We’re about to learn that workers’ rights will count for little when there’s no work
Blimey, I thought, where is everyone? It was my first visit to London in four months. The pubs and hairdressers had supposedly reopened five days earlier; yet it felt like a scene from 28 Days Later. My train had been almost empty: no more than two or three forlorn mask-wearers per carriage. At Waterloo, fewer than half the shops and cafés were open, and even that was excessive given the scarcity of customers. I set out on foot for my meeting in Knightsbridge, my gloom deepening with each step.
Other European cities bounced back when the restrictions were eased. But here, all around me, was physical evidence of what the opinion polls had been saying. We Brits are global outliers when it comes to our reluctance to return to work. Why this should be, in a country once characterised by healthy scepticism, is one of the most depressing mysteries of the whole wretched episode.
Perhaps it was the impact of the PM’s illness, which made a lot of mildly overweight people under the age of 60 sit up in alarm. Perhaps it was the effectiveness of Government messaging: no scientific nuance could compete with a slogan as taut and spare as “Stay home, save lives”. Or perhaps it was that our furlough scheme was unusually generous.
Whatever the explanation, our recovery now looks certain to be slower than those in neighbouring countries. Hopes of a V-shaped comeback rested on the idea that we stood like greyhounds in the slips, straining upon the start. Instead, we have greeted the end of the lockdown with a shrug. We rather enjoy staying at home, and vaguely assume that our jobs will wait for us. Ministers, reading the economic data, know better.
As I trudged along a deserted Victoria, I realised there was a song buzzing about in my head, one I had barely thought about in four decades.
Ghost Town by The Specials was number one for three weeks in the summer of 1981. You might remember the bleak, mildly spooky video, drained of almost all colour, in which the band drove through empty streets in an old Vauxhall Cresta. The single was inspired by deindustrialisation:
This place is coming like a ghost town/ No job to be found in this country,/ Can’t go on no more.
It is easy to forget the way unemployment dominated popular culture in the early Eighties. It was the theme, not just of chart-topping music, but of films, headlines and TV dramas. It determined general elections in an era when people did not have the luxury of obsessing about identity politics.
Although our cultural elites blamed Margaret Thatcher for the job losses, she won in 1983 with unemployment above three million, and again in 1987 when it had only recently begun to drop, because most people believed that she had a long-term economic plan. She did. The shift from heavy industry to services happened more rapidly in Britain than in most developed economies and, once that shift was complete, we were in the happy position of experiencing labour shortages – hence our high levels of immigration from the Nineties on.
The United Kingdom went into the Covid crisis with far lower structural unemployment than most of the EU because successive governments, following Thatcher, understood that it was not in their power to create jobs. Their task, rather, was to remove obstacles so that businesses could expand and take on more workers.
It sounds paradoxical, but the best way to encourage firms to hire people is to make it easier to fire them. Countries with relatively liberal labour laws, such as Britain and the United States, see many more jobs created during upswings because employers don’t fear being stuck with unwanted staff during downturns.
This is a difficult and counterintuitive argument to make even in normal times. In the current climate, politicians rarely try. Most of the coverage of this week’s emergency budget was framed as “Has Rishi Sunak done enough to save jobs?” Interviewers only ever pressed MPs from one direction.
Few ministers dared voice the unpopular truth that state intervention usually carries hidden costs. Consider, as an illustration, the minimum wage, which privileges the low paid over the unemployed. There may be a case for doing that, so as to underline that it always pays to come off benefits. The trouble is that hardly anyone is prepared to acknowledge that the trade-off exists at all. Raising the minimum wage is good news for people who are paid it, but bad news for those struggling to find work.
Until now, that tension has been largely academic: as long as wages were rising and unemployment was low, the level of the minimum wage made little difference. But, as we come out of the Covid crisis, the real value of salaries will be much less, and hikes in the minimum wage will deter firms from taking on more staff. Politicians, naturally enough, don’t want to make that argument, knowing that they will be shouted down with “How would you manage on £8.72 an hour?”
Most measures to free up the employment market are open to similar criticism. Employers might, for example, want more protection against frivolous unfair dismissal or anti-discrimination cases brought by disgruntled employees, but few MPs will run the risk of being portrayed, however preposterously, as facilitators of bigotry.
What, then, can the Government do? I have argued before in this column that it should cut taxes on employment and investment, including National Insurance and capital gains tax. It could also suspend or abolish some regulations.
It could, for example, make it easier for companies to take on workers who are treated as self-employed. It could exempt smaller businesses from some of the audit rules, and raise the threshold at which they are obliged to enrol employees in pension schemes. It could cut mandatory redundancy consultation periods. It could decline to replicate job-killing EU rules, such as the Temporary Agency Work Directive. It could cut occupational licensing requirements, making it easier, in a time of rapid transition, to move into new sectors. It could loosen Britain’s uniquely strict staff ratio rules in nurseries so as to cut the cost of childcare. It could allow pubs and restaurants permanently to offer takeaways and to operate in neighbouring parking spaces.
All these reforms rest on the recognition that businesses, not governments, create jobs. Will politicians admit that? Will voters believe it? If not, I am afraid we are going to learn the hard way that workers’ rights count for little when there is no work.
‘It sounds paradoxical, but the best way to encourage firms to hire people is to make it easier to fire them’