Better regulation has made UK job market more resilient during recession

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date: 30 March 2010

embargo: 00.01hrs Wednesday 31 March 2010

Employment protections introduced since 1997 have provided extra support for the low paid and working parents without damaging the UK's economic competitiveness, according to a new TUC touchstone pamphlet published today (Wednesday).

The latest touchstone pamphlet The Red Tape Delusion, co-authored by Stewart Lansley and Howard Reed, says that the OECD ranks the UK one of the least regulated labour markets in the world.

But while new Labour has broadly maintained the deregulation agenda inherited from previous governments, they have introduced a number of new employment measures.

Policies such as the national minimum wage, extended parental leave and pay, reducing the qualifying period for unfair dismissal and greater union recognition rights - all opposed as costly red tape by business organisations - have raised incomes for the lowest paid, helped women back into work and encouraged people to stay in the same job and build their skills, says the report.

The Red Tape Delusion says that the UK labour market has been far more resilient to this recession than in previous downturns. But this is not because of increased labour market flexibility, the report says, as today's labour market is far more regulated than in the early 90s.

Other important factors have included a greater Government emphasis on active labour market policies (for example the Future Jobs Fund providing support for unemployed young people), negotiated reductions in hours and external economic factors including low inflation, the depreciation of sterling and a more lenient approach by business creditors.

The report also says that measures such as the right to request flexible working and the duty to consult staff over major workplace changes have helped employers cope with the recession without making mass redundancies.

The Red Tape Delusion examines the impact of different labour market models on employment, growth and inequality. It says that the models that have had the most success in keeping unemployment down over the last 30 years are the flexible labour markets of the US, the UK and Ireland and the 'flexicurity' model of greater employment protection and government labour market interventions found in Denmark, the Netherlands and Scandinavian countries.

The report argues that while both models are associated with low levels of unemployment, the more flexible labour markets (such as those off the US and the UK) have led to poorer social outcomes such as greatly increased income inequality and higher levels of in-work poverty.

The collapse of the financial services sector and subsequent global recession has been a major blow to those who have argued that deregulation, pursued most doggedly over the last 30 years in the US and UK, has ended the problem of recessions, says the report.

But despite this, the rallying calls of business organisations and neoliberal economists against red tape and for further deregulation are as strong as ever, the TUC warns.

The report calls for a more ambitious programme of labour market interventions such as increasing Jobseekers Allowance and prioritising well funded welfare to work programmes to ensure a fairer and more successful UK labour market.

TUC General Secretary Brendan Barber said: 'Business leaders want us to think that 'red tape' - which means protection against unfair dismissal, a minimum wage or paid time off to have children to most ordinary workers - is suffocating the economy.

'But the reality could not be further from the truth. The modest increase in red tape over the last 13 years has helped the lowest paid get a decent wage, enabled millions of women to continue the careers and made the UK better equipped to deal with the recession.

'Some people want to pretend the recession never happened and continue with the deregulation agenda that put the global economy on the brink of collapse. Instead we want a see a radical new economic model that encourages growth, better quality jobs and less inequality that causes great social and economic harm.'

Report co-author Stewart Lansley said: 'For 30 years, economic policy has been driven by the idea that markets are best. In Britain this has meant the creation of one of the least regulated labour markets amongst developed economies, with a limited role for unions and very limited workplace protection by international standards.

'Yet the empirical evidence is clear - flexible labour markets are not necessarily good for the economy and countries with more regulations often do better.'

NOTES TO EDITORS:

- Printed copies of The Red Tape Delusion are available at £10 each from TUC Publications on 020 7467 1294 as well as being downloadable for free from Wednesday morning at www.tuc.org.uk/touchstonepamphlets

- Further comment on the pamphlet is available at www.touchstoneblog.org.uk

- Stewart Lansley is an economic and social policy consultant specialising in inequality, wealth, poverty and the labour market. He is the author of Do The Super-Rich Matter?TUC Touchstone Pamphlet, 2008 and joint author of Londongrad: From Russia With Cash, Fourth Estate, 2009.

- Howard Reed was the chief economist at the Institute for Public Policy Research and is now director of Landman Economics, an economic consultancy specialising in policy analysis and quantitative research. His research interests include labour market policy, macroeconomic policy, business finance, the tax and benefit system, and the methodology of economics.

- This pamphlet draws heavily on the TUC Report Flexible with the Truth? Exploring the Relationship Between Labour Market Flexibility and Labour Market Performance by Howard Reed. This provides a more detailed summary and analysis of the extensive body of domestic and international evidence on the economic impact of labour market regulations, drawing on macro and micro-economic studies. The report is available from the TUC press office.

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Elly Brenchley T: 020 7467 1337 M: 07900 910624 E: ebrenchley@tuc.org.uk

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