Governments are regulating employment out of existence

The recent announcements of large-scale redundancies by major companies in the USA and Europe are not just the onset of the next recession, but also the consequence of a century in which governments have progressively regulated the employment relationship to a point that threatens its extinction and taxed employers increasingly as they attempted to create jobs.

The first step to go beyond the process of establishing minimum workplace standards, to remove the worst consequences of industrialization, came in 1919 with the conventions laid down by the newly formed International Labour Organisation. Since then, there have been 190 conventions covering everything from working time to seafarers’ welfare. Although not mandatory on individual countries, they have undoubtedly led to a gradual tightening of the statutory obligations on employers around the world to such a point that the price of employment is now far too high. This is doubly the case when tax and social security obligations are also taken into account.

Currently, globally around 360,000 new laws and amendments are passed in the field of employment each year, on top of which are around a half a million labour court and arbitration decisions. The most active legislative arena is currently the USA where individual states and municipalities are passing a succession of measures to “ban the box”, protect the right to take class actions, stop employers from enquiring about salary history, stop #MeToo gagging orders or apply too restrictive post-competes.

The case against employment status has few friends, partly because of the self-interest of the great majority of employees who are content with their huge saddlebag of rights and entitlements. In this they are supported by most labour authorities around the world and tax authorities – happy to pounce on the self-employed worker struggling to grow their own business. Yet established employers still hold the dice loaded in their favour. Neither governments, trade unions nor employees create real wealth-generating jobs – entrepreneurs and private corporations do. It is only a question of their willingness to exert the power they have and seek to minimize their dependence on the permanent employee.

According to the Secretary-General of the Federation of International Employers (FedEE) “I can see the time when most labour markets around the world have become so regulated and the tax burden on employers is so great that major companies emerge that have few, if any employees. Governments that attempt to block their way will find these companies drifting off to jurisdictions that are more user friendly. In the USA, for instance, California will become a dead zone economically and Texas thrive. The gig economy will transform, but remain alive and well. Those that seek to discredit it or regulate it out of existence will find that their actions backfire on them.

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