NZIER 90-day research fatally flawed, says union

Have more people been hired as a result of the new 90-day probation law change? Economists disagree. Photo / Dean Purcell

Research showing the controversial 90-day probation employment law was helping small firms hire more people has been attacked as "fatally flawed" by the Council of Trade Unions.

The NZ Institute of Economic Research earlier this month said its research showed the 90-day trial period for new workers had "improved labour market flexibility, increased hiring activity and lifted total job numbers..."

Not so, said CTU policy director and economist Bill Rosenberg in a statement published this morning. The NZIER had used flawed analysis to draw invalid conclusions.

"There is no basis for NZIER and the Minister of Labour to present these findings as evidence that the 90-day trial period policy has resulted in the creation of jobs."

"The report's claim is unsupportable," said Rosenberg. "NZIER did not know if employers were actually using the 90-day trial."

The NZIER researchers had simply taken as an indicator two factors that firstly, a firm employed fewer than 20 staff, and secondly, that the time period was after the new law came into effect on 1 March 2009.

"It confuses timing with cause," said Rosenberg.

He said no one knew if any change in hiring practice was caused by the new law, by a statistical artefact or by the many other changes occurring around that time.

"The NZIER paper deviates far from accepted standards for reporting research findings," said Rosenberg. "It fails to clearly describe the data it uses, specify the model it uses or provide its statistical results in full."

While NZIER had acknowledged that there may be other factors causing the apparent change in hiring behaviour, there had been no attempt to specify them clearly, let alone control for them.

There was not even a token review of relevant research literature, "other than a dismissive reference to the Department of Labour study, which itself indicated that only half of the small firms it surveyed had used a 90 day trial, and that dismissal rates were high (22 per cent) among employees hired on those terms."

"The 90 day law is a major and contentious issue because it impinges on important internationally recognised work rights of New Zealand employees, and the availability of not only jobs, but work under conditions of dignity. It deserves serious and soundly based scrutiny." said Rosenberg.

- NZ HERALD ONLINE