David Seymour: Is Labour working?

Opinion 06/05/2019

By David Seymour, ACT Party Leader.

The Labour Party was born out of the trade union movement and activism for workers’ rights in the late 1800s and early 1900s. Today, Labour says it wants an “economy that provides well-paid, full-time and long-term jobs”. 

It’s hard to argue with that.

But good intentions alone don’t produce good outcomes.

Milton Friedman once wrote “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” 

So, looking beyond Labour’s intentions, what results have they achieved for workers? 

From today, firms with 20 or more employees will no longer be allowed to hire workers on 90-day trial periods, an ACT idea. 

This will increase the cost and risk associated with hiring workers because, if a firm discovers they’ve taken on a worker who can’t perform or doesn’t fit in, it’s a costly and difficult process to manage their performance and let them go.

Making it harder to let workers go means firms are less likely to take them on in the first place.

90-day trials give firms the opportunity to take a chance on workers they wouldn’t otherwise. A new survey of almost 1000 firms confirms this. 77 per cent of firms said trial periods were extremely important. 94 per cent of employees employed on 90-day trials remained with firms for longer than 18 months. 

Young or low-skill workers have the most to gain from being employed on a trial basis.

A government that cared about workers would make it easier for firms to give them a job so they can live independent and productive lives. 

On Friday, the Government announced changes to our welfare system. One of the changes will allow people on a benefit who also work to earn more from work before the amount they receive in benefits is reduced by Work and Income. 

But this will actually make it more difficult for people to get off the benefit because the combination of benefit and work pays more than work alone.

It will further encourage welfare dependence.

300,000 – or one in nine – working-age adults are already on a main benefit, yet Labour and the Greens will make it even easier for people to remain on welfare. 

Labour has also raised the minimum wage to one of the highest in the developed world, which will cost 11,000 jobs because firms will hire fewer workers. 

The Government’s so-called ‘Fair Pay Agreements’ will mean everyone in an industry gets the same collective agreement. These national awards will take us back to an era where wages aren’t linked to effort and initiative. People will spend more time complying with collective agreements and less time producing.

It is a misguided policy that will destroy incentives, tie people up in red tape, and make us all poorer.

On the face of it, banning trial periods, a more generous welfare system, forcing firms to pay higher wages, and requiring all workers to sign up to a collective agreement must be good for workers. 

But, if we follow Friedman’s advice and examine outcomes rather than intentions, we can see that Labour has been a disaster for workers.

Ultimately, to improve the lot of workers, the Government needs policies that will raise productivity and wages, and grow the economy. Labour has no such plan. 

A few weeks back, I wrote about how New Zealand could achieve higher living standards. New Zealand has high living standards compared with other countries of similar GDP per capita. But if we want greater wellbeing our best strategy is not to spend money better but increase our GDP per capita. We can only do that by raising productivity. 

Unfortunately, productivity growth is in the tank, and has been for a decade.

To some extent this is a global problem but New Zealand is among the worst. What’s more, countries that are behind normally have more scope to grow faster. Not us. One option would be for Government to improve the quality of regulation, the competitiveness of the tax system, and the skills of the workforce. 

Sadly, the current Government is either ignoring or actively damaging our policy settings in all those areas, and National are promising the same.

That’s why this country needs a party like ACT.

David Seymour is Leader of the ACT Party.