Ten economists and labour attorneys have rejected the claims of business leaders that the proposed Employment Rights Bill would harm economic growth.
Signatories, including Ozlem Onaran professor of economics from the University of Greenwich, and Jonathan Michie professor of innovation and Knowledge Exchange at the University of Cambridge, argue that better worker protection can increase productivity and economic stability.
In an Open Letter, published on the Institute for Employment Rights website, the group refutes assertions by business organizations such as the Confederation of British Industry that the Bill will create excessive regulations and hinder job growth. They claim that “labor laws are not generally negative for the economy and can have positive effects”.
The letter argues employment protection laws increase job security, encourage investments in worker training and capital improvement and boost productivity.
Professor Onaran said, “Britain is a pioneer of labour legislation. History shows that greater employment rights do not hinder economic stability but rather contribute to it.” Serious economic research does not support the notion that protecting employees harms growth.
The impact of the Employment Rights Bill on businesses and wages
Some business groups are concerned about the Bill’s measures, such as the introduction of Day-One Rights, the ban on zero-hours contract (including for Agency Workers), and the changes to Statutory sick pay. The Federation of Small Businesses has argued that this Bill will “wreak havoc on an already fragile economic system”. The economists and labour attorneys dismiss these claims. They claim that SMEs are benefited by effective enforcement of labour laws, which helps to prevent unfair competition.
The group also stresses the economic benefits that come with strengthened collective bargaining, arguing higher wages lead to increased consumer spending and a larger tax base.
Professor Onaran continued, “Labour laws that promote collective bargaining tends to raise wages and stabilize employment.” “Higher wages increase the demand for local goods and services which directly benefits business.”
The letter also challenges the idea that labour laws deter private investments, stating that well-designed employment legislation can complement improvements in public infrastructure and economic development. Signatories claim that fair labour laws are more cost-effective in the long run, because they create a more productive and stable workforce.
Calls for Stronger Worker Protections
The group acknowledges that the Bill is a step forward, but argues that this does not go as far as it could in combating exploitative employment practices. The IER is a think-tank supported by law firms and trade unions. It calls for more measures to tighten enforcement and close loopholes in the law that allow for poor working conditions.
Lord John Hendy KC (chairperson of IER) and a signatory to the letter spoke about the need for a holistic approach to employment rights.
He said that stronger employment protections were not an obstacle to growth, but rather a driver for stability, productivity and justice. “This Bill represents an important first step to address the failures of deregulation, but it is not enough.” The UK will fall behind European and international labour standards if it does not take decisive action to close the loopholes and strengthen enforcement.
He said that it is “a once in a lifetime moment” for rebalancing the power between employers and workers in the UK.
