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My previous pieces (here and here) discussed the topic of “Eurosclerosis” — how static European labor markets cause economic stagnation. While unemployment has fallen, European labor markets aren’t dynamic. Many workers stay with the same employer for more than 10 years, thereby sacrificing career growth opportunities and lifetime earnings! It also has a negative effect on labor productivity and economic growth.
Any move towards even more rigid labor markets with excessive employment protection laws, making it super costly for companies to hire and fire workers, is surely a step in the wrong direction. Unfortunately, one of Labour government’s flagship policies — the Employment Rights Bill — proposes sweeping reforms that will do just that!
The Bill is expected to become law this year, but some sections will only come into effect in 2026 and 2027. Increasing worker protections could risk plunging the