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Why the Redundancy Protection Bill matters

Written By: - Date published: 11:00 am, September 17th, 2009 - 23 comments
Categories: workers' rights - Tags: , ,

Over at Red Alert, Darien Fenton tells the story of just one of the thousands of workers currently being laid off without redundancy compensation.

Really brings home how important it is for the Government to back the Redundancy Protection Bill:

Tanya has worked for Chong Newztel for three years and some of her workmates had been working there for up to 25 years.

In January, she and her workmates were told that the company was up for sale and eventually it was bought by an Australian company, Media Monitors.

The workers were told their jobs were safe and not to worry. At the end of March, they were given a termination notice from Newztel. Tanya received hers on the 26th March and her job was due to end 5 days later on 31 March.

This was despite their contract saying they should be given four weeks notice of redundancy.

The new company came in and offered everyone three month fixed term contracts. The workers were told if they didn’t sign the contracts they could leave immediately because they would be trespassing and they signed, because they believed they had no other option.

They were repeatedly told that Media Monitors could continue to employ them after the three months expired. The workers had no idea what was happening until one morning, at the end of July when the contract expired, managers came around and said ‘we don’t need any of you’.

The workers were told to pack their bags and go home.

They are now seeking the four weeks notice from Chong Newztel through the Employment Authority.

Darien lays out how the Redundancy Protection Bill would have helped Tanya:

1. The four weeks notice would be enforceable.
2. Tanya would have been entitled to compensation of 4 weeks pay the first year and another 4 weeks pay for the additional two years she worked for the company.
3. Chong Newztel would have had to pay.

Sounds fair to me, and I’d imagine to most New Zealanders too. Time for the Government to get off the fence and back the bill.

23 comments on “Why the Redundancy Protection Bill matters ”

  1. snoozer 1

    It’s not right that people who have worked hard and find their job disappears, through no fault of their own, should be left with nothing to tide them and their families through.

  2. ben 2

    I don’t understand. Sounds like a breach of contract to me, with remedy available through courts or the raft of employee protection already in place in this country. Why the need for additional legislation?

    This is legislation that adds costs for employers. Now it’s all very well to argue they can afford it, but there is no free lunch, and they will respond quite predictably to increases in the cost of letting an emploee go by not hiring some workers in the first place. That’s the context that is essential for weighing up the value of this legislation. Oddly, that’s missing from your otherwise excellent anecdote.

    • Eddie 2.1

      Some points in response:

      1) Redundancy protection is not provided for in legisation and most Kiwis don’t have anything in their employment contract. That’s why the bill is needed.

      2) 80% of union collective agreements already have redundancy protections and it works fine for them.

      3) The Australian government has just brought in the same protections as recommended in Darien’s bill. It’s working fine over there, as it is in nearly every other developed country. In fact Australia’s unemployment rate is now lower than NZ’s.

      4) There’s no evidence redundancy protections lead to higher unemployment. In fact as No Right Turn has pointed out there’s plenty of evidence to the contrary.

      5) Even if we accept your argument it’s no reason for the Government to vote against it in its first reading. Arguing over the details is what the select committee process is for.

      • ben 2.1.1

        Eddie

        1) Redundancy protection is not provided for in legisation and most Kiwis don’t have anything in their employment contract. That’s why the bill is needed.

        I’m pretty sure just because something isn’t in legislation doesn’t make that a reason to have it!

        2) 80% of union collective agreements already have redundancy protections and it works fine for them.

        Fine compared to what? All the people outside the union who can’t get a job? Same for 3. What’s your argument here – labour demand curves don’t slope down? That tax incidence doesn’t fall on the employee? Good luck with that argument, if that’s what you’re saying. Marty G has correctly pointed out those aren’t true. If you’re not going to disagree with marty, then explain the benefit of forcing all employers to offer a benefit to workers that will reduce demand for their labour and be paid for by workers themselves.

        4) There’s no evidence redundancy protections lead to higher unemployment. In fact as No Right Turn has pointed out there’s plenty of evidence to the contrary.

        There’s all the evidence in the world that labour demand is decreasing in price. I haven’t looked at research on redundancy specifically, but its just another tax on labour and, as with all taxes, people and businesses buy less of what is being taxed.

        Or is that Standard’s position that labour demand is increasing in price? Good luck with that.

        5) Even if we accept your argument it’s no reason for the Government to vote against it in its first reading. Arguing over the details is what the select committee process is for.

        Well maybe. I was just pointing out that Tanya probably won’t benefit from this bill. If she doesn’t lose her job, she’ll necessarily have to pay for her redunancy with lower wages than she would have othrwise earned. That’s a perfectly standard result in economics, as Marty G correctly notes.

        • Eddie 2.1.1.1

          I think what you’re arguing makes sense if you’re relying entirely on first year university economic models. When you look at reality though most of your assumptions simply don’t bear out.

          Every time an improvement to wages and working conditions is raised the right screams “it’ll just lead to more unemployment!” – never happens.

          Perhaps you should start dealing in reality rather than abstract theory. Almost every other developed country has redundancy protections and it hasn’t ruined their economies.

          • ben 2.1.1.1.1

            Every time an improvement to wages and working conditions is raised the right screams “it’ll just lead to more unemployment!’ never happens.

            Actually Eddie it does happen. Minimum wage effects on unemployment is possibly the most studied empirical relationship in all of economics, and the evidence is 95% (perhaps 99%?) in favour of negative employment effects from minimum wage. It is only the fact that relatively few are caught by minimum wage that prevents it being more obvious.

            Perhaps you should start dealing in reality rather than abstract theory.

            I can point to research supporting the idea that taxing labour creates unemployment and that employees bear the cost of legislated benefits. That research is based on looking at the real world. What else did you expect?

            The only reason you can accuse me of not looking at the real world is because the model behind your comments is left implicit. But its still a model and as far as I can tell isn’t informed by anything more than your own abstract ideas. So how about YOU drop the abstract theory, for a change?

            Almost every other developed country has redundancy protections and it hasn’t ruined their economies.

            Nobody is saying the economy will be ruined by this, but thanks for the hyperbole. Actually what is being said is that it will predictably hurt the people it is trying to help – not the first time a government program has suffered that problem.

    • lprent 2.2

      Of course you forget to look at the costs to the employees…. What a surprise

      • ben 2.2.1

        Good point. Because the cost of hiring is increased by mandatory redundancy, some will be left unemployed, some will be let go ahead of the legislation taking effect, and those lucky enough to keep their jobs will pay through lower wages on average (perhaps not in direct reductions but in the form of delayed or reduced increases).

        This is a standard result in economics, which is that tax incidence is shared between employer and employee. Forcing employers to pay redundancy is a new labour tax, which will be borne in part or whole by employees.

        Marty G had a post on tax incidence only a month ago that was right in its thrust if wrong in the details, as P Walker pointed out.

        So what’s the point, folks? Higher unemployment, lost jobs, and those left bear some or all the cost of it anyway. Who doesn’t lose from this idea?

  3. vidiot 3

    When Kiwi saver was 1st implement, we opted out of it and instead went for a company policy of providing income protection insurance for all of the staff members. The cost to the company was minimal (less that the 2% that KiwiSaver was going to cost) and we all have that security in place now, should things go wrong.

  4. Monty 4

    Sometimes I wonder why the socialists are just so dim. Can you not consider the consequences of such a proposal. As someone who was made redundant (and without any prior warning on 3 September 2009 it would have been nice to have had a redundancy payment. But the flip side is employment in the first place – such provisions upon employers would mean the employers would simply not hire staff in the first place.

    Tanya would likely be out of work for a very long time simply because on tp of all the other leave and employment provisions (4 weeks annual leave, sick leave, PGs) employers will do anything not to have to employ people. In a micro-economic environment looking at individual cases, this may seem a god thing – but at a marco-economic level it is pure stupidity – just what we have come to expect from the socialists.

    • Tigger 4.1

      Using that argument why are we bothering with any employment conditions at all? Let’s all just work 7 days at 1c an hour while our children are sent to the mines to toil for bread and water.

      Employers need workers – it’s simple negotiation as to what the terms will be. Darien’s trying to improve the terms for the workers. And good on her.

      • ben 4.1.1

        Tigger actually it is not legislation that protects us from 1c wages. Something like 98% of the labour force is paid more than the government says is the minimum. So what else could it be?

        Competition between firms is the driver of those wages. Recognising this is important, because legislation that damages that competition is legislation that damages compensation.

        As you say, employers need workers, and they must offer enough to convince workers to apply to them and not the hundreds or thousands of other firms competing for them.

        Cool system, eh.

        • Noko 4.1.1.1

          98%, eh? Where’d you pull that one from?

          According to the CIA World Fact Book, the working population of New Zealand is:
          >15-64 years: 66.5% (male 1,404,143/female 1,399,530)

          According to a Wikinews article published in 2006 when minimum wage was raised to $11.25 an hour, 119,200 people were affected by this wage raise.

          2803673*0.95 (Working age population, calculating those unemployed March 2009)
          2663489.35/119200 = 22.34 (2 dp) (Working population, divided by those on minimum wage)
          1/22.34*100 = 4.48% (2 dp)

          So, it affects 4.48% of the population, not just 2% as you claim. But even that makes it sound much smaller than it is. I know you like to put faceless numbers on it, but that 119200 human beings it helps when the minimum wage is raised. It’s probably even more than that, but a quick Google didn’t reveal to me the number of people on the sickness benefit, and I didn’t find any articles that gave me more recent figures on numbers of people on minimum wage.

          What you also conveniently ignore, as most free-market economists to-oft seem to is that yes, competition can drive prices lower, and wages higher but there’s nothing preventing collusion between the companies to offer the same lower wage and screw over the people that need to survive.

          • ben 4.1.1.1.1

            Noko, thanks so much. You’re right, the new number changes everything. I will rephrase:

            Something like 96% of the labour force is paid more than the government says is the minimum. So what else could it be?

            Competition between firms is the driver of those wages. Recognising this is important, because legislation that damages that competition is legislation that damages compensation.

            As you say, employers need workers, and they must offer enough to convince workers to apply to them and not the hundreds or thousands of other firms competing for them.

            Cool system, eh.

          • ben 4.1.1.1.2

            So, it affects 4.48% of the population, not just 2% as you claim. But even that makes it sound much smaller than it is. I know you like to put faceless numbers on it, but that 119200 human beings it helps when the minimum wage is raised. It’s probably even more than that, but a quick Google didn’t reveal to me the number of people on the sickness benefit, and I didn’t find any articles that gave me more recent figures on numbers of people on minimum wage.

            What you also conveniently ignore, as most free-market economists to-oft seem to is that yes, competition can drive prices lower, and wages higher but there’s nothing preventing collusion between the companies to offer the same lower wage and screw over the people that need to survive.

            Sorry I forgot about the next bit.

            Noko, in case you hadn’t noticed the reason I’m here is because I think minimum wage is a bad deal for the people affected by it. It is simply childish to believe people who have studied minimum wage oppose it because they don’t care about other people. I cannot recall meeting a single person who opposed minimum wage because they don’t care about people affected by it. In fact I doubt those people exist other than in your imagination.

            There is a body of research available written by people who have looked very hard at all the effects of minimum wage. Much of it written, I imagine, by people who care at least as much about poverty as you do. The research is very strongly (though not entirely) negative in its conclusions. You could try looking at this research. Economics offers many ideas on alleviating poverty, but minimum wage is off the bottom of that list and in another category called ‘exacerbates the problem’.

            Finally: collusion. you’re absolutely right. Another form of market behaviour having a similar effect to collusion is monopsony: a monopoly buyer of labour who uses its size to depress wages. It is a major problem in New Zealand. What are two industries badly underpaid in New Zealand relative to overseas and with a monopoly buyer problem? Education and health.

            As I said, competition matters for compensation.

    • Maynard J 4.2

      I was mocking you yesterday for only looking at the short sighted view, and you are back at it. Should we all get paid less, so we all have jobs? That is what you are ultimately advocating, you socialist.

      Your argument is worthless – we should never agitate for better employment conditions because unemployment will increase. There is no evidence that is the case.

      • ben 4.2.1

        Ironically, Maynard, this legislation will achieve the double of destroying jobs and ensuring those who are lucky enough to keep them will get less take home pay than they otherwise would. This will become apparent in the long term, which is what I take it you care about most.

        Employment conditions can be improved through things other than legislation. The most obvious opportunity is to reduce the friction in moving between jobs, which is substantial thanks to the raft of costs put onto employers. Adding staff exit costs to employers diminishes protection for employees, who will find it more difficult to get other work when stuck with a bad employer. In fact legislation like the forced redundancy will probably interfere with other benefits firms offer. A reasonably standard finding in minimum wage research is that among those lucky enough not to lose their jobs when minimum wages are hiked, the employer compensates in other ways, such as more policing of meal breaks and less generous other benefits. Apart from lost wages and higher unemployment, forced redundancy will probably have these indirect effects too. Simply because these effects are hard to see doesn’t make them less real for those affected.

        There’s no free lunch here, folks: what the government gives will be reliably lost elsewhere, and mostly at the expense of employees.

        • snoozer 4.2.1.1

          I refer you to the hard times website and eddie’s earlier comment:

          Eddie
          September 17, 2009 at 11:46 am
          Some points in response:

          1) Redundancy protection is not provided for in legisation and most Kiwis don’t have anything in their employment contract. That’s why the bill is needed.

          2) 80% of union collective agreements already have redundancy protections and it works fine for them.

          3) The Australian government has just brought in the same protections as recommended in Darien’s bill. It’s working fine over there, as it is in nearly every other developed country. In fact Australia’s unemployment rate is now lower than NZ’s.

          4) There’s no evidence redundancy protections lead to higher unemployment. In fact as No Right Turn has pointed out there’s plenty of evidence to the contrary.

          5) Even if we accept your argument it’s no reason for the Government to vote against it in its first reading. Arguing over the details is what the select committee process is for.

          • ben 4.2.1.1.1

            Thanks for the reference, and a re-post of the text no less.

            You’ll notice I answered Eddie already. I especially liked Eddie’s theory that labour demand is increasing in wages. Oh and his idea that as long as the economy isn’t wrecked it must be good legislation.

            PhD for that man.

  5. jcuknz 5

    The long term solution is that we should have fewer babies, one per couple as in China. Fewer people would mean production would be aimed at the neccessary as opposed to the frivolous created to swell GDP to no great purpose
    I can remember when I married on $30 nett a fortnight. I was made redundant in 1989 and thanks to my union got a good payout, I feel for those today without anything and I guess stand down periods for the dole. Whatever the ecconomics it is completely wrong in human terms for people to be dumped without any consideration.

  6. Maynard J 6

    Ben, I had a read of your various comments, and if I may attempt to sum up the core idea, it is that the employment market is a better way for employees to gain what they desire than through regulation and such.

    Needless to say, I am not a huge fan of the vagaries of the market alone, market failure and the necessity for people to be priced out for an equilibrium to be struck and so on.

    The following is taking your comments further than you have, but you appear to be arguing that employment conditions would be better if there was no regulation at all, no legislated minimums or maximums or conditions or rights or concessions. I am not sure if that is what you believe, but if so, the obvious point is that yes, it would be better for some, but since demand is limited, it would clarly favour the ‘buyers’, and there would be a lot more people who would be worse off at the expense of a few.

    Perhaps that is not your point, and you are happy with a certain level of legislation and regulation – if that is the case, I would be interested to hear where exactly you draw the line.

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