The first chart below shows that NZ is the 4th most deregulated labour market for individual dismissals.
Source: OECD employment protection index
The next figure below shows that NZ is top of the world for deregulation of lay-offs and redundancies.
![clip_image002[7]](https://utopiayouarestandinginit.com/wp-content/uploads/2014/07/clip_image0027_thumb.jpg?w=668&h=418 "clip_image002[7]")
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.
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”.
![clip_image002[7]](https://utopiayouarestandinginit.com/wp-content/uploads/2014/07/clip_image0027.jpg "clip_image002[7]")
Utopia, you are standing in it! 
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