It is one of the memes of our age that regulation is a cause of unemployment and an inhibitor to growth. Is there any truth to this, and what motivations are at play on either side of the argument?
In the United States there has long been a strand of political opinion that holds that all regulation as applied to business is harmful. Bills which introduce regulation of any kind, whether it be environmental, fiscal or to do with employee rights are branded as ‘job killers’.
There are states in the US where employees have significantly fewer rights than others. These states are branded as being ‘Right to Work’ states. The implication being that the absence of burdensome regulation means that it is that much easier for enterprise to expand, generating jobs that otherwise would have not appeared.
It has been claimed by certain commentators that in terms of hard evidence the case for saying that regulations should be stripped back for the benefit of the economy and therefore society is on the thin side. If, the opponents of the ‘regulations cost jobs’ viewpoint hold, if enterprises are in a position where they would like to hire but are unwilling to because of regulations, there would be a great demand for increased hours among existing staff, however, so this strand of argument goes, this is not being seen.
Another empirical sign that regulation was stifling job growth would be that the kinds of industries where employment tends to be long term would be more reluctant to hire because of regulations that have yet to take effect. This has not been seen, and neither have other key indicators, according to the analysis of Al Jazeera’s Dean Baker.
Over on this side of the pond the opinion that what is keeping levels of unemployment at their current unacceptably high levels is the existence of employment law, both home-grown and of the imported European variety. The BBC recently revealed that a government report had been leaked which was calling for the abolition of the right of workers to sue for unfair dismissal.
At present if somebody is dismissed from their employment then they have up to twelve months in which to launch a claim for compensation over such employment disputes. The problem with this is that it is seen by some as promoting a culture where it is difficult to remove unproductive employees.
The other side of the coin is that there are benefits from job security, both to the economy and society. If a worker feels that they can be sacked arbitrarily at any point without compensation then it is hard for them to have the confidence to, for instance, commit to a mortgage, or to spend their some of their disposable income on the high street rather than save it.
Ultimately, turkeys will never vote for Christmas. There will always be calls from certain business leaders to do away with employee rights or other because it would be good for the bottom line. Whether these calls should be heeded however must be something that is given proper thought and considered in the round.
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