UK doesn’t need more labour market regulation, says CIPD

The UK’s flexible labour market is generally working well in comparison with its international peers, suggesting there isn’t a strong case for the next Government to either de-regulate further or to strengthen employment rights, according to a report from the Chartered Institute for Personnel and Development.

The report, Employment Regulation and the Labour Market, suggests that the UK is highly unlikely to get much benefit from more employment regulation or from significant deregulation of the labour market, as it already performs well in comparison to many of its OECD counterparts on a number of measures.

The link between the stringency of regulation and labour market outcomes such as productivity or job quality is in many areas either weak or complex and thus difficult to predict, it says.

The CIPD says policymakers need to focus their efforts on improving productivity through a much stronger focus on improving workplace practices while increasing awareness of existing rights and enforcing them more effectively.

The report, commissioned by the CIPD, and compiled by The Work Foundation, says that despite the UK rating below average among OECD countries on measures of employment protection, the quality of employment in the UK compares more favourably with other countries than is often thought to be the case, with more staff in permanent jobs, more good quality jobs, higher satisfactions levels about working hours and work life balance and similar levels of fear about losing jobs as those in countries with stricter employment protections. However, it states that the average weekly hours worked by employees in the UK in 2013 was 36, which was in line with the OECD average, but the UK has a comparatively high proportion of long hours jobs (those involving 50 hours or more a week) with 12% falling into this category.

Ben Willmott, head of public policy at the CIPD, said: “The public debate can often seem polarised between calls for greater regulation and employee protections from trade unions and, at the other end of the scale, employer organisations that want to reduce regulatory burdens on business. Our report shows that more or less regulation is not the issue. Overall, UK workers are more satisfied with their jobs, working hours and ability to progress than their counterparts in France, Germany and Italy. The solution to some of the challenges we face in the UK such as poor productivity and the high proportion of low paid jobs in the economy doesn’t lie in quick legislative fixes. We don’t need yet another employment bill or another zig-zag between more and less regulation. Instead, what we need is a fundamental review of the UK’s skills policy to understand how we can generate more high-skilled jobs and better progression routes for those in low-skilled and low-paid jobs. We also need a much greater focus on improving workplace practices in the areas of leadership, management and HR capability to increase demand among employers to invest in workforce development.”

While the UK performs well overall, the report says it performs comparatively poorly in three important areas – productivity, low pay and the integration of young people into the labour market, but it claims this is not linked to labour market regulation and productivity. The UK is in the top quarter of OECD countries for percentage of low paid jobs. The UK, US and Canada all have 20-25% of employment in low-paid work compared with 18% in Germany and 10% in Italy. Moreover, the UK sits in the lower half among OECD countries in terms of its youth unemployment rate and in the bottom quartile among EU 28 countries on its youth unemployment ratio.

Willmott adds: “It’s clear that the UK struggles on productivity, low-pay and unemployment among young people, but the wider picture is much more positive. The stage seems set for a good performance but something is missing in the delivery. We have good investment in ICT, above-average shares of knowledge-intensive industries and better quality employment than many European economies, including some with much higher productivity levels. Rather than meddling with regulation, a renewed focus on enforcing and improving awareness of existing rights among employers and workers is needed to help curb any abuses of employment rights where they do occur, as well as a much more explicit policy focus on the workplace to improve practice and productivity.”


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