Should we increase Youth Wages?

The Shop Distributive & Allied Employees Association has a television advertisement out at the moment. It features a young girl, Rachel, bemoaning youth rates of pay and urging us to join her in the “fight for fair pay”. Rachel tells us she works hard to pay her way through university and it is just not fair that she does not get paid more. Perhaps a persuasive emotional tale on its own, but it is a misleading one that completely ignores empiricism.

Youth wages serve an important function. They provide an incentive to employers to take on young and inexperienced staff. Many in circumstances just like Rachel’s only have a job at all because of youth rates. Rachel herself tells us she is working her way through university. Those on youth wages are relatively inexperienced, for a business to take a chance there needs to be some benefit. The logical trade off is that when employment is offered to a younger person, it is done so in circumstances where they get paid a proportion of what a more experienced person might receive. Where is the incentive to employ an eighteen year old university student like Rachel in the SDA world of one size fits all? There is none. Businesses will simply not take the risk; the more experienced and older candidate will get the job.

If the SDA really wants to do something to help young Australians earn a decent living they should seek to arrest the record youth unemployment levels in this country, not accelerate them. Unemployment amongst youths is already double the overall rate and in some areas of Australia it is as high as 30%. Eliminating youth rates of pay will indeed see some eighteen to twenty year olds take home more at the end of the week; however this will be the exception not the rule. Many more will end up taking home nothing at all in their pay packet as youth unemployment climbs, and will turn to welfare. There has already been an extraordinary 41% spike in youth allowance recipients in the past twelve months.  Do we really want to see already significant unemployment and welfare dependency amongst a generation of Australians exacerbated? Is it better public policy for a twenty year old to earn 90% of the adult wage or collect 100% of youth allowance? There could not be a worse time to start putting more young people out of work and into welfare. If the Fair Work Commission gives in to the SDA’s push to remove youth rates in the retail sector, which has the blessing of federal Minister for Workplace Relations Bill Shorten this is the likely outcome. It will not just make things harder for businesses but it will exacerbate the growing dependency of youths on the welfare state. Youth unemployment and welfare dependency is already through the roof in Australia. Abolish youth wages and the sky will be the limit.

James Duncan is Administration and Research Officer at the H. R. Nicholls Society.

1 reply
  1. Michael Di Matteo
    Michael Di Matteo says:

    Hi James,
    Are there many empirical studies that show that elimination of the minimum wage encourages job growth and standard of living growth? I’ve read the Mises, Hazlitt and Rothbard economic arguments, and agree that they are logical, however I haven’t been able to find a situation where minimum wages have been implemented then relaxed to gauge whether it works in practice. I know from personal experience as a young worker that as I got older, experience wasn’t the primary motivating factor behind the hours I was given each week. My roster seemed to become increasingly sparse with the passing of each birthday.
    All the best
    Michael

    Reply

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