Corporate Welfare; Youth Rates Who really pays?

Kay Brereton from the Beneficiary Advocacy Federation of New Zealand says “The National Party plan to bring in youth rates puts even more of the burden on the taxpayer to subsidise low wages.”

“At present an 18 year old in 20 hours employment at the minimum wage is entitled to a partial benefit of $37.80, and receives $218.16 from employment after secondary tax.”

“If the proposed changes were in force today with current tax and benefit rates would result in the taxpayer contribution being doubled with an extra $37.80 of benefit being payable, total abated benefit $75.60. A saving of $55 to the employer, with the gross wage reducing to $215, the wage after secondary tax at $173.72, and the 18 year old would be worse off by $6.64 per week.”

Current

Proposed

20 hours at minimum wage

20@ $13.50 $270

20@ $10.80 $215

After tax

$218.16

$173.72

Benefit payable

$37.80

$75.60

Take home pay

$255.96

$249.32

“The proposal may also incentivise employers to churn through young employees to keep wage bills low; not creating new jobs but re-creating the same job every 400 hours or 6 months whichever comes first.”

“The cost to the taxpayer may be even greater if the employer is entitled to W&I subsidies for the employee.”

“We believe that the taxpayer supports the need to assist and support young people into work but assert that here is a reasonable expectation of sustainable work, and that the employer benefiting from the labour pays their share.”

ends

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