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Professor Stephen  Bevan

Employment regulation kills job creation, right?

Authors: Professor Stephen Bevan

30 September 2011

Tomorrow sees the introduction of new Agency Worker regulations in the UK. Among other things, it means that people on temporary contracts or carrying out agency work will have the right from day one in an assignment to access end-users’ collective facilities such as canteens, childcare facilities, and so on and to be told about job vacancies. Perhaps most significantly, after 12 weeks, they have the right to the same basic pay and working conditions as permanent staff.

Although these new regulations have been known about for some time, they are certain to lead to further debate about whether the burden of employment regulation being placed on UK businesses is a decisive factor which stifles job growth. This is something The Work Foundation has written about extensively, showing, among other things that employment rates and employment protection regulation are not always linked in the way you might expect and that the ‘hire and fire’ benefits of so-called labour market flexibility are often over-stated. This echoes research conducted by economists here in the UK (for example Jonathan Wadsworth) and analysis published in the USA this week by Lawrence Mishel at the Economic Policy Institute.

As might be expected, about a third of employers say they will now consider terminating temporary and agency worker contracts before the 12 week cut-off because the financial benefits of using ‘contingent labour' are being undermined. Of course employers have always used people in the ‘peripheral’ workforce as a buffer against uncertain demand both on entering and leaving recessions. It’s also true that some people working on such terms find it to be a route into permanent employment and that others (eg students and some people with caring responsibilities) favour temporary work as it suits their lifestyle.

However concern has been raised recently that the use of practices such as unpaid work trials and zero-hours contracts are on the increase in some sectors, making ‘vulnerable’ employment more commonplace. In August, John Harris of The Guardian raised questions about the ‘work experience’ component of The Work Programme and whether this allowed firms to deploy cheaper labour rather than recruit permanent staff. On Wednesday, Radio 4’s You and Yours programme explored whether unpaid work trials and zero-hours contracts were fair. In the case of unpaid work trials, people are asked to work a whole shift – or longer - to assess their suitability for a job and then, on rejection, are not paid for their labour. Zero-hours contracts or ‘on-call’ contracts allow workers to be engaged and laid off at short notice depending on demand or workload. No guarantees of hours and very few employment rights accrue to these workers. I was asked to make a contribution to the programme and pointed out that about 5 per cent of UK workplaces use zero-hours contracts, though this figure was higher in some sectors (as high at 45 per cent in the hotel & catering sector). There is again evidence that some people opt for these arrangements as a preference, but some research shows that mental health, accident rates and engagement are all worse for people on such contracts.

Back in 2007 the TUC’s Vulnerable Workers Commission looked at the issue of the ‘peripheral’ workforce in some detail. More recently Dr Guy Standing, formerly of the ILO and now at the University of Bath has written a book on what he calls ‘The Precariat: The New Dangerous Class’. Guy’s work raises some very relevant questions about both the business and ethical underpinnings of ‘precarious’ work and you will be able to hear him explain his concerns at an event at The Work Foundation on 11th October as part of our Bottom 10 Million Programme.

At best, I think the argument that stripping out employment regulation is the best way to create jobs doesn’t bear much serious scrutiny. By contrast, creating what is, in effect a two-tier labour market where knowledge-workers co-exist with a low-pay, low status and contingent workforce is far more damaging to the effective operation of the labour market and the sustainability of businesses which deliver both quality products & services and Good Work.

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