90-day trial law boosted labour market: NZIER

Photo / Martin Sykes

The government's 90-day employment trial period for new workers has improved labour market flexibility, increased hiring activity and lifted total job numbers, according to preliminary research by the New Zealand Institute of Economic Research.

The report, which looked at the labour market between April and September 2009, found small and medium-sized businesses who were allowed to dismiss new workers without justification created more jobs and hired more people than those weren't.

NZIER found on average hirings by SMEs were almost six percentage points higher than expected, while total job numbers for these firms were two percentage points higher given the relative performance of other firms and annual hiring trends.

"The analysis suggests that the policy has had a small but positive impact on the job numbers for SME employers, during a time when the labour market overall was shedding workers due to the recession," the institute said in its report. "This success is likely to continue when the trial period is extended to all firms in the New Zealand economy."

The findings fly in the face of arguments by organised labour groups, such as the Public Service Association, who oppose the policy on the basis that it would make employees less willing to change jobs, and risks misuse by unscrupulous employers.

New Zealand's unions have actively been working to sidestep the broader rollout of the policy by excluding the 90-day trial in collective agreements.

NZIER put a caveat on its findings, saying the results of the research were based on preliminary data, and could benefit from better analysis once more historical information becomes available.