The paper by Motu's Nathan Chappell and Isabelle Sin also found no evidence the policy increased the chance a firm will employ a disadvantaged jobseeker. With special feature audio.
The introduction of a 90-day trial period has had no impact on hiring by New Zealand companies although they are now in widespread use, according to researchers at Motu Economic and Public Policy Research.
Trial periods of up to 90 days were widened to cover all employers in April 2011, having been introduced in early 2009 to initially cover firms with fewer than 20 workers. They were a response to the global financial crisis and intended to boost the economy, create jobs, and increase opportunities for disadvantaged jobseekers.
The paper by Motu's Nathan Chappell and Isabelle Sin also found no evidence the policy increased the chance a firm will employ a disadvantaged jobseeker, such as a young adult or recent migrant, across the economy and in industries that are high users of trials.
On the other hand, the research didn't find any evidence that 90-day trials had increased short-term hiring or made workers more reluctant to change jobs.
The main effect of the policy was to reduce firms' dismissal costs while requiring many employees to shoulder an increase in perceived initial uncertainty about their job security for three months after being hired, the researchers found.
Using individual-level linked employer-employee data from Statistics New Zealand, the Motu study found there had only been a 0.8% increase in hiring on average across all industries since the introduction of trial periods. The paper found most new hires last only five months at between 43% and 47% of firms.
Trial periods appear to be widely used and yet dismissals within the 90 days are relatively infrequent, the paper said.
"We interpret our results as showing that any effect of trial period policy on firm hiring or dismissal behaviour has been economically insignificant at the economy level," the researchers said.
There are a number of possible explanations for the overall lack of policy effect, they said, including high training costs for new employees making firms reluctant to dismiss new employees who turn out not to be good matches, the costs of any replacement hire, or that trial periods simply replaced other types of employment arrangements such as fixed term contracts and casual work.
The Council of Trade Unions says the research commissioned by the government is consistent with what working people have been saying – that the 90-day "fire at will" periods is a failed experiment.
The CTU waged a campaign against the trial's implementation and secretary Sam Huggard says the trials don't give people a "foot in the door".
"The research shows there is no evidence for the government's promise that this law would give vulnerable workers a better chance of a job. It just makes them more vulnerable."
The findings contrast with previous research into trial periods in New Zealand. Three reports based on surveys conducted in late 2009, late 2011, and 2012/2013 together showed employers support the trial period policy and many claimed it caused them to hire people they otherwise wouldn't have hired.
A Ministry of Business study in 2014 also found one-third of employers had hired people they wouldn't have otherwise have taken on because of the 90-day trial period reducing the risk and some had made it a standard part of their employment contracts. The biggest uptake according to that study was in the building industry, retail and accommodation industries.
"Our finding that trial period policy had no effect on firm hiring behaviour on average is perhaps surprising in light of the enthusiasm for the policy that firms show in the surveys, and their statements on its effect on their hiring, " the Motu researchers said. "However, note that firms may overstate the extent to which the policy affected their hiring behaviour because they don't actually know how they would have hired in the counterfactual world in which the policy was absent. Because the policy reduces their costs, they may respond positively to questions about it in an inadvertent or even deliberate attempt to influence future policy."
RAW DATA: The Effect of Trial Periods in Employment on Firm Hiring Behaviour (PDF)
(BusinessDesk)
