From the TUC

Open Europe’s attack on EU employment rights: undermining their ‘think’ tank reputation

09 Nov 2011, by in International

It’s difficult to know what is most risible about Open Europe’s latest attack on workers’ rights, “Repatriating EU social policy”. Is it the suggestion that scrapping EU-generated employment and social rights would create 60,000 jobs and boost the economy by £4.3bn, which is simply ideological wishful-thinking, or the suggestion that unions might approve of repatriating to Westminster the power to legislate over these matters because the European Commission is currently pushing an agenda of austerity (er, what, unlike the British Government?) It is unlikely that anyone will believe, let alone be persuaded by, this bizarre report, although it was especially unfortunate that its assertion that the Temporary Agency Workers Directive will have one of the worst effects on employment coincides with news that the first month after the UK implementation of the Directive saw an increase in temporary employment! The report’s purpose is presumably to increase the pressure on David Cameron to pick a fight either with the rest of the European Union (which would be bad for Britain) or to pick a fight with Nick Clegg (which would be bad for his government). But it is always worth contesting the myth that better rights at work are bad for the economy, because it helps us make the case that better rights at work are actually positive not only for workers, but for the rest of the economy too.

First, the methodology of this soi-disant think tank, set out in Annex 1 of the report, is seriously deficient. To calculate the cost of EU employment and social affairs regulation over the past 13 years, the researchers didn’t actually measure the effect, they simply added up the predictions of the costs published by the European Commission in advance of the introduction of the regulations. These regulatory impact assessments are notoriously little more than guesswork and there are many critiques of the process by which they are derived: people who don’t want the regulations are asked how much they will cost – and no attempts are made after the event to assess how accurate these predictions are (although when the Health and Safety Executive once did such a study in the 1980s, they found the cost estimates to have been massive exaggerations).

Then, having totted up the so-called ‘costs’ of regulation, Open Europe has made some staggering leaps of faith to come up with an employment impact. Two footnotes to the annex are worth reproducing:

Some aspects of these costs are naturally transfers between different actors in the economy (such as employers and employees) since these represent only the cost to UK business. For simplicity we assume here that any transfer from businesses to other parts of the economy would likely be crowding out already productive investment, as such we see the entire cost to business here as a dead weight loss to the economy, which would be returned with deregulation or repatriation.

In treating the cost as an injection, we are assuming that the regulation uses up resources and assets that could have been deployed productively in other ways, and that those other uses would have produced a direct value equivalent to the regulatory cost.

The sections I have emphasised are quite astounding examples of ideological bias, not a sensible couple of shortcuts to the truth. And the really mind-boggling nonsequitur is not highlighted – it’s the last clause of the first paragraph above, which suggests (this must surely be a mistake) that the costs would evaporate if the regulations were scrapped or even if they were merely returned to British control!

In truth, we’ve been here so many times before. Whenever new employment rights are proposed, someone in the business lobby issues a dire warning about the cost and the unemployment that will result (and conversely, we are told that any measure of deregulation will lead to untold riches and magical employment growth). The hyperbole is clearly just a bargaining chip, but the guesses keep coming. They are often wildly inconsistent and without reference to amendments (we were told that the deregulatory Services Directive would create 600,000 jobs around Europe. Once we stripped out the elements of the Directive which would have affected employment rights, we were told that the Directive would create .. yes, 600,000 jobs across Europe!)

The most detailed study of the impact of workers’ rights on economic growth and productivity was conducted by the Organisation for Economic Co-operation and Development (OECD) in Paris. The OECD are hardly left-wing revolutionaries, but they found that there was no evidence of a negative impact of employment regulations on economic growth or productivity. On the contrary, the countries in the developed world (which is what the OECD covers) with the strongest employment regulation are the ones with the strongest economies. This doesn’t prove a cause and effect relationship, but it does disprove the Open Europe hypothesis that workers’ rights cost economies real money.

But there’s more. Although Open Europe claim that all employment rights cost the British economy money, and create unemployment, they argue that if the power to regulate was repatriated to the UK, many of the EU’s employment regulation would be retained (maybe British regulation costs less than European regulation, as the above footnote suggests, although deregulators like Open Europe have never argued that before), or may even be toughened up – they mention controls on pilots’ hours. Since there is nothing in EU social and employment regulation to prevent countries doing just that, it’s difficult to see how they justify this claim: indeed, it’s the sort of action that organisations like Open Europe usally call gold-plating and oppose out of hand.

There are differences of opinion in the labour movement about the benefits or otherwise of the European Union. But almost everyone agrees that if we have a European labour market, then we need European-level rules for that labour market. And the suggestion that because we are unhappy with the European Union’s current neo-liberal austerity drive, we would prefer our employment rights to be decided by a national Government committed to exactly the same policies stretches credulity.