6. Conclusion

The United Kingdom provides a 17 year experiment with the consequences of a sustained programme of labour market deregulation. Such an experiment is intuitively more informative than comparing countries at any point in time because so many things may differ across counties, e.g. education/training systems and macroeconomic conditions. The evidence of microeconomic change in wage patterns is staggering. The UK experience with changes in wage inequality and inequality between jobless families is unprecedented. However, both aggregate and microeconomic evidence on the levels and dynamics of unemployment and joblessness shows no change or no modest deterioration since the mid-1980s.

Some of the recent work by UK labour market economists is assessing whether the mentioned "mixture of the worst of two possible worlds: the massive wage inequality of the decentralised US labour market together with high and lengthy spells of unemployment, European-style" (Blanchflower and Freeman) are linked by more than timing or powerful exogenous shocks or are in fact mutually supportive. This work centres on looking at the distribution of economic power in society between workers and employers and between workers. It offers a serious critique of why deregulation may achieve its goals of inequality in wages while failing to sufficiently lift aggregate employment and concentrating unemployment on vulnerable groups in society. The strong a priori belief held in conventional economic analysis and summarized in the OECD Jobs Study colours the reading and interpretation of empirical evidence and leads to one-sided policy analyses that emphasize only the need to weaken protection of the weakest sections of society. It would come as no surprise to most non-economists that when a government picks on the weakest in society as has been in case in the UK over the last 15 years, the result is greater inequality and poverty and also little reduction in unemployment.

Yet the British experience is not all negative. The dramatic improvement in the labour market opportunities for women is a source of reduced inequality. Labour market regulation and often implicit bargains between unions and employers produce job queues with women and young at the back. This reduces joblessness across families but does not serve gender equality. A centre left-programme would seek to include the jobless families without systematic exclusion of women and others. Genuine minimum protection supports this but protection of powerful elites in a unionised workforce does not. Creating a group of jobs with lower minimum wages or exemptions from employment protection is counterproductive. Reforms in the UK which have re-emphasised the claimant's commitment to search for work and the need to provide resources to support the search effort seem positive. The moves to make labour taxes more progressive also seem sensible.

The UK does not provide the answers to the problems of inequality and unemployment, and it desperately needs reforms which tackle the growing social exclusion and poverty that are at one of the worst levels in Europe. This will involve the setting of minimum standards and wages as well as benefit reform to support families with low-paid jobs and progressive employment taxes. Yet the British position is enviable in comparison to that of France or Germany. Reasonable growth rates, 8% unemployment and little inflationary pressure offer a platform from which poverty and joblessness can be addressed while helping to provide work at reasonable wages to excluded groups.

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Blanchflower, D. and R.Freeman (1993): "Did the Thatcher Reforms Change British Labour Market Performance?", in Barrell, R. (ed): The UK Labour Market: Comparative Aspects and Institutional Developments, CUP.

Brown, W. (1993): "The Contraction of Collective Bargaining in Britain", in British Journal of Industrial Relations, 31, 2.

Jackman, R., R.Layard and S.Nickell (1991): Unemployment: Macroeconomic Performance and the Labour Market, Oxford University Press, Oxford.

OECD (1994): The OECD Jobs Study, OECD, Paris.

Schmitt, J. (1995) "The Changing Structure of Male Earnings in Britain, 1974-1988".

© Friedrich Ebert Stiftung | technical support | net edition fes-library | Mai 1999

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