Do Workplace Contracts Harm Labour Productivity Growth? A Reconsideration of the Macroeconomic Evidence from New Zealand

This article reconsiders the argument advanced or endorsed by a large number of leading Australian academics and others that labour productivity growth in New Zealand fell markedly during the period in which New Zealand’s Employment Contracts Act 1991 (ECA) was operative—that is, for most of the 1990s. On the one hand, based on total economy estimates developed by The Conference Board and the Groningen Growth and Development Centre, labour productivity growth was unexceptional though a little higher than the New Zealand average of the last three decades or so. On the other hand, based on newly released official estimates of New Zealand’s ‘measured sector’ (which accounts for about two-thirds of the total economy), labour productivity growth was almost identical to that of Australia during the ECA period. This in turn suggests that New Zealand’s labour productivity growth rose markedly for the measured sector during the ECA years. All in all, the evidence presented in this article is inconsistent with claims that the period of the ECA was associated with relatively weak New Zealand productivity growth. Selected issues arising from these findings are briefly canvassed.