Yes, of course. The employer says “would you prefer to have three weeks leave or no job?” and the employee says “I’d rather have six weeks leave and my current pay”. Then they try to justify that to the dole office when their boss fires them for being a smart arse.

There’s a huge imbalance in bargaining power that you’re abstracting away. Legislating to correct that is something that John Key doesn’t seem willing to even talk about, and indications to date are that he will not pass any law that favours employees over employers.

The idea that since you as a rich, educated person with secure employment can bargain effectively with your employer therefore so can everyone else is just wishful thinking. Most of the casual labouring type jobs I did at uni, for example, were “do what the boss says, when the boss says, take whatever pay you’re offered and don’t argue about your paycheque” type ones. And that was in the 1990’s. These days many more people are permatemps who can keep their jobs but lose their hours at the whim of their employer, so their bargaining power is perilously close to zero (there’s still a slight hassle involved in replacing them).

Hi Moz,

Sorry I don’t really see what you are saying here.

The new law would keep 4 weeks of leave – an employee could negotiate an individual contract with 1 week less leave and some compensation for that. It gives the individual and the employer the opportunity to negotiate.

Now, we may have a case where the employee is no better off as they have no market power. However, the employer still has to compensate them for their time (making them no worse off) in order to remove the week. In net terms, this will only happen when it makes everyone better off (or at least no worse off).

If we believe that the situation could be abused in some way for people with low market power – then set it up so people who get a low income are ineligible. Then it can’t be used against them (so they are no worse off) – but people on higher incomes will still be better off.

Also, with the 90 day law it isn’t based on contract, it is based on the employee. You can’t rehire the same employee for another trial period after doing one. So I don’t think that applies as a criticism either.

I still object, because the “opportunity” is more akin to choosing not to pay taxes to the IRD than choosing chocolate icecream over vanilla. Sure, it’s theoretically trivial to avoid paying the IRD anything – just move to another country. The actual cost of so doing is such that few people choose that approach, and even fewer choose to move to low-tax or no-tax jurisdictions.

The problem is that each successful prosecution requires a worker who has nothing to lose, because this sort of complaint is another one where keeping your job afterwards is not going to work. Unfortunately the fire at will bill and other free-movement-of-labour[1] rules make it unlikely that workers will be compensated for the consequences of complaining. Can you really see a worker turning round on day 91 and saying “I’d like to renegotiate my contract because I don’t want to sell my holidays any more”… oh, but wait, that would put them back at the start of another 90 day FAW period.

[1] the theory is that labour units[2] move easily in a free market for labour. Just ask John Key.
[2] “mummy, when I grow up I want to be a human resource”.

Hi Moz,

I agree that wages didn’t suddenly fall – but it will have impacted on any future pay increases and on the rate people would start work on.

It is very hard and costly to reduce someones nominal wage in many circumstances. Ultimately though, if firms are having to effectively increase employees pay in one way (with an extra holiday – and so less production) they will have to reduce it another way – there is no “free money” sitting out their.

I completely agree that it is difficult to get additional weeks and that their is a co-ordination issue. However, I am merely comparing having 4 fixed weeks to having 4 fixed weeks and the opportunity to sell one – given that the opportunity is voluntary this is a very good idea.

I am not trying to say what level of stat holidays are optimal, I am just saying that giving employees the opportunity to “cash out” their holiday will IMO lead to better outcomes.