PRESS RELEASE: Leading economists rebuff business lobby’s anti-growth claims on Employment Rights Bill

A group of ten leading economists and labour lawyers, including Ozlem Onaran, professor of economics at the University of Greenwich and Jonathan Michie, professor of innovation and knowledge exchange at the University of Cambridge, has debunked claims by business leaders that the proposed Employment Rights Bill will stifle UK economic growth.

In an open letter, published today [Monday 10 March] on the Institute for Employment Rights (IER) website, the group argue that evidence overwhelmingly shows stronger worker protections can enhance productivity, support demand and create a more stable economy.

In the letter, published ahead of the Employment Rights Bill going to report stage at the House of Commons on 11 and 12 March, the economists and labour lawyers challenge assertions made by business groups, including the CBI, that the Bill represents a “thicket of regulation” that will prevent them from “creating the high-quality, secure jobs which we all want to achieve[1].”

Instead, they argue that “labour laws do not, on the whole, have negative economic consequences, and may well have positive ones.” The group highlights that employment protection laws lead to better job security, which incentivises firms to invest in worker training and capital improvements, ultimately boosting productivity.

Professor Ozlem Onaran, one of the signatories of the letter, says: “Britain was a pioneer in labour legislation and history shows that stronger employment rights contribute to economic stability rather than hinder it. The notion that protecting workers harms growth is not supported by serious economic research.”

Some in the business community have claimed that the Bill’s introduction of day-one rights against unfair dismissal, the ban on zero-hours contracts, including for agency workers, and changes to Statutory Sick Pay will harm businesses, particularly small and medium-sized enterprises (SMEs). However, the group dismisses this argument as misleading.

“SMEs especially benefit from effective labour law enforcement and inspection, which limit the scope for undercutting. Ultimately, nobody gains from a race to the bottom,” said the letter’s signatories.

The group also highlight that higher wages, resulting from strengthened collective bargaining rights, boost consumer spending and strengthen the tax base. “Labour laws promoting collective bargaining tend to raise wages and stabilise employment,” Professor Onaran explained. “Higher wages increase demand for locally produced goods and services, which directly benefits businesses.”

The economists and labour lawyers dispute claims from the Federation of Small Businesses (FSB) that the Bill will “wreak havoc”[2] on an already fragile economy, saying this fails to recognise the broader economic benefits of fair labour laws.

The group argues that “labour laws need not deter private investment and can complement improvements to public infrastructure… Over time, as their effects feed through to the wider economy and government finances, labour laws largely pay for themselves.”

Professor Onaran added: “The idea that weaker worker protections are necessary for growth is fundamentally flawed. This does not create a sustainable economic model—it simply increases inequality and instability.”

As the UK seeks to rebuild its economy, academics and lawyers from the IER – a think tank supported by unions and law firms – are calling for the Employment Rights Bill to go further. Despite government claims that this is the biggest upgrade to workers’ rights in a generation, the IER experts argue that it leaves significant gaps that will allow exploitative employment practices to persist.

Lord John Hendy KC, chairperson of the Institute of Employment Rights and a signatory of the letter, said: “Stronger employment protections are not an obstacle to economic growth but a driver of stability, productivity and fairness.

“This Bill is an important first step in addressing the failures of deregulation, but it does not go far enough. Without decisive action to close loopholes, strengthen enforcement and deliver the protections workers need, the UK will remain out of step with European and international labour standards. This is a once in a generation moment to get it right and rebalance the power relationship between workers and employers in the UK.”

To read the letter in full, visit: https://www.ier.org.uk/latest/news/

Ends

Notes to editor

The signatories of the letter include:

• Simon Deakin, Professor of Law, University of Cambridge
• Ruth Dukes, Professor of Labour Law, University of Glasgow
• Keith Ewing, Professor of Labour Law, King’s College London
• Lord John Hendy KC, Chairperson of the Institute of Employment Rights
• Michael Kitson, Associate Professor in International Macroeconomic, University of Cambridge
• Daniele Girardi, Doctor of Economics, King’s College London
• Jonathan Michie, Professor of Innovation & Knowledge Exchange, University of Cambridge
• Ozlem Onaran, Professor of Economics, University of Greenwich
• Roberto Veneziani, Professor of Economics, QMUL

Interview access

The following are available for interview and background briefing ahead of the embargo and on Monday 10 March:

• Ozlem Onaran, Professor of Economics, University of Greenwich
• Simon Deakin, Professor of Law, University of Cambridge

To arrange any interviews, please contact Carolyn Pugsley at Freshwater on carolyn.pugsley@freshwater.co.uk or phone 0779 052 7258

More information

For more information on the IER’s campaign to strengthen the Employment Rights Bill, visit: https://www.ier.org.uk/resources/the-employment-rights-bill-erb-2024/.

[1] https://www.cbi.org.uk/media-centre/articles/cbi-responds-to-publication-of-amendments-to-the-employment-rights-bill/

[2] https://www.fsb.org.uk/resources-page/employment-bill-will-wreak-havoc-on-our-already-fragile-economy-say-small-firms.html