NOW FOR THE JOBS CRUNCH

Every time the Government introduces a new regulation, there are howls of complaint from the self-appointed representatives of the “business community”...

...and then nothing happens.

The Government ignores the businessmen, knowing that there are few swing votes among them: most are Conservatives, and those who are not are the sort of die-hards who will always vote Labour, come what may.

In any case, the catastrophes predicted by the protesting business lobby never seem to come to pass. The minimum wage, maternity leave, the EU working hours directive, and about a hundred other new burdens have been imposed on business over the last decade, and every time it was said that they would cost jobs. Yet the economy has continued to grow.

The business lobby, like the boy who cried wolf in the story, is ignored because no wolf has appeared.

That is about to change.

After all, in the story there was a real wolf, and he has just arrived at the door in the form of a long overdue recession.

The fact is that the predictions were right all along. All these restrictions have cost jobs – except no one noticed because, in a rising labour market, employees were already at a premium. Employers were already paying more, so the cost of the additional regulations was not in itself a great burden. The minimum wage, for example, is meaningless if the markets are already forcing wages up.

Of course, the increased regulatory costs were having an effect. The economy was not growing anything like as fast as it might have done, and workers were not earning as much as they would have done if employers were paying them all in wages rather than spending the money on compliance with new regulations.

However, no one really cared because times were good.

The true cost of the new regulatory burdens would only become apparent when the economy ceased to expand, and when labour was no longer at a premium.

That day has now arrived. Faced with declining markets and increased labour costs – which are now inflexible because they are cemented into law – employers have no choice but to cut jobs.

The increased government regulation of the last ten years means that far more jobs will be lost than would otherwise be necessary.

The worst of it is that many of these jobs are not going to come back when times improve. Some companies will go under as a direct result of being uncompetitive because of these regulatory burdens. Others will survive, but, if they expand again, they will compare the over-regulated labour markets of the EU with the obvious alternatives, and they will come to the obvious conclusion about where the new jobs will be.

This recession is not just a cyclical dip. It is reaping the consequences of ten years of ignored warnings about the over-regulation of the labour market.

It is going to be a lot tougher as a result.

September 2008