Britain has less employment protection than the BRICS

I can’t remember an employment law story causing this much of a row since the 1980s. Whatever else you might say about Adrian Beecroft, at least he’s got us discussing the subject and, as Michael says, he’s inspired some great blogging as well.

It was inevitable that, at some point, Beecroft’s defenders would bring up India and China. The argument goes like this: Never mind that Britain has the lowest level of employment protection in the EU and among the lowest in the OECD, it is the BRICs we need to compete with now. I’ve seen this trotted out in a number of interviews and comments threads over the last few days.

You are probably sick of me posting this graph by now but look at it again, closely.

Employment Protection in 2008 in OECD and selected non-OECD countries

Scale from 0 (least stringent) to 6 (most restrictive)

As the title says, it shows employment protection levels in the OECD and other selected countries. Towards the right, the highly regulated end, you will find India, Indonesia, Mexico and China. In the middle you will find Brazil. All those countries which are set to overtake us by 2050 have higher levels of employment protection than we do.

Of course, it’s not just the law that causes headaches for employers, the legal process can be burdensome too. Here too, though, the UK compares favourably with other countries.

This OECD study found that countries with courts and judges dedicated to employment cases were more effective on a number of measures than those without. Ripped Off Britons has helpfully highlighted these two graphs from the report:

Compared to some of the other countries studied, the UK has relatively few contested cases and relatively few that go through a number of appeal stages. Our system is also reasonably good at keeping employment law cases out of the courts in the first place.

The study didn’t extend to the BRICs but contrast its findings with what the OECD says about India:

In the event that a dismissal is found to be unfair, the court may reinstate the worker with or without back pay. In extreme cases where the employer argues strongly against reinstatement, the court may award compensation instead of reinstatement. Labour courts typically take 3-4 years to settle disputes and make an award. 

That won’t come as a surprise to anyone who has visited India. The Indians do bureaucracy even more enthusiastically than we do. As US lawyer Mariana Costa says:

One important observation – Indian Labour and Employment Law is among the most complex in the world.

And here’s the China Law blog on the country’s employment regulations:

The Chinese system is a contract employment system. This means all employees must be engaged pursuant to a written employment contract and during the term of that contract, it is very difficult to terminate an employee. An employee can only be terminated for cause and cause must be clearly proved. This means the employer must maintain a detailed set of rules and regulations and must maintain careful discipline records to be able to establish grounds for dismissal. This whole situation makes the employment relationship and the employment documents much more adversarial than is customary in the U.S.

And yes, Quentin Letts, they do have maternity leave in India and China.

Every major economy in the world has employment legislation and, in general, both the law and the legal processes are more onerous for employers than they are in the UK. Before we reduce our employment protection even further we need good evidence that it would make a significant difference to our economy. So far, all Beecroft and his allies come up with is spurious anecdotes and scaremongering about the threat of competition from the BRICS.

Well even the BRICS have more employment protection than we do. If our only strategy for growth is to beat up on employees more than they do in India and China then the government has clearly run out of straws to clutch.