Restricting workers’ rights does not offer protection from unemployment
The CBI’s Deputy Director-General, John Cridland, has predicted that “changes in the economy since the recessions of the eighties and early nineties should help us avoid the levels of unemployment we saw then” because “the UK labour market is much more flexible”. But does a ‘flexible’ labour market with weak employment protection reduce the likelihood of us experiencing unemployment? According the OECD the answer is no. Their research shows that there is little linkage between employment protection legislation (EPL) and national employment rates – while strict EPL can make it harder to hire, it also means it’s much harder to fire.
As I write, the UK’s temporary workers are learning this lesson the hard way. The latest labour market data shows that temporary jobs are going first and fastest. At the end of August this year there were 92,000 fewer temporary workers in employment in the UK than two years ago – with an annual reduction of over 7 per cent. While unemployment is rising for all workers, employment rates for permanent employees have yet to show a year-on-year decrease. And even while they are in work temporary workers get a poor deal, with strong Government evidence that low-paid temporary jobs are less likely than permanent employment to lead to labour market progression.
There is also no evidence that reduced rights for UK workers have supported economic growth. As Adam has pointed out we now know that the last ten years have been built on debt and unsustainable risk taking, not limited labour market protections – and at any rate rights at work have improved (albeit incrementally) over this growth period, rather than being cut. On the other hand, a fairer settlement for working people would promote the sustainable growth that our country will need as it looks towards recovery.
No one knows if we can avoid the unemployment levels of previous recessions. But if we do it will be in spite of, and not because of, our limited employment protections.