Thursday, 3 February 2011

Easy to fire means easy to hire

In 2009, National implemented a policy making it easier for small employers to fire workers within a 90-day trial period. Most economists would reckon that barriers to firing are really barriers to hiring and so the policy ought to make it more likely that a company will try on a new worker. Bill Kaye-Blake at NZIER's preliminary analysis says that firms subject to the policy had a smaller decrease in hiring during the recession than did larger firms not subject to the policy.

That's consistent with what we'd expect. But we'd also want to know:
  • What was the pattern in hiring declines in prior recessions by firm size? Are larger or smaller firms more likely to freeze hiring plans? If it were previously the case that small firms were quicker to cut hiring, NZIER's estimates understate the real effects.
  • We need to know something about firings at those firms as well. I'd expect somebody at one of the leftie blogs to make the claim that those firms were hiring more because they were firing more and that it's all just churn. That seems very unlikely. But it would be nice to have the data.
Nice stuff NZIER. HT: Bernard Hickey.

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