NZ has the most deregulated labour market

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#TPPANoWay sovereignty objections apply equally to @ILO conventions

New Zealand has signed and ratified dozens of International Labour Organisation Conventions dating back to 1921. They all fetter the sovereignty of New Zealand. As a member of the ILO, New Zealand is required to report on its application of ILO Conventions.

That limitation on the sovereignty of New Zealand is no more and no less than in an international trade agreement. New Zealand can renounce an international trade agreement and has renounced nine International Labour Organisation conventions.

Jane Kelsey makes the following points about the legal implications of the Trans-Pacific Partnership agreement:

The 30 chapter Trans-Pacific Partnership Agreement (TPPA) constrains domestic law and policy at central government level, and in places by local government and SOEs, in diverse areas beyond traditional aspects of international trade.

…The TPP provides cumulative opportunities for foreign states and corporations to influence domestic decisions which may be burdensome and intrusive.

The exact same objections apply to the ILO conventions. The union movement does not hesitate to argue that the democratic process in New Zealand should be overridden because the proposal at hand purportedly conflicts with an ILO convention.


For example, when the government was choosing to deregulate collective bargaining, the sovereignty of Parliament was questioned because of an ILO convention. Helen Kelly, CTU President said:

in Parliament on 4 June, the Minister was asked if he agreed with advice from officials that the ability for employers to opt out of multi-employer bargaining may breach our obligations under ILO Convention 98 on the right to organise and collective bargaining.

…There is no point attending such an important UN ILO conference at the time your Government is being advised it is breaching its undertakings to that very organisation…

The CTU President also referred to the regulatory impact statement prepared for that collective bargaining legislation:

The paper also points out that these changes open NZ up to international examination by the International Labour Organisation (ILO) for non-compliance with Convention 98 – on the Right to Organise and Collectively Bargain, which New Zealand has signed up to.

Helen Kelly says “at least four of the proposals are deemed to be inconsistent with our international obligations, and two of them are classified as uncertain. Why the Government wants law changes that damage our international obligations is unclear.”

Council of Trade Unions submissions to minimum wage reviews have at least a dozen references to ILO conventions and the requirement to honour their provisions.


Posner and Goldsmith rightly argue that international law is a product of states pursuing their interests on the international stage. It does not induce states to comply contrary to their interests. The possibilities for what it can achieve are limited.

Government sign-up to various international agreements depending on their political priorities. You cannot complain that governments that you did not vote do what government you voted for also did, which was sign up to international agreements that suited their political agendas. The solution is to work harder to win the next general election.

As for opposing trade agreements on sovereignty grounds, it is rank hypocrisy for the union movement to do so given the number of times it cites international labour agreements when it suits them and seeks their inclusion in trade agreements to raise labour costs in developing countries.

US, Danish and NZ long-term male unemployment @grantrobertson1 @nzlabour

https://twitter.com/KiwiLiveNews/status/688503382181449728

My search for an example of how Danish flexicurity might have an advantage over the status quo in the New Zealand labour market is still to yield results. Danish flexicurity is no better than New Zealand and often worse in keeping long-term male unemployment rates down as the charts below show. The flexicurity model combines flexible hiring and firing with a generous social safety net and an extensive system of activation policies for the unemployed.

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Data extracted on 18 Jan 2016 21:55 UTC (GMT) from OECD.Stat.

The charts above and below do show is that a more generous social safety net for the unemployed introduced with the onset of the Great Recession in the USA was followed by a sharp increase in the incidence of long-term unemployment.

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Data extracted on 18 Jan 2016 21:55 UTC (GMT) from OECD.Stat.

Danish, NZ, UK & US statutory protections against layoffs @grantrobertson1@nzlabour

[Tweet https://twitter.com/KiwiLiveNews/status/688503382181449728 ]

Denmark is all the go in the New Zealand Labour Party as a model for labour market flexibility despite the fact that it is much more heavily regulated than either New Zealand or the USA.

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Source: OECD Indicators of Employment Protection – OECD.

Further evidence of the dynamic, deregulated nature of the New Zealand labour market

The chart below shows that New Zealand is far more flexible than Western Europe and is pretty near the USA in terms of people moving in and out of the unemployment pool every month with great ease. There are very high outflow rates from unemployment among the Anglo-Saxon and Nordic economies. The economies of Continental Europe stand in stark contrast. Unemployment outflow rates in these economies lie below 10% at a monthly frequency.

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Source: Unemployment Dynamics in the OECD, Elsby, Hobijn  and Şahin (2013).

How flexible is the New Zealand labour market

The first chart below shows that NZ is the 4th most deregulated labour market for individual dismissals.

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Source: OECD employment protection index

The next figure below shows that NZ is top of the world for deregulation of lay-offs and redundancies.

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Source: OECD employment protection index

The chart below shows that New Zealand is far more flexible than in Western Europe and is pretty near the USA in terms of people moving in and out of the unemployment pool every month with great ease.

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Source: Elsby, Hobijn  and Şahin (2013).

There are very high outflow rates from unemployment among the Anglo-Saxon and Nordic economies. The economies of Continental Europe stand in stark contrast. Unemployment outflow rates in these economies lie below 10% at a monthly frequency.

A major labour market reform in recent years in New Zealand was introduction of the option of a 90 day trial for new employees, initially in small businesses and then in all businesses.

The UK recently extended its trial period from one-year to two-years. Trial periods are common in OECD member countries.

There is plenty of evidence to back-up the notion that increased job security leads to less employee effort and more absenteeism. Some examples are:

· Sick leave spiking straight after probation periods ended;

· Teacher absenteeism increasing after getting tenure after 5-years; and

· Academic productivity declining after winning tenure.

The MBIE research into the actual operation of 90-day trials was highly favourable in terms of increased employment, the hiring of riskier applicants and lower costs of ending bad job matches (about 15-20% of trials did not work out). These outcomes are the usual importance of a test drive argument for employment trial periods.

Interestingly, the MBIE research also found that some employers hired new employees on 90-day trials for positions about which these employers were uncertain might be profitable. But for the option of the trial period, these jobs never would have existed.

This suggests that in some firms, 90-day trials are a decisively cheaper alternative to hiring an employee and perhaps making them redundant later if the new position does not pay for itself. No one’s fault: the market just did not sustain the expansion in staff as expected.

The MBIE research shows that winners from 90-day trials are new labour force entrants, the unemployed and beneficiaries, migrants and labour force re-entrants such as mothers.

I kept note of an interesting press report adding to this where Hospitality New Zealand Wellington president Jeremy Smith said he had hired dozens of staff he would not otherwise have considered. Because of the transient nature of the hospitality industry, it was often difficult to check references so a trial period “levelled the playing field”.