10 - State Regulation

Summary

“The trouble with government regulation of the market is that it prohibits capitalist acts between consenting adults”.

Robert Nozick (1978)

“Regulations level the playing field for everyone competing for our business. Because of regulations, good companies that do right by their customers don't have to compete against cheaters… . That's good for customers and good for upstart competitors who think they have a better product to offer.”

Senator Elizabeth Warren (2018)

This final chapter considers regulation of the labour market. The starting point for such discussions is usually that there is a tradeoff between protecting workers and strengthening the economy, and the political process decides where on the spectrum policy will end up. We show that in fact a reluctance to protect working conditions exacerbates the imbalance of power between workers and employers and contributes to the low-pay low-productivity equilibrium that locks too many people into low-paid work, and slows down the UK's economic performance.

CONTESTED POLICY

Labour market regulation has been a contested area of economic policy for centuries. When the first Factory Acts started limiting children's hours of work, there were voices that protested at the economic damage such restrictions would cause. Lord Lauderdale said in the House of Lords that he opposed the Cotton Mills and Factory Act of 1819 because it violated “the great principle of Political Economy that labour ought to be free” (Walker 1941). This Act prohibited employing children under the age of nine in the cotton industry and limited work for those aged nine to 16 to 12 hours a day (UK Parliament, n.d.). Over the course of the nineteenth century, legislation limited further children's and later women's hours of work, introduced factory inspectors and the first new rules for managing dangerous machinery (Bloy, n.d.).

Today, we take for granted a much wider range of protections. The Contracts of Employment Act 1963 brought with it a right to a written specification of hours of work, pay rates and notice periods. The 1960s and 1970s saw the first protections against discrimination at work, covering race and sex. Recent years have seen these protections extended to cover disability, sexual orientation, age, religion and belief. For two decades, there has been a national minimum wage, limits on hours of work for all workers – not just those in factories – and rights to a minimum amount of paid holiday leave each year.