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Employment Regulation and the Labour Market

So, if the employers’ assessment of the cost of regulations is at best overstated and at worst just wrong is there any substance in their argument that the UK’s economic performance has been adversely affected?

A swift glance at the data shows that the UK labour market since 1997 has posed real difficulties for the school of thought that says that more European-style regulation is a 'job-killer'. The latest figures from the Labour Force Survey shows that total employment has increased by 1.5 million since spring 1997. Moreover, there has been no shift towards more 'atypical' labour such as temporary and self-employment to escape the greater degree of protection offered to employees. Over this period permanent employee jobs have been the driving force behind job expansion. Temporary labour and self-employment have contracted in this period. The idea that the future of the labour market rests on the promotion of less secure types of employment unsuited to conventional employment protections is simply not supported by these trends. The most recent figures on job creation since 1997are set out in the table below.

Re-regulation and job growth in the UK 1997-2002

Note: total employment includes government trainees and unpaid family workers.

Source: Labour Force Survey

Predictions that unemployment would ratchet up as a direct result of the new minimum standards being established in the workplace have also proved wide of the mark. For example, according to a paper by Patrick Minford, the measures already introduced or planned by June 1999 should have produced 565,000 more unemployed within one year and 1,050, 000 within two. However, since the summer of 1999 unemployment has fallen by around 200,000 and it has fallen by a total of over half a million since the spring of 1997.

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