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90-day Trials: What Does the Research Tell Us?

The Government is in denial over the failure of the 90-day trials. New research commissioned by Treasury found that it did not increase employment or help disadvantaged workers. The Government now denies those were its objectives. Its professed commitment to evidence is selective and doesn’t apply when employers’ interests are at stake. A Cabinet paper shows it is encouraging use of the trials and MBIE “has no plans to change its monitoring of the policy”.

The research is carefully designed and uses data covering just about every firm and employee in New Zealand. In statistical terms its conclusions are very reliable. In summary the research found that as a result of 90-day trials becoming available:

  • Hiring did not increase: “we find the policy effect to be a precisely estimated zero”.
  • There was “weak evidence” of an economically significant increase in hiring for Construction and Wholesale trade. I suggest that could be the Christchurch earthquakes.
  • There was no evidence of a reduction in duration of employment or increased layoffs.
  • There was no evidence people were less likely to move to a firm they hadn’t worked for.
  • Low earners were no more or less likely to be hired than high earners.
  • There is no evidence that people from disadvantaged groups were more likely to be hired (over eight different groups were checked).
  • Why no effect? After all, 13,700 employers sacked at least one person on a 90-trial in the most recent year surveyed. Perhaps because employers just hire the number of people they need; or that they previously used other ways (lawful and unlawful) to dismiss people.

However there are some things the research could not tell, including whether people on 90-day trials were treated better or worse, how they felt about their experiences, and longer lasting impacts. Unions have seen the hurtful impacts of unfair treatment on people. Even MBIE’s research acknowledges it. The trials encourage a lazy command-and-control approach to employment relations which reduces trust and confidence. Local research shows people on 90-day trials get much less employer-funded training. Other recent research shows weak protection against dismissal can lead to poorer productivity and less innovation.

The 90-day trials policy is ineffective in meeting its stated objectives. It is short-sighted and harmful to employees, good employment relationships and productive workplaces.

Download the full bulletin: CTU Economic Bulletin 180 – June 2016.