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Early data shows some gains from 90-day trial period

Wednesday 2nd February 2011 1 Comment

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The 90-day trial period for new workers introduced by the Government appears to have lifted total job numbers, the New Zealand Institute of Economic Research (NZIER) says.

In March 2009, businesses with fewer than 20 workers were given the right to dismiss a new employee during a 90-day probation period without risking a personal grievance case. From April the trial period was to be extended to all employers.

In a note published today, NZIER principal economist Bill Kaye-Blake said a preliminary analysis by the institute suggested the extension was likely to have a positive impact on employment.

"In its first six months in 2009, the trial period policy appears to have improved labour market flexibility, increased hiring activity and lifted total job numbers," Kaye-Blake said.

Data was now available to analyse the impacts of the first several months of the policy's operation, and the analysis suggested the policy had a small but positive impact on job numbers at small and medium enterprises (SME).

That was during a time when the labour market overall was shedding workers due to the recession.

In the third quarter of 2009 hirings by employers with one to 19 employees fell by much less than hirings by larger employers.

On average, hiring by SMEs was almost 6 percentage points higher than expected, given the relative performance of other firms and the annual hiring trends, Dr Kaye-Blake said.

Total job numbers for those firms were about 2 percentage points higher.

Kaye-Blake cautioned it was difficult to separate the impact of the policy from wider economic conditions, saying that as more data became available, the policy could be assessed with more in-depth analysis.

If economic conditions between April and September 2009 had been different for SMEs than for larger firms, then the policy impacts noted may be over- or understated.

Despite that, Kaye-Blake said the analysis suggested the policy had been a success to date, demonstrating the value of flexible labour markets to employers and employees alike.

"This success is likely to continue when the trial period policy is extended to all firms in the New Zealand economy."

Labour Minister Kate Wilkinson said it was pleasing to see the early data showed small businesses had effectively used the trial periods.

"It certainly puts into perspective the shameful opposition of Labour and the unions to these jobs being available for workers," Wilkinson said.

With the extension of the trial period policy, she would expect to see increased hiring through larger employers.



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Comments from our readers

On 3 February 2011 at 10:45 am cheryl said:
It would be interesting to know what percentage of people employed were then let go within the 90 day period.
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