Is free employment mediation really free if you have to wait for it?

The New Zealand Herald reported last month:

An employment lawyer is advising businesses to bypass the government’s free employment mediation service.

There was currently a seven-week waiting list to access the Ministry of Innovation, Business and Employment’s mediation service, which was supposed to be a way to avoid drawn-out disputes between employers and their employees.

“Don’t wait,” Rotorua employment lawyer Michelle Urquhart said, adding the cost of accessing private services was well worth it given the risks associated with leaving a dispute to fester.

MBIE advised availability was limited due to high demand and apologised for the inconvenience, though wait time was an improvement from the peak 11-week wait in February.

When the price of a good or service is zero (free), there is often a shortage (excess demand) for the good or service - there are more people wanting to access the good or service than there is available. This is illustrated in the diagram below. If the market for public mediation services operated at equilibrium, the market price would be P0, and the quantity of mediation services would be Q0. That quantity (Q0) is both the quantity of mediation demanded, and the quantity of mediation supplied (the number of mediation appointments available for businesses). We can say that the market clears, because quantity demanded is equal to quantity supplied (the market is in equilibrium).

However, the price is below equilibrium, at zero (free) [*]. At that zero price, the quantity of mediation demanded is QD, while the quantity of mediation supplied is QS. Since QD is greater than QS, there is excess demand (a shortage). That is what we are seeing, with long waits for mediation services.

That excess demand needs to be managed. Ordinarily, we would expect the price to rise when there is excess demand, but since the government has set the price at zero, that cannot happen. So, the alternative is that the excess demand is managed with a waiting list. When a business wants to access the free employment mediation service, it is added to the waiting list, and then needs to wait until the service is available.

Ironically, the operation of the waiting list means that the 'free' mediation service is no longer 'free'. It just has no monetary cost. There is a cost associated with waiting for the mediation, because in the meantime whatever employment dispute necessitated mediation is not being resolved (and festering, as the employment lawyer in the quote above notes). The costs of that unresolved situation might be much less than the cost of paying for private mediation services. The free public services are not really free at all. It should be little wonder that some businesses are opting for private mediation services instead.