Christmas came early in New Zealand. In a generous mood Helen Clark decided that all workers will have 4 weeks of paid annual leave per year.

She said that the change in the law will make New Zealand more competitive when it comes to attracting and retaining labour. That concernt is odd since the Labour government recently tightened up immigration standards making it more difficult to attract labour.

The Prime Minister also said that the new law will put New Zealand on par with ³our major trading partners like Australia and the United Kingdom.²

Her choice of those two nations, out of the list of major trading partners, is a bit puzzling. In terms or either imports or exports Australia is clearly New Zealand¹s largest trading partner. But the United Kingdom comes in fourth, well behind the United States and Japan, which are second and third respectively, in terms of both our export and import markets.

By using the first and fourth place nations Helen makes her case. But she makes it selectively. Some might say, dishonestly.

The UK accounts for only 3.8% of NZ imports, according to Central Intelligence Agency statistics, while the US accounts for 15.9%. In other words the US, when it comes to imports, is four times larger than the UK. Yet Clark mentions the UK and ignores the US when making her case.

The UK falls well behind Japan as a trading partner as well. Japan accounts for 3 times more of our imports than does the UK.

Even in the export market the UK comes in a distant fourth. Only 4% of our exports go to the UK while 12.2% go to Japan and 14.4% go to the United States.

Clark¹s justification still falls short if you add the trading figures for Australia and the UK together and compare them to the combined figures for the United States and Japan. The US and Japan combined account for both more exports and more imports than do Australia and the UK.

So why did Clark latch on to Australia and the UK as examples to justify her new labour policy? Simply because they have 4 week mandatory annual leave and the US and Japan do not.

In the US there is no mandatory leave at all. It¹s a matter of a private contract between employer and employee. But it is considered customary to have two weeks leave.

According to the US Library of Congress Japanese workers are entitled to 15 days annual leave, about half of what Clark is proposing. But it was also noted that the average Japanese worker only takes 7 days annual leave per year. In addition it was noted that the average Japanese worker actually works longer hours per year than does the average American worker.

It appears that Helen was distorting the facts a tad bit by latching on to two trading partners that do have four weeks of leave while ignoring the other two major partners who don¹t have it. Her selectivity is even more suspicious when you realise that the two without the leave are actually, combined, larger trading partners than the two that do.

Clark did say that the new law will only take effect by 2007. That gives smart employers plenty of time to adjust. And she says she wants them to adjust. But how will that be done?

One way is by reducing the need for labour. In other words jobs will simply disappear or not come into existence as employers shift production to less costly, less labour intensive, methods.

Another way of adjusting will be to hold down wage increases for the next three and a half years. The law will, for most workers, merely rearrange their employment package. They¹ll get four weeks annual leave in lieu of higher wages.

Unfortunately many workers would actually be better off with higher wages and less leave time. But Helen has decided that she, not they, should determine how their pay package is structured.

Clark is clearly counting on this move being popular with voters and thus helpful in the next election. And it probably will be popular even though it shouldn¹t be.

But, since most people don¹t understand economics they are likely to see her as their champion. Helen may be playing Santa Claus but the bad news is: there ain¹t no Santa.

* Jim Peron is the executive director of the Institute for Liberal Values. This opinion piece is provided as a public service by the Institute for Liberal Values. For more information write peron@orcon.net.nz.

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