Alasdair Thompson: Youth job plan a load of ironies

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Opinion

Public policy is likely to be the better if the views of those at the coalface who will deliver it can have a say.

So given National's $152 million youth job plan is just the start, in the words of Prime Minister John Key, let's hope the Government discusses the next round of employment policy with its tripartite partners, Business New Zealand and the Council of Trade Unions, before announcing it.

The new plan provides a $5000 subsidy on wages paid for six months employment for up to 4000 young people. At present 17,000 such people are unemployed, and unemployment in the 16-24 age group is 14 per cent and rising.

Many of these people left school with inadequate literacy and numeracy skills, and are therefore not very fit for employment. It is said 20 per cent of all school leavers fall into this category.

For young people like these business does support sound initiatives to improve their skills.

The new plan is in addition to other taxpayer-funded measures such as Community Max for 500 positions ($40.3 million), the national cycleway ($50 million), defence force training ($2.6 million), limited service volunteers ($19.1 million), 700 more Polytech places ($8 million), and 1600 summer scholarships ($4 million).

But it comes after the Labour Government abolished minimum youth rates and raised minimum pay rates to $12.50 an hour. So it is little wonder employers have preferred to hire older, more work-experienced workers from the growing numbers of them available.

This Government intervention made it difficult for young unskilled new entrants to get on the employment ladder, but the latest intervention of a $5.13 per hour subsidy for employers to take these people on in effect reduces the minimum pay rate to $7.37 hour.

The irony is one Government prescribed high minimum pay rates making it hard for young, unskilled people to get jobs and now we have another Government intervention to subsidise some of them into jobs.

A second irony is the new policy may well work against another of the Government's policies: to raise worker productivity. If this measure causes employers to prefer unskilled and inexperienced young people to skilled, experienced older people, the impact on worker productivity will be negative.

Third, if the $5000 subsidy swings employers towards employing subsidised younger people and away from older people, then it won't achieve a significant reduction in unemployment overall.

Though the policy may get more young people on the skills and employment ladder, which is ultimately for the good, it ignores the fact that employers favour older people because they cost about the same as younger people to employ, and their work experience means they are more productive.

The new policy is in reality an admission that minimum rates of pay were pushed too high to the cost of young people seeking first-time and even subsequent employment. Minimum pay rates are all well and good until they price young people out of the market.

Employers tell us they employ older, work-experienced people whenever they can ahead of 16-to-24-year-olds.

Employers & Manufacturers Association (EMA) members are also very good at paying for training to improve the skills of their staff. We know this because we run nearly 700 courses a year to do just that.

Many more businesses, especially smaller employers, would invest more were the Government to subsidise their staff training.

This is not to talk up EMA's own work as we are a not-for-profit organisation; our members already subsidise their staff training through their voluntary member subscriptions. But more training would mean lower prices for more young people to improve their skills.

Had the Government talked with its tripartite partners - Business New Zealand and the Combined Trade Unions - it would probably have got some good ideas along these lines and announced a better policy.

After all, the Government, Business NZ and the CTU all want to achieve more jobs for young people, though not at the expense of older, unemployed people.

EMA would have said at the least: "Do not increase minimum pay rates for at least the next 18 months". We would have also said: "Put half the $5000 subsidy per person or $5.13 an hour into training that young worker."

National should shift away from Labour's failure to talk to its tripartite partners on issues affecting employment. Labour even failed to do this when required to do so by International Labour Organisation (ILO) membership rules.

Too often public policy is made on the hoof for political reasons. The Opposition has been saying "the Government has not been doing enough for the unemployed", and no doubt the new policy is partly in response to this.

But even though the Opposition's response to it is that it's okay, is it good public policy? Actually, it could have been better.

* Alasdair Thompson is chief executive of the Employers & Manufacturers Association (Northern).