1 April 2011

Once again the NZ Institute of Economic Research (NZIER) is claiming it has done research to show that the 90 day law has increased hiring in small firms. But this draws invalid conclusions from a flawed analysis, said the Council of Trade Unions today. There is no basis for NZIER to present these findings as evidence that the 90-day trial period policy has resulted in the creation of jobs.

CTU Policy Director and Economist Bill Rosenberg said: “The report’s claim is unsupportable. NZIER did not know if employers were actually using the 90-day trial. Instead they simply took as an indicator the two factors that (1) a firm employed fewer than 20 staff, and that (2) the time period was after the new law came into effect on 1 March 2009. It confuses timing with cause. We don’t know if any change in hiring practice is caused by the new law, by a statistical artefact, or by the many other changes occurring around that time.”

Other changes which may have affected results include government tax changes and other assistance targeted at small business introduced at around the same time, other stimulus measures which could have assisted small business disproportionately, and upheaval in the economy, international trade and job market in the depths of the recession. It could even be partly a statistical artefact caused by firms shrinking in size.

“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 it acknowledges that there may be other factors causing the apparent change in hiring behaviour, there is no attempt to specify them clearly, let alone control for them. There is 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 percent) among employees hired on those terms.”

“The value of brief reports on items of interest should not be allowed to outrank good scientific method.”

“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.”

ENDS

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