The government has finally published its economic analysis of the Employment Rights Bill. The report highlights some issues with the legislation and gives a go at calculating the significant costs to businesses and the taxpayer. From the outset it makes clear that extra dismissal protections may “make employers less willing to hire workers,” a distortion which could completely “offset the productivity gains from more efficient employer and employee matching.” Guido has leafed through the analysis for the key points:

• Increased job switching could reduce incentives for employers to invest in firm-specific learning and development.
• Higher labour costs could also have a negative impact on the level of labour demand in the economy.
• Cutting staffing levels will “weigh on growth, unless employers subsequently invest sufficiently in capital that means increased productivity offsets the fall in employment.“
• Up to £5 billion in extra costs will be imposed directly on businesses as a result of the legislation – including a £1 billion per year cost of ending zero hours contracts. That will be a low-ball…
• Trade union reforms “may directly impact the public sector pay bill” because their bargaining power will be increased.
• On top of that “if relations remain more fractious, there could be more working days lost from strike action.” If businesses resist, that is…
• Increased costs on the public sector on local authorities.
• Small businesses will be the most affected by “five of the nine largest measures” impacting them disproportionately.
• 15% increased cost burden on courts and employment tribunals.
• Making unfair dismissal protections a “day one right” “could damage the employment prospects of people who are trying to re-enter the labour market, especially if they are observed to be riskier to hire.”
• Where businesses can’t absorb the costs they will pass them on to workers by “reducing expenditures that benefit workers (e.g. staff training) or scaling back future improvements to T&CS  (e.g. wage growth).“
• “The risks are highest for workers with the weakest attachment to the labour market.” The low-paid, disabled, and young…

The analysis relies heavily on research from Labour’s favourite think tank the Resolution Foundation, which is cited 30 times and whose former director is now a Labour MP. In the end it is forced to conclude that “offsetting effects” suggest “the net impact on growth will be small.” No wonder the government accidentally called it the “union bill” – it’s a victory for anti-market bureaucrats…