Intervention in the labour market in the name of social protection raises unemployment, prices marginal groups of workers out of jobs and even reduces net incomes thanks to the high tax burden, claims a pamphlet from the Centre for Policy Studies.
Keith Marsden, the author, notes that the unemployment rate is far lower in the US (4.5 per cent) and UK (4.6 per cent) than in Germany (10.9 per cent) or France (11.4 per cent). Yet average after-tax incomes for a two- earner family are higher at $35,151 in the US and $31,810 in the UK against $31,199 in Germany and $24,650 in France.
The report analyses a series of continental-style policies, and finds every one wanting. For example, despite legal limits on working hours, and reductions of up to 10 per cent in average hours worked in Germany and France, the two countries have seen unemployment rise steadily.
Even government policies to impose tough health and safety standards in continental Europe have backfired, with fewer occupational injuries in the Anglo-Saxon countries. Mr Marsden concludes: "The Franco-German model isn't working."
The issue of social protection has become newly controversial since the publication last month of a report by the Organisation for Economic Co-operation and Development (OECD) suggesting that employment protection laws were of some use in reducing unemployment.
The result was greeted with such delight by opponents of jobs market reforms that the OECD had to put out a clarifying statement. It pointed out that such protections did, however, tend to keep peripheral workers such as women, young people and older workers out of jobs, and did discourage employers from creating new jobs.
The statement said the organisation continued to recommend "flexibility in national labour markets in a number of areas, including working time, wage and labour costs, and legislation designed to protect employment."
It added: "The OECD will continue to recommend that countries with relatively strict employment protection legislation which have a serious problem of long-term unemployment and/or relatively low overall employment rates, should consider relaxing their employment protection."
A separate paper published today in the Economic Journal reports that the evidence from US programmes for the unemployed similar to the Government's New Deal measures make very little difference to the people going through them. In particular, young unemployed men are almost as likely to find new jobs at similar pay whether or not they go through a government programme, according to Professors James Heckman and Jeffrey Smith.Reuse content