Friday, May 13, 2011

Maori hurt most by youth rates?

The opening lines from a new US study into the employment consequences of minimum wages:

When the Great Recession’s negative effect on the U.S. labor market was strongest, the national unemployment rate stood at 10.1 percent—a depth last seen in June 1983. But the greatest amount of pain was felt by younger and more vulnerable workers—though not in equal amounts. For instance, the unemployment rate for 16-to-19 year-olds reached 27.1 percent at the recession’s trough. For white teens, the figure was 25 percent; for black teens, it was close to 50 percent.

New Zealand's current 15-19 year-old unemployment rate is 27.5 percent. Unfortunately the HLFS tables do not show the ethnic breakdown of each age group. There is a suggestion here that Maori youth unemployment is over 40 percent.

According to the Department of Labour the Maori Youth NEET (not in education, employment or training) rate is around 17 percent:

The difference between the two rates comes about because the DOL defines youth as 15-24, not 15-19, and the unemployment rate for 20-24 year-olds is much lower.

Anyway the point of this post is to highlight the findings of the study because what holds for US blacks probably has relevance for NZ Maori.

... the picture grows even more troubling when the authors focus just on the 21 states fully affected by the federal minimum wage increases in 2007, 2008, and 2009. Approximately 13,200 black young adults in these states lost their job as a direct result of the recession; 18,500 lost their job as a result of the federal wage mandate—nearly 40 percent more than the recession. In
other words, the consequences of the minimum wage for this subgroup were more harmful than the consequences of the recession.

The substantial disemployment effects that emerge from the data raise an important question: Why do black males suffer more harm from wage mandates than their white or Hispanic counterparts?

The authors find that they’re more likely to be employed in eat-ing and drinking places–nearly one out of three black young adults without a high school diploma works in the industry. Businesses in this industry generally have narrow profit margins and are more likely to be adversely impacted by a wage mandate. There’s also substantial variation in regional location, as black young adults are
overwhelmingly located in the South and in urban areas. It’s also likely that unobserved differences in skill level and job experience play a role. To the extent that these differences are concentrated among young men of a particular race or ethnicity, this group would have the greatest risk of losing jobs when the minimum wage is increased.

Minimum wage increases remain politically popular, which means they’ll continue to be debated at the state and federal level for years to come. But the debate on the employment consequences of the minimum wage has been settled conclusively, and this research proves that those consequences are felt most by young black males.

(Hat-tip NCPA)


Anonymous said...

But the debate on the employment consequences of the minimum wage has been settled conclusively,

As has the debate on
- tax rates, especially corporate tax rates
- trades unions and awards - especially in the state sector
- the holidays act
- socialised central funding of schools
- socialised central funding of "healthcare"
- the worlds most generous benefit provision
- the worlds most generous super provision
- and especially huge government deficits

Gee - there's only one party who is going to apply this conclusively settled science to the NZ economy, and do the simple and quick things that will end NZ's dependency culture.

Anonymous said...

One of the few completely accepted results in economics is that minimum wages lower employment

Brash's policy - as in the 2025 taskforce - will abolish both the youth minimum wage, the adult minimum wage, and union-based accords.

Finally "freedom to work" will come to NZ!