. The purpose being to prevent exploitation by making it easier for police to prosecute. (e.g. non-payment, deductions etc).

    This would prevent all these distortions. Welfare could then be dealt with through the welfare system.

    Comment by swan — October 10, 2012 @ 1:32 pm

  24. Given that the market is unlikely to clear because there will always be unemployed unwilling to work for those wages how would determine the minimum wage?

    Comment by Doug — October 10, 2012 @ 1:40 pm

  25. Someone unwilling to work is not counted as unemployed. To be unemployed you have to be seeking work.

    Comment by swan — October 10, 2012 @ 1:58 pm

  26. how low do you think the market clearing rate would be, Swan?

    Comment by nommopilot — October 10, 2012 @ 2:03 pm

  27. Honestly nommopilot, I have no idea (you already knew that though 🙂 ). But my guess would be around $8 or $9 an hour. Obviously I dont expect families to maintain what our society would consider a minimum acceptable standard of living at this rate. So it would need to be brought in with a UBI or something similar. And at this lower level, fewer workers would be on the minimum wage.

    Comment by swan — October 10, 2012 @ 2:17 pm

  28. Swan so you’re saying that someone must always be prepared to take what they are offered. No matter whether it actually results in a loss of income, well being, or dignity. What a cut throat world you want to us to live in. I wonder have you thought how you might fair in such a place?

    Comment by Doug — October 10, 2012 @ 2:22 pm

  29. Just saw #27 so you want to reintroduce the PEP schemes. Well that was such a success last time.

    Comment by Doug — October 10, 2012 @ 2:23 pm

  30. If you throw in an untaxed UBI for every adult citizen – something I support btw as managed correctly, it would effectively eliminate ancillary social welfare transfers – you then need to apply a fairly rigourous imposition (probably about 35-40%) on every dollar earned over that.

    So while I’m sure our chums on the right support nixing the mimimum wage to eliminate distortion, I’m sure as shit they won’t want to fork over a flat 40 points to pay for the alternate social subsidy.

    Comment by Gregor W — October 10, 2012 @ 2:29 pm

  31. Just saw #27 so you want to reintroduce the PEP schemes. Well that was such a success last time.
    PEP schemes paid award wages. In Auckland, where the City Council administered the schemes and provided bridging finance for their day to day running, all participants were covered by the employment conditions negotiated by the Northern Region Local Government Officers’ Union. As Colin Scrimgeour predicted in a late 70s interview, Muldoon would be remembered as NZ’s last socialist PM.

    Comment by Joe W — October 10, 2012 @ 2:43 pm

  32. There needs to be a focus on what companies and businesses these young people are going into. Are they meeting all their obligations to their current staff in terms of pay, facilities, treatment, etc? Do they get two weeks’ notice if the company wants them to take holidays, or just a “I want you to take the next day off, and a couple of days off at the end of next week as well” and are expected to do this without question? Does the receptionist accurately count up their hours, or does she get it wrong sometimes? Is communication effective in the company, so that these young people will not be blamed for an accident and be back on the dole soon enough?

    Most importantly, is it a proper business that consists of a building (and not a marquee) and includes proper washing facilities so that an 18 year old employee will not unnecessarily be poisoned with a chemical that happens to be 20 times stronger than it should be, the result of which may be sores that take two years to emerge but then last for five or more years?

    Comment by Dan — October 10, 2012 @ 2:45 pm

  33. RE 31. Yes you are right. The Govt topped up the difference. Sorry I was so traumatised by the memory of working in them I misremembered.

    Comment by Doug — October 10, 2012 @ 2:55 pm

  34. A lot of people on this thread have said “employers will [rort the system/screw over their employees/eat babies]”, but can anyone point to any actual evidence that they are? Otherwise I think my original description of this as bullshit is still pretty fair. The 90 day trial has been around for a reasonable time now, show me the wholesale abuse already.

    Comment by Andy M — October 10, 2012 @ 3:42 pm

  35. 90-day law is not quite fire-at-will as you portray it. Good faith is still required and churning staff every 89 days would very easily be shown as a lack of good faith with significant penalty on the employer…

    Comment by garethw — October 10, 2012 @ 3:57 pm

  36. Andy M – theres plenty of evidence, past and current, that certain employers will happily treat their workers like shit and even break labour laws to do it. Just as theres plenty of evidence that there are good employers. Do i have any on hand? well, no – but does that mean it doesnt happen? Burger King does come to mind as a recent issue though

    With all govt policy its helpful to look at what you cant do currently – with the 90 day trail law there was nothing stopping someone being taken on in a trail capacity before it came in – what changed was the employees right of redress. Call me cynical if you want – but i do wonder if thats not deliberate enabling of bad behaviour for employers who are too crap to get what they want within exsisiting legal frameworks

    Comment by framu — October 10, 2012 @ 4:02 pm

  37. gah – trial not trail

    Comment by framu — October 10, 2012 @ 4:03 pm

  38. Gosh yes that mechanism to help get you unemployed people into the workforce is evil and MUST be stopped. Speaking of working don’t you peeps have paying jobs that you were supposed to be doing during work hours?

    Comment by Bob — October 10, 2012 @ 6:04 pm

  39. The 90 day work trial is unfair in that you are waiting three whole months, quarter of a year, before you know if you are going to have job security or if you are going to have to do this whole thing all over again. By doing the whole thing all over again, you are:
    1. Receiving some form of government assistance
    2. Have the WINZ staff breathing down your neck that the 90 day work trial didn’t succeed
    3. Being put onto another course for “self confidence”
    4. Finding time to look for employment whilst being on this 30 hour a week course, bringing up a family, cooking, cleaning, etc (these courses help you to find work by looking on the internet and in the newspapers, cold calling, etc, but their methods are self serving sometimes and so you have to do proper job search in your own time)
    5. Finding another job with another 90 day work trial and walking on eggshells for another three months

    I’m not against work trials, I just think they should be reduced to 60 days

    As for “good faith” and “significant penalty on the employer”, what’s that about? There’s a lot of businesses that go through their staff like there’s no tomorrow. We, unfortunately, are no longer living int he days where there are plenty of jobs out there, we don’t even have compulsory redundancy pay, and employers are taking full and merciless advantage of those facts.

    Comment by Dan — October 10, 2012 @ 6:13 pm

  40. Yes clearly the only way to view it is as a an employer subsidy. Dirty word but thats how it is.

    Comment by Peter Littler — October 10, 2012 @ 8:18 pm

  41. Our heroic business entrepreneurs need a slave class to exploit.


    Our USA domiciled Wall Street gambler prime minister could not care less.

    “Bronny, I want to be Prime Minister.” A famous headline that radical left wing rag called the dominion post ran.

    That is all that matters.

    To hell with the damage I cause to the country or its unamerican inhabitants.

    I am Prime Minister. Hee Hee!

    Slavish teenagers are desirable to Wall Street traders, (and probably to some parents).

    No slave class? No business.

    Our business entrepreneurs are so heroic.

    We really need to support a group of people that rely on slaves?

    Comment by peterlepaysan — October 10, 2012 @ 8:25 pm

  42. Peterlepatsan,

    Real classy. First world teenagers on $10 an hour is slavery. Grow up.

    Comment by Swan — October 10, 2012 @ 8:48 pm

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