25 November 2005

Employment Law Alert

Government briefings from the Treasury and the Department of Labour show Labour's rigid employment laws will only add to the problems facing business as the economy slows.

Labour's employment laws make doing business in New Zealand unnecessarily hard and, subsequently, have left us lagging behind our major trading partners.

"Our labour productivity is low by OECD standards, and significantly behind that of Australia. Indeed, every OECD country with higher per capita GDP than New Zealand has higher labour productivity. Lifting labour productivity is the central challenge for generating long term sustainable growth."

- Department of Labour Briefing paper, p.9

In fact, Australia's productivity growth is 2.0% to 2.5% per annum (On average over the past 10 years) and ours is 1.0% to 1.5% over the same period. That is the single reason why Australian incomes have risen faster than New Zealand. Whatever economic growth New Zealand has had went into increased workforce participation, not making existing workers more productive.

Treasury warns about problems ahead if the economy slows down:

"The agreed policy to increase statutory annual leave entitlements to four weeks in 2007 will increase employment costs and reduce potential labour supply. However, it is too early to make an assessment of the economic effects of other changes. Individually most are unlikely to have substantial negative effects on firm productivity - but their cumulative effects may be more significant, particularly in an economic downturn".

- Treasury briefing to the incoming minister, p. 26

The ANZ National Bank November business outlook survey, which is widely reputed as a good measure of future economic activity, shows business confidence has slumped to a 17-year low.

It's time for Labour to pull its head out of the sand and admit that business is not the enemy. A confident and productive business sector is the only defence against economic hardship.

What I'm doing about it

National's approach to employment is about providing the essential flexibility to enable productivity gains that match those of our closest competitors.

I am currently preparing a private members bill to provide for a 90-day probation period for new workers and their employers. That means employers won't face the hassle of personal grievance procedures. It will make it easier to employ people who need a chance to get started. It will simply put us in the middle of OECD practice. At the moment, only New Zealand and Denmark do not have probation periods. During the election campaign, both New Zealand First and United Future thought that this was a good idea. Now they will have the chance to make good on their promises.

ENDS

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