Some Macroeconomics of the Employment Contracts Act

Abstract

Earlier this year Wolfgang Kasper produced a book "Free to Work: The Liberalization of New Zealand's Labour Markets" (Centre for Independent Studies). By reviewing this book, the paper is able to shed some understanding of the effectiveness or otherwise of the Employments Contract Act. On the basis of the empirical evidence it is very difficult to reach, in a systematic way, Kasper's conclusions about the beneficial effects of the Employment Contract Act. In particular the poor productivity growth rules out the likelihood that the ECA was a major contributor to the macroeconomic expansion of the mid-1990s. The Act would, however, seem to have contributed to the poor real wage growth, and the failure of many workers to obtain a share in any increase in prosperity of the 1990s.