Bringing back 90-day trials is not supported by evidence

Sunday, 5 November 2023

Richard Wagstaff is president of the NZ Council of Trade Unions.

OPINION: 'Yes, we will bring back 90-day trials. We think that's a good way for an employer to take on an employee.” Those are the words of Christopher Luxon, the prime minister-elect. National, ACT and New Zealand First have committed to reintroducing this policy, which will see all firms being able to fire new workers without good cause. But where is the evidence that supports it?

Evidence won’t be found in the advice produced by Motu for Treasury in 2017. They found “no evidence that the ability to use trial periods significantly increases firms’ overall hiring”. At the overall economy level it’s perhaps not that surprising, since the policy was primarily promoted as providing a pathway into paid employment for people who aren’t already working.

Sadly for its supporters, the Motu report goes on to say, “We also find no evidence that the policy increased the probability that a new hire by a firm was a disadvantaged jobseeker for a range of definitions of disadvantaged jobseeker: beneficiaries, jobseeker beneficiaries, non-workers, recent migrants, youths under 25 years old, Māori or Pasifika under 25 years old, or education leavers. This result holds both over the economy as a whole, and in the high-use industries”.

That’s pretty emphatic. Perhaps then the policy supports people into temporary work? Some workers can use temporary work as a means of accessing more permanent employment. Again, the report reads, “the policy seems not to have substantially increased short-term hiring”.

So no increase in employment. No increase in work for marginalised workers. No increase in short-term hiring. Who does benefit from this policy?

On this, the research is clearer. “We conclude that the main benefit of the policy was a decrease in dismissal costs for firms, while many employees faced increased uncertainty about their job security for three months after being hired.” So the biggest benefit of the policy was to make it cheaper to fire workers.

That’s not exactly a compelling case for change. Particularly a change that is most likely to impact young people, already disadvantaged workers, and the unemployed. But then perhaps the economic context has changed. Is the need more pressing now?

Again, the evidence here doesn’t suggest any current need to bring back this policy. When 90-day trials were first introduced, unemployment was 6.6%, against just 3.9% now. During the same period, the employment rate has increased from 63.8% to 69.4%, which is just shy of the record set in December 2022. Right now, there are more people in work, working more hours, and fewer people are out of work. For those who believe in markets, the labour market seems to be working right now. Given that, what problem is this trying to solve?

The analysis to date makes it difficult to believe that the case is rooted in any economic evidence. When then prime minister John Key was presented with the evidence from Treasury, he simply dismissed it, relying instead on anecdotal support that the law was effective. It is easier to believe that the reintroduction of 90-day trials is simply giving employers even more power over their employees.

Stephen Blumenfeld, Director of the Centre for Labour, Employment and Work at Victoria University, has previously noted that “union members were less likely to be hired under trial periods, and the concern was that people who joined a union or opted for a collective contract could be dismissed”.

Ninety-day trials target the requirement that employers must engage new employees with the same terms and conditions as the collective agreement on that site for the first 30 days at work. After that, the employer is “free to negotiate and agree on different terms and conditions” – for which, read worse. Lots of workers choose to join the union at that point. The 90-day trial law therefore empowers unscrupulous employers, while stifling workers’ ability to freely exercise their right to join a union.

As one employer noted on the possible return of 90-day trials, “there’s the risk of it being used as a weapon”, and that some employers will “see the law as “90 days of labour”. Together with the rollback of Fair Pay Agreements, and risks to reforms to contracting, there is a compelling case that this reform is simply designed to create a more insecure, compliant, and less well-organised workforce.

Given that New Zealand already has one of the most relaxed sets of labour laws in the developed world, 90-day trials would put Kiwi workers at another serious disadvantage. The OCED places New Zealand just behind Paraguay in terms of employment protections for dismissed workers. A lack of income insurance and shockingly low rates of welfare payments mean that many already find themselves in insecure work and open to exploitation.

Ninety-day trials don’t work as the incoming government claims. The only real effects 90-day trials have are detrimental, and that is according to the Government’s own evidence. Reintroducing them will be a step backwards, and only put more pressure on young workers.