Workers’ rights and the European Union

workersA nice piece by Labour MP Hilary Benn, son of the late Tony Benn, on why ordinary workers, men and women, part-timers and full-timers alike, benefit from EU membership. Many Tories see labour market regulation as ‘red tape’ and a burden, and would happily sweep away workers’ rights and protections.

The claim is sometimes made that such regulation destroys jobs, but the UK already has one of the least regulated economies in the advanced world, whether one looks at labour or product markets. Despite that our productivity level remains relatively poor when compared with a number of EU member states, with little sign that we are catching up. Employment levels may be high and unemployment reasonably low, but in the longer term, it is productivity which determines living standards.

An overvalued currency, weak investment, a dysfunctional housing market and a shrunken manufacturing sector are some of the reasons the UK economy has performed so poorly in recent years. Reducing already moderate worker protections would be damaging to the livelihoods of ordinary people, and it is not clear that it would improve economic performance.

As Benn argues in the article, continent-wide labour market regulations help to prevent a race to the bottom in which companies compete by cutting labour costs rather than investing in new products and processes, which long run economic progress requires. One firm might gain a temporary cost advantage by cutting wages and working conditions, but if it happens on a large enough scale, none will gain, and there will be reduced incentives to engage in improving productivity through investment.

To repeat, we already have more ‘flexible’ labour and product markets than most other EU members, and the consequences have been at best mixed in terms of employment and productivity. An alternative path to a more productive economy is required.

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