The Government's new $152 million plan to create work, education and training opportunities for unemployed young people might well work against other measures to raise productivity, Otago-Southland Employers Association chief executive John Scandrett said.
"If this new measure leads employers to prefer unskilled and inexperienced young people to skilled, experienced older people, the overall impact on worker productivity will be negative."
Prime Minister John Key announced at the weekend the money needed to be spent, as the number of unemployed youth rose from 4000 last June to 17,000 in June this year.
Mr Key said it was "absolutely critical that we provide young people with adequate development opportunities".
Included in the new plan was a $5000 subsidy on wages paid for six months employment for up to 4000 young people.
A business would get $3000 up front for employing a person, then $2000 at the end of the six months.
In addition, as part of the package, there were other taxpayer-funded steps, such as the $40.3 million scheme to be known as Community Max, which will place 3000 people in community programmes paying the minimum wage for 30 hours a week and a $1250 training payment paid to the community group.
Mr Scandrett said the initiatives came after the previous Labour-led government abolished minimum youth rates and raised minimum pay rates to $12.50 an hour.
"We have, therefore, seen that employers have preferred to hire older, more work-experienced employees and it should be noted that there are more and more of these becoming available."
The previous government made it difficult for young, unskilled new entrants to get on the employment ladder.
The latest government step to pay a $5.13-per-hour subsidy for employers to take those people on effectively reduced the minimum pay rate to $7.37 an hour, he said.
"The irony is the last government prescribed high minimum pay rates, making it hard for young, unskilled people to get jobs and now we have another government intervention to subsidise some of them into jobs."
If the $5000 subsidy swung employers towards employing subsidised younger people, and away from older people, the result would not achieve a significant reduction in unemployment overall.
The policy might get more young people on the skills-and-employment ladder, which was ultimately for the good.
But it ignored the fact employers tended to favour older people because they cost about the same as younger people to employ and their work experience meant they were more productive.
"The new policy is, in reality, an admission that minimum rates of pay were pushed too high, to the cost of young people seeking first time, and even subsequent, employment.
"Minimum pay rates are all well and good until they price young people out of the market.
"Generally speaking, employers tell us they employ older, work-experienced people whenever they can, ahead of 16-to-24-year-olds."
