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!