IEA - Labour market intervention may do more harm than good
Reaction to Conservative Party announcement on employment regulations
“Intervention of this kind will lead to increased costs and threaten to undermine the UK’s comparatively high employment rate – largely a result of our flexible labour market. Brexit should be used as an opportunity to reduce the burden of regulation in this sector, not to increase it.
“The costs of increased rights for some will initially be borne by companies, but will be passed on to workers and consumers in the form of lower wages and higher prices. Anything that makes it more expensive to employ people will make it harder for the unemployed to find jobs – harming the young, unskilled and those outside of work the most.
“While critics allege that flexible forms of working are open to exploitation, the few hard cases of this should not be used to justify blanket intervention that reduces the choices available to all. Particularly when there is little evidence that workers in more flexible forms of employment are any more vulnerable or less content than those on more conventional contracts.
“Finally, these seemingly harmless proposals will open the door to more and more legislation. Linking the minimum wage to average earnings may result in smaller increases than might otherwise have happened, but future Chancellors will be tempted to ratchet this higher.”
Notes to editors:
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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
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