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No Jobs is Government’s Fault, Not Recession’s

Written By: - Date published: 12:12 pm, January 17th, 2011 - 25 comments
Categories: economy, employment - Tags: ,

The “Great Recession” saw a greater spike in unemployment in New Zealand compared to its drop in GDP than everywhere but economic basketcase Spain.

An ILO study shows that whilst GDP slumped, unemployment did less so in all but 2 countries across the world: NZ and Spain.  The Government, far from being relentlessly focussed on jobs, or even catching Australia, has ensured with its policies that workers were laid off in swathes.

New Zealand’s “flexible” employment laws make it too easy to sack employees.  Rather than treating them as people, businesses are encouraged to think of labour as just another resource, to be thrown on the scrap-heap when no longer required.  Overseas businesses are made to look after their employees in good times and bad – if you employ someone you have a duty of care and security in return for their efforts.  It may sound quaint, but humans are to be valued.

Sure people are still sacked or made redundant, but not just on a whim.  Redundancy legislation means it costs to get rid of people, so you don’t sack them for six months and get them back on again when the business picks up, leaving individuals to suffer the pain.  It makes it slightly harder to employ people, as a few additional costs are considered, but it gives the far greater stability that people (real people, not numbers on a balance-sheet) need.  Ultimately businesses will still employ people on the basis that they have work that needs doing, so it has only a slight depressing effect on re-employment after recession, and provides higher quality jobs and employment.  It also makes more sense for businesses as a whole too – employed people are much better customers than unemployed ones.  But, like higher wages, it’s a prisoner’s dilemma for businesses – they do best if they can pay low wages and sack people on a whim and everyone else pays high wages and keeps their staff employed; the best for the country is if everyone stays working in well-paid jobs, and the worst is if everyone pays badly and sacks on a whim.

In Aotearoa we have to deal with many people being rapidly laid off, and the disruption that causes.  Younger generations are shut out of work for longer and careers are interrupted.  If people have skills they will often head overseas, to be lost to the NZ economy forever.

The Business Roundtable, seeing that light regulation hasn’t worked, calls for even more of the same.  Roger Kerr says we should cut welfare to provide ‘incentives’ to people to work, re-introduce youth rates and cut the minimum wage.  Because the low-wage economy and competing with China and Mexico is really going to get us to the top of the OECD ladder and a better life for kiwis.  He may hope it provide a better life for him, but then it turns out inequality harms the rich too.

The CTU are much more sensible – endorsing a government stimulus to help the economy through difficult times, more workplace security, better on-job training, and indeed, setting out a more cogent economic plan.

25 comments on “No Jobs is Government’s Fault, Not Recession’s ”

  1. Deadly_NZ 1

    Yep The CTU’s economic plan is very good, unfortunately it’s the ultimate in HERESY for Shonky and his rich mates. You can hear the jaws grinding from here as they read it.

    • bbfloyd 1.1

      you don’t honestly think key will read it, do you? why should he? all he needs is a sheet with the answers for the press. they never ask the hard questions, so no need for any more than a summary.

    • Fisiani 1.2

      Unemployment in NZ was predicted to reach 11% due to the world recession and the effects of 9 years of economic mismangement. It never reached such heights. It is only 6.4% and will probably fall further with the massive rise in exports and the productive infrastructure expenditure.

  2. Lanthanide 2

    It is far-fetched to lay all of this at the feet of “flexible employment law”. The US has some of the most flexible labour laws in the world – employment “at will” means your employer can fire you, on the spot, with no legal restitution for (officially) “no reason” or any non-protected reason, such as “your sales results were only 199% of what I demanded you achieve instead of 200%, you’re fired”.

    So if the US has the most flexible employment laws, and apparently the drop in employment is because NZ has flexible laws, how come the US didn’t have a greater drop in employment? I’m sure there are other countries that had a lower drop than NZ but that also have more flexible laws than NZ does.

    • Bunji 2.1

      There are other factors to be sure, but there aren’t that many developed countries with more flexible labour laws than us. The US is a prime example, but they do have a lot of corporations where past union action has created strong redundancy packages that still mean it costs to get rid of people. They also tend to have various insurance packages (employment & health) as part of standard employment practices. And they also have unemployment of 10%, despite the dodgy way the US counts unemployment statistics (you only get the dole for 6 months max, and then you rapidly fall off the stats). So they may have sacked the staff before the recession even started…

      • Afewknowthetruth 2.1.1

        The official US unemploymnet rate is a joke since it does not count those unemployed for over 2 years and therefore represents around half the true rate,

        Relatively well paid jobs have been replaced by poorly paid service secrtor jobs as manufacturing has been systematically shifted to low-wage economies in Asia. .

        The other often overlooked factor is weekly hours worked, which have dropped in most western economies..

        A full -ystem inplosion is coming, sooner rather than later.

    • Roger 2.2

      It is not about the drop in employment numbers, it is the drop in employment numbers in relation to the drop in GDP. The US has an unemployment level running at almost 10% from below 5% in 2007. Link is here:
      http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD

      The US also suffered significantly higher loss in GDP than New Zealand.
      http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?symbol=USD

      The US had a greater drop in both unemployment AND gross domestic product.

  3. Is the interpretation of NCEA results by prospective employers putting some employers off employing youth? Without an employment record, academic achievement is all that an employer has to go on.

    • Craig Glen Eden 3.1

      It shouldn’t do Treetop with NCEA the employer can look at all the persons/students results and as an example see that they are very could at Maths but they failed a certain area say algebra. So ok we dont use algebra in our work place so no worries. People who say negative things about NCEA I find have not taken the time to sit down and get to grips with it, its actually very comprehensive and you can tell if someone can apply them selves and has critical thinking skills or if some one is good at doing exams but lacks application.

      Cambridge as a comparison is an old out dated form of teaching and testing and gives you little info in comparison.

  4. JJ 4

    Spain has some of the LEAST flexible employment laws in the world – and yet its unemployment rate is 20% (more than three times our 6.4% or w/e).

    • prism 4.1

      JJ- I would like to look up that info – can you provide link to where it is in the item?

        • Bunji 4.1.1.1

          That article shows extreme flexibility for some of the workforce – hence why their jobs could be shed so quickly. A lot employed as contractors (rather than permanent employees), so that a lot of workers have too few rights, whilst others are very secure. I don’t see how it proves your point.
          The money quote from the article:

          A two-tier labour market provides flexibility, but on the back of an underclass of temporary workers.

          I’m certainly not holding up Spain as an example of where our economy wants to go, with a bankrupt state and an unemployed underclass after probably the worst of the housing bubbles.

          • JJ 4.1.1.1.1

            But the whole reason employees are on temporary contracts is due to the total (and logical) unwillingness of companies to hire permanent workers.

            Massive unintended consequence.

            Bad employees on permanent contracts are not being fired whilst temporary contract workers are being fired, regardless of if they are good or not, simply because that is the only way to save money. The inefficiencies of this are hampering the recovery.

            • Colonial Viper 4.1.1.1.1.1

              Ah, you’re describing a class of incompetent business people who don’t know how to performance manage their staff, even though they get paid the big bucks to do so.

              • JJ

                What on earth are you on about Viper, ALL the staff in Spain on permanent contracts are incompetent managerial staff? Here I was thinking it was a generational thing, those already on permanent contracts (i.e. the middle aged +) and those who came into the market at a later point (i.e. in the young)

  5. Colonial Viper 5

    I want flexible employment laws so I can sack as many staff as I need to if the business climate deteriorates unexpectedly.

    I don’t want to have to take into account planning and budgeting to keep staff on if that happens, its too much responsibility and business burden, I just want the right to fire them.

    Later on when things might be looking up, I’d like to be able to take staff on at no risk – if it looks like the economy is turning down again I want to be able to lay the new staff off on the spot, no questions asked.

    That’s why the 90 day right to fire law should be extended to at least one year.

    NZ needs a totally free and unregulated market in labour and no minimum wage too so that my business can use people as a commercial resource, a commodity to be traded at will. Also best if we have at least 5% unemployment, keeps workers grateful for what little you do offer them.

    • JJ 5.1

      The natural response to this is a satirical post, pretending to be an entitled worker who wants governemtn enforced infitite job security so they do not have to take responsibility, e.g. by account planning and budgeting, so if they lose there job they will have a safety net untill a new one is found.

      This employee wants the 90 day trial peroid to be abolished, as they would like to slack off immediately after starting work.

      In fact, this employee wishes that the labour force was so regulated that they, a lazy useless employee, would have all the same benefits, security and pay as a talanted and hard working employee.

      Of course, mindless rhetroic trolls only get us so far.

      • Colonial Viper 5.1.1

        The natural response to this is a satirical post, pretending to be an entitled worker who wants governemtn enforced infitite job security so they do not have to take responsibility, e.g. by account planning and budgeting, so if they lose there job they will have a safety net untill a new one is found.

        That’s right, I agree that we need to get rid of all job security and employment protections, this is a package of reforms which is going to turn our country into an economic powerhouse. That gap with Australia will be gone by 2025, and putting NZ workers under the boot is the only way to accomplish it.

        We need a free market in labour right now so that these freeloading entitlement pricks you talk about get taught a lesson in self responsibility, wow they won’t forget when they lose their family home and their spouse has to queue up at the food bank. Serves the losers right if they can’t deal with a bit of self budgeting.

        I cannot think of a happier society, for myself, than one where every worker has no job security and has to grovel for what little that they get from my hand. Don’t know about you, but it definitely fills me with a sense of pleasure and accomplishment.

        • JJ 5.1.1.1

          I think you missed the point of my post.

          • McFlock 5.1.1.1.1

            You missed the fact that a halfway competent manager can manage the staff member who slacks off on day one just as effectively as they manage the staff member who survives their 3-month fire at will period. Whereas a good employee has greater ability to leave a crap manager than a crap employee.

            crap employee + good manager = improve or leave, no matter what the employment period.

            crap manager + 90 fire at will = high staff turnover that damages the company.

            good employee + crap manager = high staff turnover that damages the company + former good employees go to work for your competitor.

            good employee + 90 day fire at will = crap manager + poor job security = high staff turnover that damages the company + greater likelihood that former good employees go to work for your competitor.

  6. TonyP 6

    Meanwhile Mr Smile and Wave spends his day helping commentate at the cricket. Nice for some.

  7. Rusty Shackleford 7

    “if you employ someone you have a duty of care and security in return for their efforts.”

    The terms and conditions set out in the contract and in labour law?

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