Analysis: Wrong way to try to create jobs

Published on Monday 10 January 2011 17:43

The idea that the UK is an over-regulated, over-taxed business dystopia permeates every aspect of the coalition government's thinking. Nowhere is this more apparent than in its approach to labour market policy.

Despite years of international comparative studies confirming the UK labour market is very lightly regulated, ministers appear determined to pander to the more feral elements of the employer lobby in portraying over-regulation as an ongoing barrier to job creation.

The theory is that making it easier to sack and mistreat workers will encourage employers to create more jobs. The Prime Minister's problem is that real-world evidence from across the globe singularly fails to demonstrate any significant relationship between employment levels and employment protection legislation.

A recent literature review by economists at Oxford University concluded: "Our results suggest a yawning gap between the confidence with which the case for labour market deregulation has been asserted and the evidence that regulating institutions are the culprits. It is even less evident that further weakening of social or collective protections for workers will have significant positive impacts on employment prospects.|

The previous administration partially re-regulated the labour market through measures such as the minimum wage and more generous maternity leave. How, then, to explain the historically high employment levels achieved before recession hit? The coalition would do well to focus on constructing a credible growth strategy rather than seeking to further undermine employment rights that are already weaker than nearly all other developed nations.

• Stephen Boyd is assistant secretary at the Scottish Trades Union Congress.