Labour Market

The myth of Britain’s ‘deregulated’ labour market

It is a constantly-reiterated view on the Left that the Conservatives are hell-bent on attacking employment rights and deregulating the labour market. We were warned during the referendum debate by the TUC, for example, that only the EU could guarantee paid holidays and parental leave and equality for part-time workers.

This flies against the evidence of the last six years, which shows that the Conservatives have considerably increased employment regulation. Sometimes, admittedly, this has been the result of prompting from the EU or their erstwhile Lib Dem coalition partners, but more recently it has been completely off their own bat.

Measures such as the National Living Wage, pension auto-enrolment and the apprenticeship levy, amongst others, have hit the headlines. It also seems clear that new Prime Minister Theresa May favours further interventions over gender pay gaps and putting workers on company boards.

But the process of gradually adding more and more restrictions to the terms on which employment can be offered continues all the time, little-noticed by the public.

There is an interesting, though I imagine little-read government website covering labour market reform. It will disappoint those – whether on the Left or on the Right – expecting evidence that the government is busily engaged on deregulation. Far from it. Civil servants and their transient political masters are beavering away all the time looking for more things to do.

There are 25 entries since Christmas alone. Several of these are calls for evidence or reports on previous consultations. But there are many new developments, none perhaps with huge implications of their own but nevertheless adding to what is already a much more highly regulated employment environment than most Brits think.

One problem is that we tend to compare our labour market with those of France or Spain rather than Australia or New Zealand – let alone those of the fast-growing developing economies. Yes, compared with most EU countries we are thankfully free of the more excessive forms of regulation – but it’s hardly the Wild West here, or likely to be in the foreseeable future.

Amongst recent under-the-radar changes are the extension of the Posted Worker rules to sub-contractors, the award of new powers to the Gangmasters’ Licensing Authority (soon to be renamed the Gangmasters and Labour Abuse Authority), a ban on direct recruitment by employment agents from the EEA, new rules on Whistleblowing and plans for the appointment of a new Director for Labour Market Enforcement.

A consultation has just concluded on bringing in new rules concerning tips and gratuities, and this seems likely to lead to more government action.

Month by month and year by year we move further and further away from the assumption that workers and employers should be allowed to negotiate freely over terms and conditions. While output growth continues, and employment rises, this apparently only worries the comparatively small numbers of firms directly affected.

But if Brexit does lead to a significant downturn in the economy, these self-inflicted – nothing to do with Brussels – restraints on business may hinder Britain’s recovery.

Prof Len Shackleton is Professor of Economics at the University of Buckingham, and an Economics Fellow at the IEA.

Editorial and Research Fellow

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.