How Wage Subsidies & The Minimum Wage Price Job Seekers Out Of Job Market
Currently Australian wage subsidies and the minimum wage are pricing young job seekers with little to no experience and job seekers under 50 out of the job market in relation to older job seekers.
What wage subsidies are available?
In Australia, The Department of Employment states an employer can receive the following wage subsidies:
- Youth Wage Subsidy, up to $6,500 offered to a job seeker under 30 years of age
- Restart programme, up to $10,000 to a job seeker 50 years or over
- Parents Wage Subsidy, up to $6,500 offered to a job seeker who is a parent
- Long Term Unemployed and Indigenous Wage Subsidy, up to $6,500 offered to an indigenous job seeker (6 months) or unemployed non-indigenous (12 months)
This pricing of subsidy amounts takes no consideration toward those inexperienced being priced out of the job market by the minimum wage and those under 50 being priced out of the job market by the Restart programme.
If the minimum wage outweighs the inexperienced workers return on investment then it would be inefficient to hire such worker.
While, those inexperienced can’t compete on price in the job market because of the minimum wage preventing them from gaining some low wage work opportunity. Wage subsidies are in place to correct for that gap, however when programs such as Restart exist for older job seekers, that offer a $10,000 wage subsidy over the $6,500 subsidies on offer, then the employers incentives become even more imbalanced.
If employers were to hire an under 50 job seeker they would now have an opportunity cost of $10,000.
To hire an under 50 job seeker, whether that be youth, parent, indigenous, or long-term unemployed and receive a $6,500 subsidy that only just makes up the loss in investment, your opportunity cost would be forgoing the $10,000 wage subsidy and/or the extra experience from an older worker.
Age should not equal return on investment.
This view that older job seekers need a larger subsidy is not an efficient basis, as this only assumes old workers are less productive. While, it is most likely the young who have little work experience and in need of more help to get a first job. In some instances both young and old can have the same productivity, as young workers may be more technological minded while older workers may be more qualified in a trade. Either way, it comes down to the type of job when hiring an older or younger worker. However, no matter ones experience, for those under 50 the subsidy incentive outweighs the chance of them being hired, in place for those over 50 with a $10,000 subsidy.
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Copyright © 2016 Zoë-Marie Beesley
Licensed under a Creative Commons Attribution 4.0 International License.