Personally this is just going to make me more risk averse about changing jobs: if I move to a new employer and they suddenly run into budget problems a couple of months after hiring me then I could be summarily dismissed with no warning and no redundancy. Not a chance I’m willing to take while I have a mortgage to pay.
Sure, this law might make employers more likely to take risks when hiring – but employers already have the option of hiring new employees on three month contracts before making them permanent. So the benefits are likely to be negligible – medium and large companies can now avoid this minor bureaucratic overhead – with the drawback being decreased labour market mobility.
So how do those costs and benefits balance out? New Zealand is already one of the easiest countries in the world for companies to do business – that just got slightly easier. Great. Decreasing labour mobility will reduce productivity and wage growth. National based it’s entire election campaign on improving these two metrics and this policy is another indication that they have absolutely no idea of how to do that – so why not toss some red meat to their members and donors at their conference this weekend instead?
Wasn’t this an optional thing when introduced – i.e. the 90 day period could be contracted out of if agreed between employer/employee?
Comment by The Double Standard — July 17, 2010 @ 8:02 am
Danyl: personally this is just going to make me more risk averse about changing jobs
I agree. But as The Double Standard says, it’s of course optional. I suppose it’s open for negotiation. If an employer insists in 90 days, I’m pretty sure I wouldn’t move. Trust has to come from two sides.
But Danyl, ever noticed our high youth unemployment? Why would that be? Has of course nothing to do with the abolishment of youth wages right?
The 90 days is so employers can, with less risk, hire someone with no credentials.
Danyl: employers already have the option of hiring new employees on three month contracts before making them permanent.
Hmm, not sure how true this is, but a three month contract sounds far less attractive than a permanent job with 90 days dismissal.
The target of this policy is those with no previous job, and no mortgage. And I hope you can take the responsibility to negotiate less than 90 days with your employer. Or does the state really have to run every detail of your life?
Comment by Berend de Boer — July 17, 2010 @ 8:07 am
Sure – so someone like me might be able to negotiate my way out of it depending on the job and the competition. But only a tiny minority of workers will be in a strong enough position to do so.
Comment by danylmc — July 17, 2010 @ 8:08 am
The target of this policy is those with no previous job, and no mortgage
The target of the policy is every employee in the country.
Comment by danylmc — July 17, 2010 @ 8:09 am
If you are sailing that close to the wind financially, maybe you should be hanging on to the job you have until you have saved up a little nest egg to tide you over.
BTW, wouldn’t you do a bit of due diligence on an employer first?
Comment by Adolf Fiinkensein — July 17, 2010 @ 8:27 am
Danyl: The target of the policy is every employee in the country.
How are you going to formulate such a policy in a way it wouldn’t catch you? Not possible in our PC world.
Secondly, if the Labour market is really tight, employers can use it to differentiate: we only do 30 days notice.
BTW, I agree with your points, and you may well be right that the net effect is negative. But we need to acknowledge the offsetting effects as well, to weigh this thing properly.
Comment by Berend de Boer — July 17, 2010 @ 8:41 am
Contractors will be glad. Less mobility in perm drones equals higher demand for contractors.
Comment by har — July 17, 2010 @ 9:08 am
“If you are sailing that close to the wind financially, maybe you should be hanging on to the job you have until you have saved up a little nest egg to tide you over.”
Says someone from the generation responsible for the biggest housing-price boom in NZ history.
L
Comment by Lew — July 17, 2010 @ 9:15 am
All valid points for 5% of the population but most jobs in New Zealand are low paid retail or service jobs. They don’t allow for contractors, they don’t allow for performing ‘due diligence’ on prospective employers and they don’t negotiate favourable employment conditions with new staff.
Comment by danylmc — July 17, 2010 @ 9:17 am
Danyl: most jobs in New Zealand are low paid retail or service jobs.
If that’s true, which it isn’t, job mobility doesn’t matter, does it?
Comment by Berend de Boer — July 17, 2010 @ 9:27 am
this is just going to make me more risk averse about changing jobs: if I move to a new employer and they suddenly run into budget problems a couple of months after hiring me then I could be summarily dismissed with no warning and no redundancy. Not a chance I’m willing to take while I have a mortgage to pay.
…
The target of the policy is every employee in the country.
Every employee who agrees. You don’t have to agree: This has to be specifically contracted into. Now this doesn’t mean much for those seeking “low paid retail or service jobs”, but it is important for someone like you in skilled employment.
Employers looking for good staff, with good work records, in skilled positions, will find that many of the best and brightest possibilities will baulk at signing on for a 90-day trial. These employers won’t get the employees they want, for precisely the reasons you lay out – it’s not a worthwhile risk for someone with a mortgage who already has a good job. While low-paid service workers might suffer, most of your prospective employers would be stupid to require you to sign on for a 90-day probation period, and you’ll be fine. This law isn’t about every employee in the country, and employers who act like it is will soon realise they’re not getting the good staff they want.
Comment by Graeme Edgeler — July 17, 2010 @ 9:30 am
Graeme, I’m sure that’s a comfort to people desperately looking for work in industries that aren’t suffering from skill shortages.
Comment by Eddie C — July 17, 2010 @ 9:34 am
har @7 -N.B. “perm drones” to quote yourself from the previous thread – “sounds a little bit like a slogan” – but wait!! It’s not a slogan, it’s a depressing note of dog whistle gibberish.
Comment by John Thomson — July 17, 2010 @ 9:46 am
The 90 days is simply a sensible reaction to a minimum wage that is conceived in idealism and little else.
If you must insist on a minimum wage for callow yoof with few prospects in difficult times, then you must accept the actuality of yoof unemployment being 3/4/5 times that of the general working population. That what is happening here and say, the US.
The 90 days is a reasonable workaround of a silly law that causes unemployment.
JC
Comment by JC — July 17, 2010 @ 9:52 am
Eddie – I’m not trying to comfort people looking for unskilled labour. I trying to point out that Danyl hasn’t really thought this through when he applies this to skilled labour like his own.
Comment by Graeme Edgeler — July 17, 2010 @ 10:40 am
Nothing to do with the massive world recession, then?
Try to keep up.
Comment by dontsurf — July 17, 2010 @ 10:49 am
I’ve been on both sides of the 90-day probation period as an employer and an employee. It’s something that can easily be abused by less moral employers, especially when unemployment is up.
Although I’ve been stung by it, I’m not completely opposed to the concept. My recommendation is it be discarded when the unemployment level is high and the system is more open to abuse (employees are more desperate for a job, are competing with a greater pool and employers are more likely to find someone they like more during the three months).
I’m sure this sounds whack to some of you, but I’m guessing you haven’t seen it at the coal face.
Comment by Dav — July 17, 2010 @ 10:56 am
“employers already have the option of hiring new employees on three month contracts before making them permanent”
Danyl, employers can’t do this (except under the 90-day rule for small employers, but you were arguing about a general power). You can’t sign someone on to a 3 month contract and then dismiss them if the job continues. You can only have fixed-term contracts if the work is of a fixed-term nature.
And I agree with Graeme – the 90-day period will only operate in some parts of the job market.
Comment by Dave Guerin — July 17, 2010 @ 11:02 am
I see nothing in these labour law changes that will doing anything to address the chronically poor mangerial skills of our business class; nothing to address the chronic short termism of our employers who refuse to invest in productivity; nothing to address the wage gap with Australia; nothing to address the collapse of wage growth in this country; nothing to address the fact that fewer and fewer New Zealanders are getting less and less. All I see is a kicking of the most vulnerable and lowest paid whilst we are in the depths of recession – a recession which in an exact repeat of his hero Bill Birch the double dipper of Dipton seems determined to turn in a double dip recession by persuing insane Hoover-like policies in the face of a global downturn.
Anyway, I’m rapidly losing faith in peaceful reform in this country that’ll finally root out the mad mullahs of monetarism. My partner and I will probably decamp to Australia when we finish our degrees next year. I’ve already noted jobs that a step down for me that are paying 20-25k more than here. And I am not even sure I’ll bother paying back my student loan when I go.
Comment by Sanctuary — July 17, 2010 @ 11:45 am
*nothing to address the fact that fewer and fewer New Zealanders are getting MORE AND MORE
shesh.
Comment by Sanctuary — July 17, 2010 @ 11:46 am
Danyl, as Easton noted yesterday, the complaints made against this are unlikely to register with the Government or their backers. If you have a low liquid asset base or high commitments (most of the country), the threat of instant dismissal is something that will chill you. If you have substantial liquid assets, then it would be an inconvenience but not a mortal threat.
Graeme, maintain the fiction in your mind that employers and potential employees have equal bargaining power in job negotiations. This is the fiction that the Employment Contracts Act was based on, and it saw a decade of wage stagnation and low productivity.
The only recourse a potential employee has is withdrawing their offer of labour, either by not applying in the first place (or not even looking), or by not accepting the job. Once/if the general public become aware of this, directly or indirectly (I favour the latter, since the NZ media rarely engage in direct discussion of matters like this), it will have a dampener on job mobility, and direct impact on productivity, as workers will stay in jobs that are ill suited to them to avoid a very substantial risk.
Comment by georgedarroch — July 17, 2010 @ 12:38 pm
most of your prospective employers would be stupid to require you to sign on for a 90-day probation period, and you’ll be fine.
So they won’t. Not by negotiating contracts. You, and a small section of society might be in a position to negotiate (ie. your skills are in demand and the labour pool is limited), but most people are in a different position – there is sufficient underemployment and unemployment and competition that they’re not in that position, and they do not feel empowered as mere minions to take on a more powerful entity.
If unions could negotiate contracts, or there was a compulsory independent negotiator, then things might be different. But these are solutions that neither Labour, and certainly not this Government, favour.
employers who act like it is will soon realise they’re not getting the good staff they want.
Let me correct that for you:
Good employers will soon realise a 90 day clause will mean they will not get the good staff they want.
I have no confidence in the rest of the business community. And if this law is socially mainstreamed among business, then it may in-fact become a default clause in contracts. I’m not saying it will happen, but it is frequent enough that conditions that hurt both employers and employees have become widespread in New Zealand when they’ve been encouraged by the Government.
Comment by georgedarroch — July 17, 2010 @ 12:47 pm
georgedarroch: Graeme, maintain the fiction in your mind that employers and potential employees have equal bargaining power in job negotiations. This is the fiction that
George, the only fiction is your socialist outlook on this world. I mean, you can only see class struggle right? Those evil employers getting all the gains and giving nothing to their employees, unless the unions come in to negotiate their fair share.
Maybe one day you will understand the concept of productivity. If you are productive, you earn more. That’s why a truck driver earns now oodles more money than a horse+cart in the middle ages as he can transport much more.
And in a free market economy you cannot simply expect to underpay your staff and keep enormous the gains. If there is much money to made, people, perhaps former staff, will stream into this market and start their own business, so they can get the gains. At which point the demand for labour goes up, and if there is no increase in supply, wages will go up, to the point that an increase is beyond the productivity of the employee, at which point it is smarter not to have that employee, as he or she is employed at a loss.
Comment by Berend de Boer — July 17, 2010 @ 1:10 pm
And in a free market economy you cannot simply expect to underpay your staff and keep enormous the gains. If there is much money to made, people, perhaps former staff, will stream into this market and start their own business, so they can get the gains.
And how do the majority of New Zealanders who aren’t financially secure enough to risk a 90 day fire-at-will clause raise the capital to start their own business? Maybe in your libertarian fantasy world I can compete with my employer, but not in any real world I’ve lived in
And in a free market economy you cannot simply expect to underpay your staff and keep enormous the gains.
If the labour market is structured in particular ways, yes you can. The Reserve Bank of New Zealand had an explicit policy (I’m talking direct quotes from Brash) in the 1990s of maintaining high unemployment by raising interest rates every time inflation (usually caused by wage growth) crept above 1%. National deliberately kept wages low for a decade. Don Brash is the man the Government commissioned to review productivity and closing the wage gap.
At which point the demand for labour goes up, and if there is no increase in supply, wages will go up, to the point that an increase is beyond the productivity of the employee, at which point it is smarter not to have that employee, as he or she is employed at a loss.
Wages had been going up under Labour, both as a share of the economy, and in absolute terms. Not incidentally, New Zealand had among the lowest share of the economy constituted by wages of any developed economy when Labour were elected. What the business community have been arguing for is changes to labour legislation that weaken the position of workers, by denying them stability of employment (90 fire at will) and reducing their access to unions (organised labour has more power than fractured individuals). We saw the effect of these changes very vividly during the 1990s under the Employment Contracts Act, and the resulting lack of wage growth is plain to see.
Comment by georgedarroch — July 17, 2010 @ 1:35 pm
Sorry, I don’t mean to smear all businesses – but when I say business community I mean those establishment figures who Easton mentions and who have had the ears of English, Brash, Key and Joyce for as long as I can remember.
Comment by georgedarroch — July 17, 2010 @ 1:37 pm
georgedarroch: Maybe in your libertarian fantasy world I can compete with my employer, but not in any real world I’ve lived in
Can’t do this, can’t do that. Isn’t that the typical liberal whining? I can’t, you can’t, we can’t, we suck.
Get out more George, many have made this step and started their own business. But none of them started from where you start: I can’t.
georgedarroch: the resulting lack of wage growth is plain to see.
You live in a fantasy world George. Only the Soviet Union worked like you think the world works. Productivity is the key.
Please explain to me why a farm worker these days makes so much more than in the past? All due to Labour’s policies I suppose! Who not simply regulate the pay as an all knowing government can easily do. Fair pay for all by our great benevolent big brother.
George, you see the world divided in workers and employers, diametrically opposed and no one ever switches from worker to employer or vice versa. The evil haves versus the good have nots. Nice story, but perhaps you may have noticed that people are not that interested in joining unions anymore. The story has become a bit stale.
Comment by Berend de Boer — July 17, 2010 @ 1:52 pm
Maybe one day you will understand the concept of productivity. If you are productive, you earn more. That’s why a truck driver earns now oodles more money than a horse+cart in the middle ages as he can transport much more.
Yes, and can you see why someone might stay in a guaranteed wage as a cart driver rather than risk their family, mortgage, or debt? The impact of lower labour mobility is graphically illustrated by your example. And it hurts the employer who can’t recruit qualified cart drivers into his or her trucking business, and slows the economy.
And yes, there are risks for employers in taking on employees too. I acknowledge that. Often substantial risks, that would make a normal person think twice about opening a business, and make them ensure they have a sound business model. The payoff for those risks is profit, and New Zealand is already ranked one of the easiest places in the world to do business.
Comment by georgedarroch — July 17, 2010 @ 1:53 pm
You live in a fantasy world George.
This is the real world.
Comment by georgedarroch — July 17, 2010 @ 1:56 pm
And this.
Comment by georgedarroch — July 17, 2010 @ 1:58 pm
Hahah, nice try George. Funny that no one ever noticed they were earning oodles more under Labour!
You’re sure this graph doesn’t depict civil servants wages?
Comment by Berend de Boer — July 17, 2010 @ 1:59 pm
And in a free market economy you cannot simply expect to underpay your staff and keep enormous the gains. If there is much money to made, people, perhaps former staff, will stream into this market and start their own business, so they can get the gains.
I’m glad you read your 5th Form Economics textbook, but you can’t honestly believe that excess economic returns aren’t possible in the medium-to-long term of the real (and volatile) market?
Quite why people insist on ignoring the fact that the bedrock assumptions behind simple neoclassical economics don’t actually hold is beyond me.
Comment by garethw — July 17, 2010 @ 1:59 pm
Berend, that’s a nice, elegant theory, but unfortunately it doesn’t seem to happen quite like that in the real world. If it did, countries with deregulated labour markets like the UK, Italy and Portugal would long-since have become more prosperous and economically robust that their more highly-regulated counterparts like Germany, Belgium and Finland.
Comment by kahikatea — July 17, 2010 @ 2:02 pm
Good old Berend, plenty of straw men and wind mills to tilt at in his fantasy land of market purity.
Why don’t you go back to South Africa Berend, I hear the market is particularly pure there.
Comment by Sanctuary — July 17, 2010 @ 2:04 pm
Related to the original topic, I was intrigued by this post at Kiwiblog the other day: http://www.kiwiblog.co.nz/2010/07/hoep_he_stays_off_welfare.html
The underpinning of the anti-union/anti-employer-regulation ethos is that all parties are equal with full opportunity and employment is highly fluid. Yet the second an employee chooses to be so “fluid”, it’s a horror that will likely lead to welfare dependency…
Comment by garethw — July 17, 2010 @ 2:19 pm
garethw: you can’t honestly believe that excess economic returns aren’t possible in the medium-to-long term of the real (and volatile) market?
I do honestly believe that excess economic returns are possible in the medium term. Not in the long term (10 years or more).
Notice that most barriers to entry are government supplied: ever noticed that big businesses like regulation? Keeps competitors out.
Comment by Berend de Boer — July 17, 2010 @ 3:15 pm
kahikatea, there is far more to markets than a one dimensional regulation. You can kill an economy with a thousand cuts you know. If the UK decides to spend the money of their children, it will have an impact one day.
And I know that the more highly regulated markets in Europe tend to use temps far more. Temps supplied by temp agencies. Advantage for employer: dismissal on the spot any time. Disadvantage for employee: higher barrier to permanent employment, rising in the ranks, etc. As always, employers and employees work around restrictions, and restrictions can end up doing more harm than good.
Comment by Berend de Boer — July 17, 2010 @ 3:20 pm
So apparently 1 in 4 of the people taken on under the 90-day probation period are dismissed by employers before the end of it. Make of that what you will…
Comment by garethw — July 17, 2010 @ 7:36 pm
i think i’ve said before, what i saw in Oz was this rule being used to dismiss workers at the end of the christmas rush, or when seasonal picking was over.
salary workers only get it in the neck if it turns out they’re just plain stupid, lied on their CV, or refuse to lie on the casting couch.
Comment by Che Tibby — July 17, 2010 @ 8:34 pm
Berend wrote: “kahikatea, there is far more to markets than a one dimensional regulation.”
I know. That’s why I gave three examples of each, rather than just one.
Comment by kahikatea — July 17, 2010 @ 9:15 pm
Here is a fun activity you can do at home with just an internet connection and some spreadsheet software: look up statistics on productivity and real wages in developed countries over the past two or three decades and graph them against each other.
Comment by derp de derp — July 17, 2010 @ 9:29 pm
Hiring someone with no credentials is entirely the choice of the employer.
Dismissing an employee is entirely the choice of the employer.
Why is it so hard for employers to exercise the principles of natural justice and fair play?
If they are so stupid that they cannot do that, they do not deserve to be in business.
I would have thought that the principles of natural justice and fair play apply in dealings with business
associations and customers.
Apparently they do not apply to employees.
The law has to be rewritten in favour of stupid business people?
Where is this country heading?
Comment by peterlepaysan — July 18, 2010 @ 10:38 pm
I like that first graph, georgedarroch:
http://www.thestandard.org.nz/wp-content/uploads/2008/03/average-weekly-earnings-800.jpg
From that graph you could easily assert that National undertook all the hard, unpopular reform and, just as it was beginning to pay dividends, we dumped them in favour of the commies. Eh?
Comment by Clunking Fist — July 19, 2010 @ 1:55 pm
Nothing to do with the massive world recession, then?
Try to keep up.
- Comment by dontsurf
http://offsettingbehaviour.blogspot.com/2010/02/youth-rates-revisited.html
Keep on keeping up Dontsurf…
Comment by Phil — July 19, 2010 @ 2:28 pm
look up statistics on productivity and real wages in developed countries over the past two or three decades
I’d love to, really, I would. But, productivity statistics are a comparatively new dataset, and there are as many different ways of measuring productivity as their are countries producing it.
Comment by Phil — July 19, 2010 @ 2:42 pm
I would quite like to see compulsory redundancy packages being reinstated. Why don’t we have this anymore?
Comment by Troy — July 20, 2010 @ 10:56 am