Regulation continues to hinder job creation

Today’s labour market figures again present a largely positive picture, with unemployment falling once more, employment rising sharply, and economic inactivity falling. But there is plenty more for the government to do in encouraging employment growth.

The one obvious weakness this time is the slight rise in youth unemployment, indicating once again that we need to look very carefully at the effects of the minimum wage on young people. The government might also sensibly consider reducing the burden of national insurance on employers and employees at the bottom end of the pay distribution, the point of entry for many young workers. It should not relax its efforts to encourage young people to take up job placements or part-time work.

The latter, commonly denigrated, is often a stepping-stone to full-time employment for those who want it – and remember that 69% of male and 87% of female part-time workers prefer part-time employment because of family responsibilities, studies or approaching retirement.

More generally, little has been done so far to relax employment regulation which continues to hinder job creation, especially amongst small firms. Some clear movement on this is long overdue.

An end to procrastination on airport capacity, housebuilding and energy generation would also encourage private sector investment and enable firms in the appropriate sectors to begin to recruit and train more skilled workers.

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

2 thoughts on “Regulation continues to hinder job creation”

  1. Posted 20/02/2013 at 17:36 | Permalink

    To pick up one particular piece of regulation: Since the introduction of the EU Temporary and Agency Work Directive was introduced in 2008 (but I think not implemented until 2011?), there has been a substantial decline in the amount of temporary placements available. This is a serious impediment to those seeking temporary work to gain experience to enter the permanent job market, as it serves as a very good point of entry to many workers.

  2. Posted 21/02/2013 at 13:21 | Permalink

    Another example of small firms not rcruiting is a small builder I know who used to have people on his payroll but now has none. The overheads and bureaucracy in dealing with emoloyees was just to much. Now he hires self employed people which keeps his overheads down and improves flexibility but does slow his ability to gear up for work. Thus he makes less money. But is more secure.
    You can also add the many small hairdessers who find female staff are fully aware their rights when they become pregnant. They take days off with out notice, more or less on a whim. This has lost him business because he has to can cel appointments for booked business. it in turn frustrates his clients and in the long run costs him money. Thus this hairdresser has older staff who he can trust.
    Both the above examples show how employment opportunities for young people are reduced.

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