Evidence-free policy making: Cable repeats Labour errors on trade, working time and flexible labour markets
Vince Cable has reinforced his reputation for economic liberalism and for continuity with the Blair-Brown government with a speech to the European Parliament today. And in at least three areas where he outlined his determination to maintain the policies of the previous Government, he has also underlined that he blieves in evidence-free rather than evidence-based policy making: labour standards in trade agreements; restrictions on working hours; and flexible labour markets. On trade and labour standards, Vince simply repeats word for word what previous Labour business ministers said:
“We must beware of environmental and labour concerns serving as fig leaves for protectionist policies. Developing countries tend to regard trade conditionality of this kind as simply an excuse to erect barriers – which can harm not hinder dialogue on these deeper social concerns.”
The TUC has repeatedly asked Ministers to provide some actual evidence of ‘labour concerns serving as fig leaves for protectionist policies’ and we have never received any such evidence (Patricia Hewitt did at least have the grace to admit that, although she didn’t change her opposition to requiring our trade partners to implement international conventions on workers’ rights). It’s certainly true that governments claim that they regard trade conditionality as protectionism, even when the standards they refuse to accept are ones that they are required to uphold as ILO members. But we think they’re lying, and they never explain why, for example, it is protectionism to require the outlawing of slavery, for example, or child labour. We have confirmed with the World Trade Organisation – the police of the free trade movement – that there is no reason why such labour standards can’t be built into free trade agreements (although the WTO doesn’t advocate or support such moves). The TUC has supported free trade for over a hundred years, as Ed Balls frequently points out. But we also support core ILO conventions and fair trade.
Turning to working time, Cable trots out again that
“In the 21st century, with stalled productivity and a looming demographic crisis, it is neither fair nor sensible to force people to work fewer hours than they would freely choose.”
I assume that Vince isn’t in favour of allowing people to drive as fast as they freely choose, because that would of course be dangerous, and he knows that. But I assume he simply doesn’t know that the epidemiological evidence is clear that working long hours is also dangerous (think over-tired surgeons and lorry drivers if you like, but actually there’s sufficient evidence on long hours and heart attacks, gastrointestinal illness, mental illness and so on, too). The 48 hour limit in the Working Time Directive is the best estimate of a single safe over-riding level of an average working week in the same way that 70mph is the best estimate of a single over-riding limit on speed (and indeed, unlike the flexible Working Time Directive, you aren’t supposed merely to average under 70pmh).
I suspect we will get the same answer from Vince as we got from Labour Ministers when we present him with the scientific evidence on working time – a complete failure to accept what the evidence says. So much for evidence-based policy making.
Vince is also at least ‘evidence-lite’ when it comes to labour market flexibility:
“There is much that Britain has got wrong but our flexible labour markets helped us get through the worst of the recession with only a moderate impact on employment.”
But was that actually down to labour market flexibility? If so, Germany, with what is always described by free marketeers as having a far less flexible labour market than the UK, must have experienced a far worse increase in unemployment during the same period. Er, no. Although Germany entered the world recession with higher unemployment than the UK (7.7% in November 2008 in Germany compared with 5.8% in the UK – something free marketeers also ascribe to Britain’s flexible labour market, as opposed to the continuing impact of integrating East Germany, something the UK probably wouldn’t have managed as well as Germany did), unemployment in Germany has now returned to the levels of two years ago (7.6% by July 2010) whereas the UK’s unemployment rate is now slightly worse than Germany’s at 7.8% (September 2010). So Germany, with its less flexible labour market, did better than the UK with its more flexible labour market. It’s also good to know that Vince thinks an increase of unemployment from 5.8% to 7.8% (that’s over half a million extra unemployed people) is a “moderate impact”, although the TUC agrees it was better than we feared it would be.
And in both Germany and the UK, the better than feared unemployment picture was the result – in larger part in Germany than the UK, because in Germany the measures had practical assistance from the Government – of many, many agreements between employers and unions that substituted pay restraint and short-time working for redundancy: not quite what economic liberals like Vince mean when they talk about labour market flexibility.