Home / Economics / The UK and US need job security, not just job subsidies

The UK and US need job security, not just job subsidies

The opposing ideology and the OECD

But if job security is so good, why are our laws so bad? One answer is that for many years, dozens of economics papers have argued job security damages the economy by reducing productivity, killing jobs, or stifling innovation. The main source of evidence for these claims is the OECD’s ‘indicators of employment protection’, which ranks the strength of different countries’ job security laws. But none of those conclusions are credible, because the OECD’s index is visibly riddled with legal errors, which have escaped any real scrutiny until recently. For instance, the OECD asserts that Italy’s protection is greater than Germany’s, even though Italy has no elected work councils that can veto dismissals. It ranks the UK and Germany’s notice and severance rules as equally protective, when German workers are far better off. The OECD believes US enforcement of employment rights is one of the world’s strongest when the US has no Employment Tribunals, no work councils and often no rights. The OECD’s database is so backwards, so indefensible, that the conclusions of every economics paper based upon it must be regarded as suspect or wrong.

By contrast, research based on a credible and transparent legal database from the University of Cambridge, Centre for Business Research, shows that job security enhances innovation, employment and productivity. Credible understanding of job security is crucial now, given the scale of the corona crisis.

So what can the UK, the US and the world do?

What can the UK do?

The UK is fortunate in its ability to freeze dismissals immediately, put workers on boards, and extend the scope of worker rights protection, all without Parliament. First, by order the Secretary of State can amend the ACAS code on redundancies, to require no dismissals for the duration of the coronavirus (with strict exceptions), and it can make all subsidies to business conditional on rehiring anybody already dismissed. It can equally, like France, Italy and Spain, give an emergency order freezing all dismissals. As Keir Starmer has argued, money must come with ‘job protection’.

Second, the government can change the UK Corporate Governance Code, so every listed company elects worker directors to boards. It can also order that pensions and shareholder rights are democratically controlled by the real investors, and not short-term asset manager intermediaries. Accountable corporate governance is essential in this emergency to ensure subsidies are not squandered. Third, the Secretary of State can extend all worker rights by order to everyone who personally performs work. No doubt the corona crisis and our response so far has ‘exposed the inadequacy of the existing UK labour law framework’, and proved (as Boris Johnson says) ‘that there really is such a thing as society’. Our law and our society are hurt, but they can be mended.

What can the US do?

The US federal government is in a dire place, but a “You’re Fired” Depression can be pre-empted by democratic state action. Number one, states can legislate to replace “at will employment” with discharge only for “just cause”, as recommended by Harvard’s Labor and Worklife program, and Bernie Sanders’ presidential campaign.

Number two, states can create elected work councils with powers to stop unjust discharge, like the plan the US government helped write for Germany in 1946.

Number three, states can require all corporations have elected worker directors on boards, and require worker pension and capital funds have elected representatives, so that termination decisions are accountable. Elizabeth Warren’s coronavirus plan advocates worker representation on boards in return for federal money, and Bernie Sanders proposes to ensure ‘shareholder democracy’ in capital. These measures can also be enacted by every state before the federal government acts. Number four, states can, like California’s AB5 law, extend protection for all rights to more employees. Once again, states can become the laboratories of democracy.

What can every country do?

British and American workers have among the worst job security and democratic rights ‘in the western world’. But every country would benefit by extending job security and workplace democracy. Every country would also benefit by increasing the right to paid holidays, because more holidays will enable more flexibility in responding to crisis. European economies shrink by 10-20% each summer because people go on holiday, and we have no trouble managing that economic ‘downturn’. We simply shift our work. The human right to more ‘holidays with pay’ is the best guarantor of flexible workplaces.

This is an appalling health crisis, our loved ones are being lost, we face mass unemployment, and potentially a social catastrophe. But the coronavirus also shows how easily we can improve the future. In cities and towns, the air has become clean, traffic accidents have dropped, and noise has turned to calm. People are sometimes bored staying at home, but many of us are no longer frantically running, driving, elbowing, or flying around. We see our international institutions, like the World Health Organisation, coordinating containment and research on a vaccine. We also see pettiness, and selfishness, but we see those people are an isolated few.

Governments everywhere have shown that with the will, we can expand health, give everyone an income, abolish homelessness, and switch our production rapidly for ventilators or health equipment: things we can also do to halt climate damage and war. Above all we see people helping each other. Maybe, just maybe, we can not only heal our people in this crisis, we can also heal our society and heal the world.

Further reading E McGaughey, ‘Ten things the government can do right now to prevent a Corona depression’ (20 March 2020) Institute for Employment Rights, co-signed by 40 labour law experts.A Adams-Prassl et al, ‘Inequality in the Impact of the Coronavirus Shock: New Survey Evidence from the UK’ (2020) Working PaperV De Stefano, ‘Labour and social protection in times of COVID-19’ (3 April 2020) YouTubeS Block and B Sachs, ‘Clean slate for worker power: building a just economy and democracy’ (2019) Harvard Worklife Program

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