Unemployment isn’t a collection of people who’ve lost their jobs. It’s better to think of it as the pool between two fast flowing streams. People losing their jobs, or enetering the Labour market when they leave education, return to work after illness, or maternity and so on are flowing in; and people finding work, or reaching retirement age are in the stream flowing out of the pool.

The evidence suggests that, contrary to traditonal left-wing rhetoric, the rate at which people enter the pool through job losses is rather constant over the business cycle. It is hiring that influences the rate of unemployment, not firing.

Traditionally, socialists are very keen on ‘workers’ rights’. These include mandatory periods of leave, pensions, notice and so on. They are very hostile to flexible temporary, part-time or insecure work. The problem few left-wingers acknowledge is that increasing labour rights increases the risk and cost of hiring to an employer. When a good or service gets more expensive, less is used, the same is true of Labour.

Much is made by the left of the rise of part-time work. There are a lot of people in part-time work who want full-time. There are a lot of Temps who want permanent jobs. At the margin, removing some of the more expensive employment rights, expecially making it easier and cheaper for firms to fire unsuitable workers, reduces the risk and cost of hiring and will reduce unemployment.

This is no magic bullet, but if it forms part of a deregulation of business (“deregulation” isn’t a dirty word, and it didn’t cause the crisis…) then that represents a “growth strategy” which might work, unlike the Labour’s plan to spend until we’re Italy.

9 replies
  1. Malcolm Bracken
    Malcolm Bracken says:

    That German economic miracle is based on the Unions and Govenrnment conspiring to keep Germans' wages down.

    If that's the "rights" you want, be my guest.

    Their economy is only strong because they've rigged the Eurozone to their benefit. It's a bit like British imperial preference.

    Recommendation: don't laud what you don't understand.

  2. SSH
    SSH says:

    Given that for the last 5 years that I worked in the UK my salary hardly increased at all despite having great performance reviews, Germany must have had decreasing wages, then…

    Of course, everything that foreigners do is simple and bad. I forgot. They can only do better than us by cheating, not by having a better system.

  3. Malcolm Bracken
    Malcolm Bracken says:

    But of course, the Germans have done OK for the last few years, but for the decade before that, they struggled with high unemployment.

    You know Germans have no minimum wage, sensible unions which don't strike when wages get cut, and a flexible property market where most rent.

    Yes, they have got some things better than us, but not the things most lefties want.

    But most of their "success" at present is them brutally raping their empire. Savagely, in the arse, without lube.

  4. Anonymous
    Anonymous says:

    I really do think that the government is playing on the dark side. Thats why Cameron and Osbourne have both taken part in Bilderberg. Bilderberg is of global importance, and is now advocating Rubio with Romney.

    Even without the terrifying importance of Bilderberg, this government has managed to pass three bills which will damage the fabric of society. They did these in a way which was reprehensible, with welfare reform bill, legal aid bill and health and social care bill.

    The really sad thing is that this was so unncessary. Its motivated entirely by greed and money, the grim fact is that in a recession the rich get richer and the poor get poorer. Using the media the government has launched a cynical campaign of propoganda against disabled people. The welfare reform bill went through a scandalous process in the house of lords and was eventually forced through in its ugliness with financial privilege. The legal aid bill followed it closely, which was also cynically planned to fraudulently attack disabled people. The Health and Social Care Bill which is like a 'hand grenade thrown into the NHS' was also conducted with brutal suppression of sense, and was accompanied by a risk register which is yet unpublished.

    But now this is done, we are left with an aftermath which no politician has been able to forsee. The reason is that no MP is disabled and on benefits, being told to find a job which does not exist. Make no bones about it Tories, after the olympics the country will go down disgustingly. First 500000 disabled people will be cut off support. With nowhere to turn to they will turn to the NHS. With no drugs, no homes, no future, there will be acts of desperation. People with mental health issues will set fire to themselves in public places. The NHS will fail.

    Politicians will be scratching their heads wondering how this happened, because all over UK people will be angry and desperate. All because a handful of crypto fascist super toffs have done a hatchet job on UK.

  5. Malcolm Bracken
    Malcolm Bracken says:

    Thanks, anon.

    I think the welfare reform bill is going to cut a lot of people who've been taking the piss off from welfare. The NHS is a cancer at the heart of our democracy. If, as left-wing wankers say, it is being broken up, this is a good thing.

    I agree with you re: the legal aid bill, but it's pretty small beer.

    If someone with mental health issues sets themselves on fire because of the mental health bill, it will be the fault of hysterical, passive-aggressive activists like yourself.

    Seriously, 10% of the UK population is "disabled" in some way. Really? Or are some of them taking the piss out of the likes of me who've got to PAY FOR THE FUCKING THING?

  6. Anonymous
    Anonymous says:

    The reason is that no MP is disabled and on benefits

    Err – isn't that as it should be? I wouldn't like to think you could pull in an MP's salary and qualify for benefits as well.

    crypto fascist super toffs

    Blaming people for their background is almost a definition of fascism. No-one can help who their parents are.


  7. David Ashcombe
    David Ashcombe says:

    Yes, flexibility in firing would be much more helpful in promoting hiring, but both employer and employee do benefit from protections such as notice periods. In the US with "at will" employment, I had critical staff resign and be out the door within days, leaving me with siginificant expense in contractors to cover the gap. So we do need to think this through thoroughly about what system will work best for both employees and employers.

    What this piece fails to address is that one of the major reasons many labour protections are in place is because a loss of a job has not been properly priced, hence regulation has come along to make up for those weaknesses in protection for employees. So I believe it would be possible to eliminate many of the regulations, and institute a more flexible employment policy, provided that we rectified that weakness in standard employment terms.

    Otherwise there would be inevitable public pressure (employees representing much more of the electorate than employers) to bring back those protections – extensive hard luck stories and suicides of good and hard working employees who have been let go for no perceived reason after 20 years of hard work, with no or minimal compensation, would be very beneficial to Labour, who would likely gain a mandate to reverse such changes in very short order.

    But such flexibility would be possible, and more sustainable against the risk of future legislative reversals, if the standard employment contract contained reasonable financial compensation for "no fault" departures.

    For example a minimum standard payment of 5% of pay x length of service would both be affordable to employees and gve certainty to employers about the cost of asking an employee to leave – five weeks pay for a two year employee, six months pay to a ten year employee, in addition to any normal notice period.

    Such a system would eliminate the need for many of the current employment protections, because employees would not risk "destitution" after giving their all for their employer over many years.

    And for employers there would be a clear benefit – the flexibility to hire when they need to, in the knowledge that they can reduce headcount as needed, with a sensible price that employers can price into their commercial decision making.

    Absent such an offsetting reform I believe there will always be strong opposition to weakening employment protections and an unwillingness amongst politicians to pursue such policies. Hence Cameron rolling over to Cable today, he knows that this would be a gift to Labour politically, and so he will be constrained to "tweaking" employment laws rather than anything more radical.

    DA @davidashcombe

  8. Malcolm Bracken
    Malcolm Bracken says:

    Absolutely. As a rule of thumb a month's notice after a year, and one month per year or so worked up to some maximum seems fair.

    But notice is for contractural negotiations, not legislation.


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