More than 150,000 people have signed a petition to raise the minimum wage to $15 an hour, but Act says $12.75 is already too much for young people. Simon Collins looks at both sides of the argument
FOR $15
Ryan Poitoa resents getting paid less than his mates doing the same job beside him.
Poitoa, 17, is one of the 150 people who got work when a Countdown supermarket opened in Manukau.
He reckons he was picked out of the 3090 hopefuls who queued for the
jobs for two days in January because he was confident and well dressed. Twenty-two staff hired by the supermarket were aged under 18.
Ryan recalled: "I was pretty open, clear, and just had a good interview."
He's fit and has just completed two years training to be a gym instructor at Sports Education NZ. But he needed a job and has taken one unloading and stacking groceries in the new store's warehouse, with prospects for promotion.
As it's his first job, he's been hired on $10.09 an hour, only just above the legal minimum of $10 an hour for "new entrants" aged 16 or 17.
Under the current law that took effect in 2008, his pay has to go up to at least the adult minimum of $12.50 ($12.75 from April 1) after 200 hours, or three months, or when he turns 18 in June, whichever comes sooner.
At Countdown, his pay will actually jump to the company's adult starting rate of $13.59.
But in the meantime, he's working alongside mates who already get $13.59 because they're either over 18 or have worked their 200 hours somewhere else.
"We all do the same work but they get paid more than me," he says. "It just makes you feel like, why should I do the same amount of work as them?"
That sense of basic fairness is what motivated Unite Union secretary Matt McCarten to push for the abolition of youth rates at fast-food giants such as McDonald's and Burger King, and which now drives the union's petition for a citizen-initiated referendum on raising the legal minimum to $15 an hour.
The petition, signed by 153,000 people by Tuesday, needs just over 300,000 signatures by May 7 to force a referendum.
It asks for $15 as the first step towards raising the minimum wage over three years from 50 per cent of the average wage at present to 66 per cent, in line with national superannuation for a couple.
"We are seeing what people are prepared to pay for labour in a deregulated market, and it's a race to the bottom," McCarten says.
"We need to re-regulate the market, otherwise we will not be able to meet the needs of people to live a decent life."
He says less than $15 an hour, or $600 a week, is not enough to keep a family when tenancy bond data shows the average rent for a three-bedroom house in Otara, the poorest part of Auckland, is now $330 a week.
"People on less than $15 an hour have no show of owning their own homes. They are always going to have long hours and insecure work," he says.
Parents working long hours leave children unattended. A higher minimum wage would let parents earn a living wage in fewer hours, leaving them more time for their children.
Statistics NZ data show that 130,000 of the 150,000 people earning between the current $12.50 an hour minimum and $13.10 an hour work in domestic sectors that are not exposed to international competition, such as retailing (49,000), hospitality (29,000) and aged care and community services (11,400).
Only 20,000 work in the exposed sectors of manufacturing and agriculture.
In most cases, employers in the domestic sectors could raise their prices to pass on the costs of a higher minimum wage to the rest of us, their customers.
McCarten says that is exactly what happened when he pushed the fast-food companies into abandoning youth rates.
"More than half their people were under 18 and they said that if the wages go up like we were advocating to $12 an hour, we're all out of business," he says.
"Not true. Of course they have all expanded since the wages went up."
A Lincoln University survey of 34 employers for the Labour Department on the effects of a 75c rise in the minimum wage in 2006 found that supermarkets, in particular, were "reasonably relaxed about the prospect of a higher minimum wage as long as it applies to everyone".
Most employers (19 of the 34) accepted some compression of their wage structure, giving pay rises to higher-paid workers that were less than the increase in the minimum wage.
But eight of the 34 cut hours of work, five stopped replacing staff who left or made other changes to intensify working conditions, and others cut various other costs. Aged care businesses had to lobby Government for extra funding to cover the higher costs.
Auckland University of Technology economist Gail Pacheco found that compression of the wage structure caused by raising the youth minimum wage made overall wages for young workers more equal over the decade to 2007.
Unite national director Mike Treen cites international evidence that greater equality improves the quality of life across a whole range of social indicators such as reduced violence, better educational performance and better physical and mental health.
As McCarten puts it: "Successful economies, and happier people, come from a knowledge that you have a more equitable society."
On the web: www.unite.org.nz
AGAINST
The manager of Countdown's new Manukau supermarket, Phil Guilford, says he didn't consciously pick any workers on the basis of their age.
"If they are able to carry out the requirements of the job then there's no issue," he says.
"But one of the things you get from a more mature person is life skills and life experience which youth are unable to offer - they just haven't experienced that yet."
The Progressive Enterprises group, which owns Countdown, officially supports next month's rise in the minimum wage to $12.75 an hour because its adult starting rate is already above that, at $13.59.
But other employers say an April 2008 law change which raised the minimum wage to the adult rate for everyone aged 16 and over who has worked for 200 hours (five weeks full-time) or three months part-time has reduced the number of young people being hired.
The Warehouse human resources manager Paul Walsh says under-18-year-olds fluctuated between 30 and 33 per cent of his company's 7500 staff in the four years up to June 2008, then plunged to 25.2 per cent in the year to last June and 24.1 per cent from July to this week.
"It's dangerous to draw a conclusion that it's purely the minimum wage rate that has affected that, but you would have to say it must have had some impact," he says.
Act MP Sir Roger Douglas, whose bill to bring back a lower youth rate was rejected by the National Party caucus this week, says other employers have told him they can no longer afford to employ young people at all.
One woman who employed more than 60 people hadn't taken on anyone under 18 since the law changed.
"She said, 'I always employed young people and I could afford to because I could offer to spend the time they needed on training them. Now that they've forced the wage up I just can't spend the time that's required on training."' Douglas says.
He believes the effective abolition of youth rates for most young people has been a major factor in pushing unemployment up to 26.5 per cent of those working or seeking work in the 15-to-19 age group in December, even worse than the peak of 24.5 per cent in the last big recession in 1992-93.
In contrast, the overall unemployment rate of 7.3 per cent is still much less than the 1992 peak of 11.4 per cent.
"It's disgraceful to say to someone who could be earning $400 a week [at $10 an hour]: 'You are not allowed to by law,"' he says.
"So the person has to go on the unemployment benefit which is only $127 a week if they're living at home or $159 away from home [for teens aged 18 or 19]."
Of course other factors besides the minimum wage affect youth unemployment.
For a start, young people always fare worst in a recession when employers have the luxury of more experienced people to choose from the job queue.
In this recession, coming straight after intense labour shortages, many employers have also held on to skilled workers more than in past recessions because they know they will need them when the economy picks up. So the proportion of people aged 25 to 64 in paid work dropped only marginally from 80.2 per cent to 78.8 per cent in the two years to December.
That means young people looking for their first jobs have borne almost the whole brunt of this slump.
Over the same two years, employment plummeted from 50.1 per cent to 39.1 per cent for teenagers aged 15 to 19, and from 71.6 per cent to 64.6 per cent for young adults aged 20 to 24.
Research in better times has failed to find strong effects on employment from raising minimum wages.
Auckland University of Technology economist Gail Pacheco found that raising the youth minimum wage between 1997 and 2004 reduced employment of 16 and 17 year olds only marginally, and actually boosted employment for 18 and 19 year olds who were enticed into working instead of, or as well as, studying.
But in a review of the international evidence, the Australian Fair Pay Commission concluded last year that raising the minimum wage has "a magnified negative effect on employment" in a recession. As a result it decided against increasing Australia's A$14.31 ($18.51) minimum wage.
In any case, Pacheco argues that the minimum wage is an inefficient way of tackling poverty because many minimum-wage earners are actually teenagers or second earners in wealthy households.
She says 16.6 per cent of all those earning within 50c an hour of the minimum wage between 2006 and 2008 lived in the richest three-tenths of all households.
Douglas says it might be more efficient for the state to top up the incomes of the households who actually need it, as he did through a guaranteed minimum family income scheme when he was Finance Minister in the 1980s.
The top-up still exists for working families with children earning under $395 a week after tax.
"That was for families," he says. "But you could apply the same principle if you wanted to for youth."
On the web: www.act.org.nz
