The Minimum Wage Amendment Bill – encompassing the starting out wage – passed its third reading in Parliament last week.

The starting-out wage will be set at 80 per cent of the minimum wage and is available for 16 and 17-year-olds in their first six months of work with a new employer, 18 and 19-year-olds that have come directly off a benefit which they’ve been receiving for six continuous months, and 16 to 19-year-olds in training in a recognised industry training course involving at least 40 credits a year.

The intent of the Bill is to support young people, who are new to the workforce, into long-term sustainable employment by providing incentives for employers to take them on.

The Household Labour Force Survey shows young people under the age of 20 have been more negatively affected in terms of employment than older groups of workers.

In the past five years there has been a drop in employment for young people aged 15- 19 of about 42 per cent.

The starting-out wage will help young people, who would otherwise be locked out of a job, get into work. 

The minimum wage is currently $13.75 an hour, which is around half the average hourly wage of $27 – the OECD’s database shows that this proportion is in fact the highest in the developed world, and that on this measure our minimum wage is the most generous in the developed world.

International research shows that long spells of unemployment and inactivity may permanently lower young people’s future employment prospects, particularly for low-skilled and inexperienced young people.

As with other OECD countries, New Zealand is responding to the negative effects of the global recession on young people. A reduced minimum wage is used in several OECD countries, including Australia and the United Kingdom, to encourage youth employment.

We need to ensure young people are ready and equipped for work as the economic recovery gains momentum.

This change is about providing young people with the opportunity to gain skills, earn money and get the valuable work experience they need in a tight labour market.

Young people with a steady work history, like all employees, are seen as less risky for employers to take on.

Research suggests the starting-out wage could create up to 2000 new jobs for 16 to 19-year-olds in its first two years.

The starting-out wage is part of a wider package of initiatives to help young people into work.