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Youth contract

The other day at a Starbucks in a motorway services I was served by a young man who was, frankly, a bit useless. He couldn’t do anything without help from another member of staff who looked somewhat exasperated. I found myself speculating about whether he was worth £5 an hour.

Tim Worstall has for a long time been writing about the connection between the minimum wage and youth unemployment.

The British government obviously understands it, but won’t get rid of the minimum wage. Instead, starting today, if you employ fewer than 50 people you can apply for a £2,275 wage incentive in return for employing a young person.

In an amusing side-note, the Department for Work and Pensions, whose idea this is, seems slightly worried about age discrimination legislation. The big game of Nomic is getting increasingly self-contradictory.

33 comments to Youth contract

  • RRS

    If prices are the “information” of market systems, can wages serve serve a similar function?

    What happens to the “information” characteristics of wages under conditions of any kind of non-market determinants?

  • RRS

    The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid

    There is the CLUE to Britain’s legislative problem.

    Properly stated: NMW is a minimum amount most employers become obligated to pay.

    The legislation does not provide entitlement to employment; nor an obligation to hire. It does not require an obligation to work or seek work.

    There is only one obligation; that of the provider of employment.

  • Jim

    So if I read the DWP advice correctly, someone who is currently thinking of employing someone, and could afford to under existing MW requirements etc, would then be breaking the law if they do employ a young person (instead of an older person) and claim the wage subsidy?

    So a scheme designed to increase youth employment actually gives an incentive for an employer to break the law.

    And the UK is not totally f*cked because……………………???

  • pst314

    Rob: If I may ignore the good point you make in your post, it seems a bit funny to find Starbucks in England. After all, there should be no shortage of Brits who know how to make an excellent cup of coffee. So how about a new, competing chain? Call it Killick’s, with the logo being the scowling head of an ill-tempered 18th-century sailor?

    “Of all the many virtues, Preserved Killick possessed only two, polishing silver and making coffee; but these he possessed to such a high degree that for those who liked their plate brilliant and their coffee prompt, freely roasted, freshly ground and piping hot it was worth putting up with his countless vices.”

    :-)

  • pst314

    …and if they sold bottled coffee, they would naturally label it “Preserved Killick”.

  • RRS – yes, wages are prices. And if the price of labour is distorted then it follows it becomes increasingly difficult to plan based on the quality of labour you expect to get.
    It also means that if wages are held to some value, then some enterprises that produce products with low prices are no longer viable.
    A list that grows ever longer.

  • Jim: …..the British have a deep understanding of dark humour which mysteriously sustains them.

    pst314: I do like your idea of a Patrick O Brian themed coffee shop. But “there should be no shortage of Brits who know how to make an excellent cup of coffee” couldn’t be more wrong, alas.

    Coffee shops as we know them today started in the UK when a couple of Americans, horrified at the quality of coffee served in the UK, founded the Seattle Coffee Company, which was later bought by Starbucks.

    Most people drink instant coffee, and think they are being fancy if they make coffee with pre-ground supermarket beans. Before Starbucks and clones in the UK, you’d be lucky to get any better in a cafe. That’s partly why the Starbucks and clones have been so successful here. Also they get the atmosphere right. The alternative is the British tea room — the service in these varies on a scale from indifferent to resentful.

    Of course, my perspective could be skewed because I am as geeky about coffee making as anything else I try.

  • llamas

    pst314 wrote:

    ‘…and if they sold bottled coffee, they would naturally label it “Preserved Killick”.’

    I always thought his character was a little bit Camp.

    Seriously, tho’, the Brits have never understood customer service & never will. No matter what you pay them. So I don’t know that this is a very good datapoint – you can get absolutely crappy, gormless, clueless service from employees with years of experience making full rate.

    llater,

    llamas

  • RRS

    For those who really, really like to walk among these kinds of weeds, cf. Suber (Nomic) and Hurwicz, Maskin & Meyerson (Mechanical Design [in Game Theory] Nobel 2007).

  • pst314

    llamas: Maybe camp, but I like the character, such as when he grumbles and whines while mending the captain’s uniform after a battle. “epaulette fair ‘acked to pieces, Jesus what a life.” I also enjoy Aubrey’s numerous malapropisms.

  • llamas

    Me make obscure Brit culture pun.

    http://www.sybertooth.com/camp/

    Me not do again.

    llater,

    llamas

  • pst314

    “Seriously, tho’, the Brits have never understood customer service & never will.”

    I’ve only spent about a week in England–mostly London–so my opinion isn’t worth much and I bow to your knowledge.

    But…how about excellent coffee combined with surly service?

    “You’ll get a perfectly brewed cup of coffee or my name isn’t Preserved. Now stop bothering me.”

    Keep a silver coffee pot in the shop, to be polished every morning by the grumpiest man you can hire: “Can you add milk? Lowfat milk he wants. Hazelnut syrup, even. Jesus what a life.”

  • pst314

    Me like puns. Especially obscure puns and cross-language puns. Like Jack Aubrey, I would like to have an account at Hoare’s so that I can say “My bankers are Hoares” but alas they do not have branches in the States.

  • Make grumpy customer service a selling point… that could actually work.

  • Mendicant

    The purpose of the minimum wage is so people can survive on their wage. Prior to the minimum wage employees were often paid slave wages, (£1 an hour was commonplace) which are utterly worthless. The concept of a living wage is a necessary one if the economy is to function.

    Without a minimum wage you end up with Foxconn. The notion that employer and employee have an equal relationship is believed by people who also very likely believe in the tooth fairy.

    Abolition of the minimum wage would lead to a massacre of high street retailers as spending power rapidly declined. Most Britons, as things stand, have almost zero purchasing power.

    NEETS are very much the product of the ninnying, cloying middle class “forever mums”. Why on Earth are parents (who are not impartial, and may, and often do, have very dubious motives) allowed to decide whether teenagers should have student bank accounts? Why do they have that power? Encourage teenagers to be independent of mum and dad and society will be much better off.

    Also, given the likes of Ridley Scott and Clint Eastwood keep working beyond retirement age, why not ditch the idea of retirement, why not do away with the state pension entirely?

  • Andrew

    “£1 an hour was commonplace”

    Really?

    My first job as a 16 year old was in ’95 (before the minimum wage), I worked part-time stacking shelves and working the till at a local supermarket. I got £3 something an hour.

    “Without a minimum wage you end up with Foxconn”

    China has a minimum wage. The notion that the state can simply wave a wand and make everything “fair” is believed by people who also very likely believe in the tooth fairy.

  • 'Nuke' Gray

    Breaking news- the Froggies have been surly for centuries! When did Brits start copying them?

  • RRS

    Mendicant –

    Perhaps I shall be banned for this;

    But the zipper seems to be down on your intellectual fly.

    Not to worry, nothing’s showing, so before something happens:

    Millions have risen out of dire, dire sub-subsistence poverty in China and other nations without MW.
    Millions in those nations are achieving levels of goods satisfactions never possible when they could not elect to work.

    What statistics or other data cause you to lay NEETS on the “middle class?”

    Consider California and Texas. Guess which state has cities with “living wage” ordinances/ Guess which state has a “functioning” economy.

  • Sam Duncan

    Funny how the Left’s principled defence of consumer rights evaporates when the thing being consumed is labour.

  • veryretired

    Study after study after study of the minimum wage has shown the same effect—the number of jobs available at the entry level declines as each job becomes more expensive.

    Entry level jobs are needed for young people to learn how to work, i.e., clean appearence, dressing properly, dealing with people properly, being on time, understanding required tasks, etc. etc.

    They are not meant to be a career for a family supporting wage earner. That idea is one of the statist delusions that cause people to demand that someone who can barely figure out how to pour coffee or make french fries requires a wage suitable for a skilled employee who can perform several tasks well with minimal supervision.

    An absolutely bizarre number of people believe that businesses exist to provide people with well-paying jobs, and if they don’t, they are somehow immoral.

    This is a complete and utter fallacy.

    That capability is the mature phase of a well managed small business which has been nutured through any number of problems and growing pains by the founders, many of whom worked for basically nothing for an extended period to get the business on its feet.

    I worked for several small and medium level businesses as I grew up, and the owners worked like dogs to keep the place running properly.

    The main thing they all required, and eagerly sought out, was an employee who was honest, reliable, and did his or her work properly without constant nannying. They saw plenty of those who were none of those things.

    The minimum wage is, as so many statist proposals are, a piece of feel-good rock that people who don’t have the slightest idea what they are doing slip into a small business owners’ backpack, thinking he will never notice the weight.

    Then they are so surprised when, after dozens of rocks have been put there, that the guy’s back breaks, and all those jobs just go away.

  • Laird

    RRS and veryretired: Why do you feed the troll?

  • “there should be no shortage of Brits who know how to make an excellent cup of coffee” couldn’t be more wrong, alas.

    I like Starbucks as a business, but don’t really care for their coffee. There is something overburn about the way they roast the beans that doesn’t quite work.

    It is impossible to overstate just how bad coffee was in England in about 1990 though. Absurdly weak and watery instant coffee was about it. Disgusting beyond words. (It is still very easy to get this). Starbucks have been very successful in the UK market because their product is infinitely better than what came before.

    There are British owned chains of Starbucks style coffee shops that have come into being over the same period, though. Caffe Nero is most ubiquitous (and feels about as ubiquitous as Starbucks, although I haven’t looked at store numbers) and I like their coffee more than I do that of Starbucks.

    Interestingly enough, Starbucks entered the Australian market assuming that it would be exactly like the British market, I think. They opened lots of stores, and nobody used them (particularly for the take-away coffee that is their lifeblood). Unlike British coffee circa 1990, Australian coffee is spectacularly good – a consequence of entirely different immigration patterns. Starbucks provided an inferior product at a higher price, and it really didn’t work.

  • bloke in spain

    Only the British could take a concept like ‘fast food’, remove the two vital ingredients – the fast & the food – & charge for what remains.

  • Laird, I don’t think Mendicant was trolling, just disagreeing, which is useful because we get to hear the counter-arguments.

    Michael: agreed about Starbucks. They’re not my favourite for the same reason.

  • Andrew Duffin

    On entering a British-themed coffee shop, clearly the correct etiquette would be to announce to all and sundry that “we want the finest coffee known to humanity and we want it NOW”.

    :o)

  • Jack Olson

    I suspect the useless attendant in the coffee shop was struggling because it was his first day on the job and his training consisted of “go do it.” Employers with a high turnover, such as retail food service establishments, find it expensive to train employees whose tenure is likely to be brief. This implies that they’re better off retaining experienced employees if they want good service. I doubt they do. More likely, when they notice that business declines they think the solution is better, more expensive advertising instead of better, more expensive employees. It isn’t that business managers are stupid, exactly. It’s just that they measure the things which are easiest to measure, like wage rates, and ignore the things which are harder to measure, like customer satisfaction.

  • RRS

    Laird –

    On reflection, you’re right. Besides, I can’t seem to make the necessary “jump” suggested by Haidt to be able to think with the viewpoint of the “other side” on some of these topics.

  • RAB

    Lousy coffee may have been the norm in England before Starbucks Rob, but not in Wales. When I grew up in South Wales all the cafes in the Valleys were owned by Italians, families that had turned up in the late 19th Century. Generically known as Braccies, as they were the largest family. So even as far back as my grandparents, we Welsh were drinking the finest coffee going.

    There were about 500 of them at one time, but it does take an Italian to make a really good cup of coffee though. I think Starbucks stuff is rubbish myself.

  • Sam Duncan

    Same here in Glasgow, if not the rest of Scotland, RAB. The “’Tallies” made the best ice cream on the face of the earth as well. Still do.

    And, although it wasn’t Italian, Thomson’s in the centre of the city sold the widest range of beans I’ve ever seen. They roasted them on the premises, and had forgotten more about coffee than any “barista” ever knew. I’m not a big fan of the stuff, to be honest (I’m British; what’s wrong with a good cuppa?) but I used to love walking past that place as a kid, just for the smell.

    It’s now a second-rate Starbuck’s knockoff.

  • Alisa

    the zipper seems to be down on your intellectual fly.

    Not to worry, nothing’s showing, so before something happens:

    Lucky I wasn’t drinking anything at the moment, RRS!:-)

    As to trolls (regardless of whether Mendicant is actually a troll), they can be useful in order to present the respondents opinion to other readers.

  • Lee Moore

    The thing that worries me a bit from the libertarian perspective is that for some people the wage that any rational employer would be willing to pay to employ them is negative.

    Probably not slow people who can quietly sweep the floor and not waste other employees time. They may be worth £1 an hour – but see the employment tribunal story below. But people who irritate their workmates, create more work than they do, break things, steal things etc – they’re often worth less than nothing. The question is – is this a problem largely created by the state ? If there were no welfare benefits would most people with negative value as an employee shape up and become positively valued ? Or are there a lot of people who are essentially doomed in a free market ? What’s the evidence from countries without welfare systems ? Are there a lot of troublesome wasters who have got their act together, or are they mostly the ones who starve ?

    Moving on from the tossers, what about the slow and pretty much useless ? Employing them, out of a feeling of moral duty to help the slow and fairly useless, is a valuable social service, good for society, good for the slow and useless, and good for the conscience of the employer. So what is the effect of loading the employer with all sorts of employment regulations making it impossible to sack people ? How many chances are you going to take employing marginal, or even mildly negatively valued employees ?

    I remember reading an employment tribunal report a few years back where a council had made a learning impaired park keeper redundant, as part of a cost cutting operation shedding park keepers. The plan was that park keepers wouldn’t stick to one park, they could move and work on different parks. So one of the criteria for deciding on who to make redundant was whether the employee could drive. Obviously the learning impaired guy couldn’t so he was one of the people selected for the chop. He (or presumably some legal aid johnny) sued and was awarded a lump sum equal to the actuarial value of his future earnings up to age 65. (He was 35 or so, so it was somewhere north of quarter of a million.) The employment tribunal decided (God knoweth how) that choosing ability to drive was discriminatory against the disabled and not sufficiently rationally connected with the council’s reorganisation plan.

    So that park keeper is taken care of. Great. But how many learning impaired people do you want to employ now ?

  • Alisa

    Lee, IMHO, there are very, very few people (if any) who are truly useless under all circumstances.

  • veryretired

    We’ve had had true trolls here on occasion, one who called himself “kodiak” several years ago was particularly pointless, but I didn’t get that from the above.

    I just thought he was either a pretend lib or one who didn’t really have a very good grip on the general idea, even if he thought he was.

    In either case, I responded to a pernicious idea, the “living wage” crapola, not to him specifically.

    Far too many people, across the entire spectrum of ideologies, look at this or that business and see only what it is now, after it has been successful to some degree.

    They forget that Apple was once a start-up in Wozniak’s garage, that Macdonald’s started with one drive-in back in the 50’s, that Ford motor company was a modest brick building turning out a few cars a month in the beginning.

    I have many criticisms of corporate activity, business practices, stupidities, and incompetences.

    What I do not have is some airy-fairy belief that, if we kick and degrade and tax and regulate businesses as if any and everything we can think of is ok, and they will just learn to live with it, that we can continue to live indefinitely as ignorant free-riders on the carcass of what was the most free and productive economic engine in human history.

    Every morsel of food we eat, every stitch of clothing, every tablet of medicine, every home from the most humble to the most extravagant, every vehicle, plane, boat, or bike we ride, every item that makes our lives better, easier, more productive, healthier, longer—in short, everything that we have all around us, exists because some person went through all the effort and heartache and sleepless nights that were required to create it.

    We live in the land of milk and honey that millenia of our ancestors would have considered heaven on earth, a dream beyond their wildest dreams.

    And we stare at it all, mouths agape like 3 year olds at the circus, and complain because that kid over there has blue cotton candy, and we only have popcorn.

    The hardest part of our current social environment for me to take is the endless, childish whining that life isn’t perfectly fair and wonderful every minute of every day for everyone, everywhere, no matter what.

    I apologize. I’m an old man and I get grumpy sometimes.