The real cost of employing youth needs debate

Julian Wood – 

Labour’s ‘Ready For Work’ Policy is a great idea.

Unveiled at the Party’s Conference (on November 6, 2016), the Plan offers on-the-job training for unemployed young people by paying them (through a wage subsidy to employers) to work fixing Department of Conservation (DoC) tracks, killing pests, or riparian planting.

The concept is laudable, providing investment in our unemployed youth with the chance to change the trajectory of their lives by letting them see the difference working and earning an extra $300-$400 a week can make. And, at Labour’s quoted costing of $60 million for the programme, it’s a steal.

Real cost higher

Unfortunately, this $60 million only covers the direct wage costs (if that). The real cost of the policy will be much higher. It needs to include some the costs of employing someone, some of the hidden costs associated with being hired, the administrative costs of ensuring that employers don’t just take advantage of the system as well as the indirect costs of potentially longer job search for unsubsidised unemployed. All that does not come cheap.

It is not costless to employ someone.

For an employer, costs go well beyond wages. New workers must be trained how to safely repair tracks in remote areas.

Existing workers might need retraining to effectively manage a crew of recently unemployed workers.

While DoC currently works with many volunteers for these tasks, even a brief overview of the DoC website reveals that volunteers must make a real commitment in time, money, and training before they are ‘volunteer ready.’

It certainly doesn’t look like a role we just throw an unemployed youth into without significant investment.

Other expenses

It is not costless to take a job. How many young people will have a full set of work gloves, boots, socks, thermals and wet weather gear lying around? Should we expect someone to purchase all these items for four months of work? Is DOC supposed to pay? In their release, Labour admits that “DoC is (already) struggling to meet its goals in the face of funding and staffing cuts.”

Costings must include a range of associated funding for these proposed employers, (DoC, Regional Councils, NGO’s, and charities) to administer and look after these “free workers.”

On top of this, wage subsidies are attractive incentive for employers.

Someone must check that these are additional jobs, and not just an employer replacing existing workers with subsidised workers.

Subsidising jobs to provide work for young people might well mean existing workers lose their jobs.

It is also highly likely that non-subsidised workers will now take longer to find a job.

It is easy to assert that care will be taken to design the system to minimise these costs. Actually, ensuring this doesn’t happen costs money as well.

We need to help young unemployed people.

We cannot just throw our arms in the air and say that the problem is too difficult to solve. Let us see how expensive a scheme like this actually is and be honest about it.

Julian Wood is a Researcher at Maxim Institute based in Auckland

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