Again with the 90-day trial

13/06/2014 § 2 Comments

Several years ago, New Zealand law was changed to allow smaller employers a 90-day trial period for new employees (yes, you wag, ‘smaller’ is measured in number of employees not in centimetres). In the trial period, employers could simply let people go, no harm, no foul. This provision was later extended to all employers.

The Council of Trade Unions did not approve in 2010:

The 90-day trials are part of a “low road” approach to employment. In the 1990s this road led employers to rely on low wages and skills, building a distrustful and ultimately unsustainable workplace environment. It corrodes the trust required for those wishing to take the “high road” of long term, respectful employment relationships which strengthen productivity, skills, work satisfaction, and wages.

According to CTU President Helen Kelly, it still does not approve in 2014:

“The infamous 90 day trial period is a flop. There is no evidence that 90 day trial periods have led to the creation of a single job. In fact it shows that tens of thousands of workers are being dismissed under 90 day trials each year. There’s not a shred of evidence that trial periods have created any additional employment”

The Ministry of Business, Innovation and Employment released a report this week out of its old Department of Labour group. The report concludes that:

Trial periods have provided greater opportunities for workers to be hired.

What the report does not do is assess the impact of the trial period on overall employment. It says:

A key question in this evaluation is whether employers are confident to take on new staff as a result of the trial period provisions. Answering this with certainty would require a detailed statistical counterfactual comparison between firms that did and did not use trial periods, isolating the effect of wider economic and other factors and over a sufficiently long period. Such an analysis is not realistically possible due to data constraints and a lack of an identifiable ‘control group’, and has not been attempted in this report.

The CTU has used this lack to claim that the government has no evidence that the trial has created jobs. And they have no evidence. Because they haven’t looked.

This is a bit of a problem. If one starts from the point of view that labour market flexibility is good to the extent that it provides employees with opportunities and employers with risk-management tools, then THE key question is whether the trial periods led to (a) increased employment or at the very least (b) more employment for traditionally disadvantaged job-seekers. If the rule change doesn’t improve employment outcomes, then it just looks like a shift of power from one group to another with no compensating benefit.

So, really, the key question for the Ministry is, did it work? And the Ministry just shrugged its shoulders and said, ‘Dunno, beats me, it’s too hard.’

We have been here before. DoL/MBIE has already released a report on the 90-day trial period that did not actually answer the central question. And it led 6 months ago to the same wailing and gnashing of teeth — which I discussed at the time.

Let’s put this issue to rest, already. Can I get an econometrician in aisle three for a clean-up? People are spilling out their prejudices and it needs to be sorted out.

Mr Economist goes to Washington!

12/06/2014 § 1 Comment

Well, may go to Washington.

The big news from my home state of Virginia (sic semper tyrannis!) is the primary to select the Republic candidate for the 7th congressional district. Eric Cantor, leading Republican, lost the primary to David Brat, economist. Way to go, bro’! Let’s see you stick it to those lawyers up on the Hill.

But then one digs a little deeper, and….

“So should there be a minimum wage in your opinion?” Todd pressed.

“Um, I don’t have a well-crafted response on that one,” Brat said, haltingly.

Sorry, what? An economics professor without an opinion on the minimum wage? Such a beast does not exist. That’s like a baseball fan with no thoughts on the designated hitter rule, a physicist with no opinion on string theory.

But then he goes on to explain himself a bit:

“All I know is that if you take the long-run graph over 200 years of the wage rate, it cannot differ from your nation’s productivity. Right? So you can’t make up wage rates.”

Oh, right, that clears it up. Wages cannot differ from productivity, at least not in the long run. Well, that’s easy enough to look up — the Bureau of Labor Statistics does the work for us:


from: Updated charts and data associated with the paper “The compensation-productivity gap: a visual essay,” by Susan Fleck, John Glaser, and Shawn Sprague.

Hey, look at that. Productivity has been running faster than wages since the First Oil Shock Recession, especially since the Volcker vs Inflation Recession of the early 1980s. Well, given the good professor’s theory, we should be expecting a regression to the mean anytime.


In the medium term.

And raising the minimum wage shouldn’t be a problem for the economy, since the productivity is there and has been for 30 years.

I look forward to him sponsoring that bill.


Bonus points: apparently, he is facing off against another professor from the same college, a sociology professor! Disciplinary disputes go prime-time! I’m praying for a cage match.

Bonuser points: as one does, I looked Brat up on Google Scholar, and ran him through Publish or Perish. Professional curiosity. It looks like an h-index of 2? Based on work in the 1990s? Honey, that would get you an R ranking in the PBRF. Not a good look.

Thompson, Arendt, and the ‘nazi’ word

11/06/2014 § Leave a comment

I was recently re-reading Hunter S. Thompson’s Fear and Loathing on the Campaign Trail ’72  (for a sample, see here). Words fail, really. Thompson’s approach was so…different, and that’s true for his political writing and his living.

A seemingly minor point, but as I was reading along I noticed the almost-casual use of the word ‘nazi’. Maybe it’s the internet era and Godwin’s law, maybe it’s the mythologising that goes with the distance of time — the War isn’t something in which we participated (my WWII-veteran relatives died in the last few years) but something we tell stories about — but it seems the word has become monstrous in a phantasmagorical sense.

But, of course, Thompson, writing in 1972, would have had a better idea of what ‘nazi’ means than I do, forty years later. He grew up in that generation too young to serve in WWII but old enough to know what was going on. And certainly, in his military service and journalism career, he would have met many vets and heard their stories.

So, when he calls someone a ‘nazi’, he knows what he means. But, do I?

As it happens, a movie about Hannah Arendt was recently playing in Wellington. I couldn’t go, but it reminded me that Corey Robin uses Arendt as one of the four political philosophers in his book Fear: the history of a political idea (several keys ideas are picked up here). Arendt is famous for The Origins of Totalitarianism and Eichmann in Jerusalem. Robin argues that she pursues two different lines of thinking about fear in the two books, and that many Arendt (errant?) academics focus on Origins without understanding the lessons of Eichmann.

The key to Eichmann, both the man and the book, is careerism:

Many people believe that great crimes come from terrible ideas: Marxism, racism and Islamic fundamentalism gave us the Gulag, Auschwitz and 9/11. It was the singular achievement of Eichmann in Jerusalem, however, to remind us that the worst atrocities often arise from the simplest of vices. And few vices, in Arendt’s mind, were more vicious than careerism.

Slavoj Zizek also discusses Arendt. In How to read Lacan, he points to the key twist in perspective that Himmler and other performed to justify / validate / rationalise their actions:

Most of them were not simply evil, they were well aware that they are doing things which bring humiliation, suffering and death to their victims. The way out of this predicament was that, “instead of saying: What horrible things I did to people!, the murderers would be able to say: What horrible things I had to watch in the pursuance of my duties, how heavily the task weighed upon my shoulders!”

I came to realise that Thompson was not being casual in calling the politicians he observed ‘nazis’. He was calling it as he saw it, as Arendt saw the hustlers and operators of her day. He saw them as mean little careerists, willing to destroy anything that got in the way of their pursuit of power, happy to absolve themselves of responsibility and able to wash their hands of any stain by invoking the Himmler twist — the more horrible the deed, the more noble am I to have done it.

We still need such a word. ‘Nazi’ doesn’t cut it anymore, for the reasons given. But the impulse is not gone. In this era in which far-right parties are gaining ground in national and European elections, we need to be able to talk about what they are and why they exist.

How much would carbon policies hurt?

10/06/2014 § 3 Comments

We’ve been talking about carbon policies to address climate change for years — the Kyoto Protocol was agreed in 1997 — but carbon emissions keep increasing. The recent news about the West Antarctic Ice Sheet seems to confirm that climate change and sea level rise are coming, ready or not. Policies are not biting enough to change emissions enough to have an impact.

One thing holding us back is that we don’t want to pay for it. There are interesting discussions about the best way to pay for climate change policies. Do we reduce economic activity now by a little? Or, do we grow faster now and pay more later but out of a larger pot of money? How do we divide our efforts among prevention, mitigation, and adaptation? But these interesting discussions also serve to delay, limiting our ‘prevention’ options and de facto pushing us into adaptation. We will end up paying one way or another.

Also, emissions reductions are not necessarily that expensive, as a new study confirms and earlier research has shown. Car emissions are a good example. I have driven American cars made in the 1970s; they were horribly inefficient compared to modern cars. We have learned how to motor around using a lot less fuel per kilometre, and we are getting better all the time.

I often think about the economic impacts of carbon policy as turning back the clock to some earlier time when we were poorer. That’s not to say I’m taking the Roger Pielke view that energy and the economy have an immutable one-to-one linkage our only two options are either economic growth or ‘technological innovation in energy systems on a predictable schedule‘ — a view ably rejected by Paul Krugman. Less carbon, though, does mean less energy use, which does mean less energy-intensive production, which essentially means less stuff. It might mean prettier stuff, in a baroque/Japanese, let’s-make-it-exquisite sort of way. But, still, probably, not so many physical objects that have been transformed from raw materials into commodities.

So, what are we talking about? Even with more efficient cars, lighting, heating, hot water systems, etc., we might have to put up with less stuff. Can we place it in an era? Well, let me explain with US data, with the caveat that the New Zealand experience has been different. How about the 1980s? Or the 1970s? How awful was it, really, just to have one television set per household instead of three? Or, to have 50 square metres per person instead of 100?

On the other hand — and I think this is important when considering resistance to carbon policies — a lot of people aren’t much richer than they were 20, 30, or even 40 years ago. The recent focus on inequality keeps emphasising that growth has been better for some people than others:


There are two ways to look at this. The first is that moving to the same level of consumption as 1975-ish wouldn’t be that painful for a lot of people. They are already there. The consumption basket has changed, sure, but the overall level of consumption has barely moved.

The second way, the one that creates the resistance, is this: lots of people have gained only a little over the last 40 years. Would carbon policies ask them to give up what little they have gained? If so, that’s a big ask.

The question, therefore, isn’t just ‘how much would carbon policies hurt’. It is also, ‘who bears the brunt of the change?’

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