Who picks up the tab for introducing laws?

If Dickens’ A Christmas Carol was updated surely Ebenezer Scrooge, the
hard-nosed local employer, would have signed up to a progressive work-focused
think-tank following his ghostly visitations. Hard working employee Bob
Cratchit – a newly empowered stakeholder – would have been given so much reward
and time sovereignty that Tiny Tim would have grown up to be a Chippendale.

But even the enlightened Scrooge would have rejected the idea that improved
working conditions should be enforced by law. He prefers that employers should
voluntarily come to share his change of heart.

It is a typical view even for the enlightened. Employers constantly complain
that offering greater legal rights to workers is harmful to jobs. Recent
legislation has cost UK employers about £6bn each year.

However, while obviously a big number, the implicit assertion that this is
necessarily bad news for job creation is misleading. Half the amount is due to
paying the National Minimum Wage – which at the modest rate set has had no
discernible effect on employment levels. The remainder stems from new rights
that include working time, part-time work and parental leave.

But as with any tax one must ask the key question – who pays? And in this
case the answer is not employers, but workers. Over time wages adjust downwards
to compensate for higher regulation costs. In other words, workers themselves
pay for these improved employment rights.

Enshrining better working conditions in law could therefore be viewed as a
form of social compact whereby employers are required to act as intermediaries
between the state and civil society to enhance the common good. Employers
should be eager to adopt this role since, as research from CIPD and elsewhere
shows, better work is also more profitable work.

So why do employers complain? The trouble, of course, is that regulation
tends to be introduced with such speed, or in such a bureaucratic fashion, that
employers struggle to cope. A sudden tsunami of red tape can kill small
employers faced with cash flow prob- lems, while the cost hike involved can
lead to short-run job losses throughout the economy. And excessive form filling
detracts from everyday business activities.

These are clearly legitimate grounds for concern. Yet while it is
justifiable to criticise how it is introduced, there is a tendency for some
employers to take their opposition to red tape too far. Workers have a right to
expect decent employment conditions and sensibly implemented regulation can
help guarantee these. Let’s hope UK employers recognise this in 2002, and then
staff everywhere will agree with Tiny Tim when he declared, "God bless
’em, every one."

By John Philpott, Chief economist, CIPD

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