Report on 90-day trials at odds with Govt line

Labour Minister Kate Wilkinson. Photo / Supplied

Two of the main benefits hailed by the Government for the 90-day trial for newly hired workers - creating jobs and helping workers at the margins - have been challenged in the same report that has been cited as evidence that the scheme should be extended.

Prime Minister John Key came out defending the intended changes to labour laws at his post-Cabinet press conference yesterday, calling them "moderate" changes to promote growth and jobs.

He said at the weekend that extending the 90-day-trial scheme - which applies only to companies with fewer than 20 workers - to all companies would create more jobs.

Labour Minister Kate Wilkinson agrees.

"Removing the risk of a personal grievance case resulting from a hiring mistake encourages employers to grow their business and take on more staff," Ms Wilkinson said.

But the Department of Labour report released last week said there was no evidence a probationary period did this.

"The ability to use trial periods appeared to have encouraged 40 per cent of employers who had hired someone to do so, however without any counterfactual evidence it cannot be stated categorically that trial periods had created extra job opportunities," the report said.

"The international literature suggests exemptions to employment protection legislation, such as the trial period legislation, increase both hiring and firing but have an unclear overall impact on unemployment."

Ms Wilkinson said the decision to open the trial period to all companies was based not only on the report, but also on surveys from other employers and visits to businesses throughout the country.

Mr Key also said marginalised workers - migrants, prisoners being released and mothers returning to the workforce, for example - would benefit from extending the scheme, as more bosses would take a chance on hiring them.

The report noted some anecdotal evidence that the trial helped disadvantaged job seekers. "[But] very few [employers] used trial periods specifically for this purpose, being focused on hiring the most suitable candidate."

The report cited "international literature" suggesting a trial period cut youth unemployment, but said the result might also be because of a higher proportion of unemployed youths.

The survey showed 43 per cent of the latest employees hired on the scheme were aged between 15 and 24. The youth unemployment rate was 17.2 per cent for the March quarter, while overall unemployment was 6 per cent.

The Labour Party spokesman on labour relations, Trevor Mallard, questioned the report's research.

A total of 3532 employers were contacted for it, of which 989 were small businesses. Of these, 527 did the follow-up survey.

To find out the impact of the trials, only 31 people were spoken to: 15 employers, 13 employees, two union officials and a person with a general perspective.

"It was clearly a very questionable methodology that does not reflect well on the department. A survey has to be done in a way that stacks up," Mr Mallard said.

Ms Wilkinson said the report was "not a categorical study of the trial period, [but] a sample-based evaluation" to paint a better picture of how it was operating.

Labour MP Grant Robertson is considering a complaint to the State Services Commissioner over the "shocking breach of public service rules" by National in releasing the report to media at its annual conference.

Differing Views

Labour minister Kate Wilkinson:
"Removing the risk of a personal grievance case resulting from a hiring mistake encourages employers to grow their business and take on more staff."

Department of Labour report:
"Without any counterfactual evidence it cannot be stated categorically that trial periods had created extra job opportunities."