The Coalition Government argues that reducing
the 'burden' of employment law on employers
through radical reform is essential for economic recovery. Foreign Secretary William Hague recently suggested that radical reform to the labour market and the welfare system would be the legacy of the Coalition Government.
Chancellor George Osborne took up this theme in his Mansion House speech in London on Thursday 14 June 2012.
In this speech, Osborne hailed "more pro-business employment law" as one way in which "we have [...] made our whole economy a place that better supports businesses, wealth creation and new jobs."
'Deregulation drive' will not aid job creation, says CIPD
However, a growing number of individuals and professional bodies disagree:
- The CIPD says: "We do not believe that a 'deregulation drive' will lead to employers creating more jobs, thus stimulating economic growth." (For further detail of the context of these remarks, see Update 17 here)
- The ILO argues that the austerity measures and tough labour market reforms that many countries (including the UK) have launched in response to the crisis are making things worse, not better.
- The Coalition Government's argument that making it easier for firms to hire and fire workers will aid recovery is not backed up by historical evidence, according to University of Cambridge Reader in the Political Economy of Development Ha-Joon Chang.
- Employment law considerations are not putting employers off hiring,
argues Heather Stewart in the Guardian: "Firms are not hiring for two
interlinked reasons: the crippling uncertainty of the eurozone crisis;
and a severe lack of demand. Why hire staff if you've got no customers
to sell to?"
As employment law specialist Darren Newman reports, Adrian Beecroft's controversial compensated no-fault dismissal proposals would appear to have met their "final death."
Despite this setback, the Coalition Government's radical programme of employment law reform is ongoing.
The Enterprise and Regulatory Reform Bill includes measures to reform the employment tribunal system.
Barrister Anya Palmer argues that, if enacted, some proposals in the Enterprise and Regulatory Reform Bill would pave "the way for a major reduction in employment rights" in the future, which could effectively make unfair dismissal "worthless".
- Read more in XpertHR economic commentary July 2012: Black clouds.
The British Chambers of Commerce (BCC) has called for "more forceful deregulation" to help boost economic growth.
The BCC's latest Quarterly Economic Survey, published today, includes the following statement:
The real challenges still facing our economy are vast. Businesses must plan for relatively low growth in the next few years, as fiscal austerity restores stability to our public finances and the eurozone's problems create a challenging environment for our exports. But UK businesses are resilient, and have huge untapped potential. To empower them, the government must act radically and decisively to support growth. More forceful deregulation, increased infrastructure investment, and the creation of a new business bank will help businesses create jobs and drive growth.UPDATE 2 (Tuesday 3 July 2012): IMF Working Paper
My thanks to @BenHouchen (who in his Twitter bio describes himself as an "Employment Solicitor and a Conservative Borough Councillor") for tweeting me a link to a March 2012 IMF Working Paper entitled Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects, which he says provides "imperical evidence showing [employment law reform] does aid job creation."
In this Working Paper, the IMF finds "that policies aimed at increasing labor market flexibility may have an important effect in reducing unemployment. These policies, however, have to be properly designed to also improve the quality of employment and to minimize possible negative short-term effects, not investigated here, on inequality and job destruction."
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