Britain’s problem isn’t EU regulation but productivity and investment


by Owen Tudor    
9:11 am - January 18th 2013

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Before we heard the Prime Minister’s Amsterdam speech was cancelled, the TUC issued a press release on what we expected to see in it about the Working Time Directive.

The extracts from the speech that I’ve seen so far don’t specifically refer to it, although they do say Europe must become more competitive, and they suggest he was going to repeat calls for elements of the European social model to be repatriated. Clearly code for allowing Britain to scrap the Directive the coalition most loves to hate.

We wanted to draw attention to the irony of delivering that speech in the country which more than any other demonstrates that cutting working hours doesn’t make a country uncompetitive. Indeed, the Netherlands suggests that the opposite is the case.

The average Dutch worker can knock off an hour earlier every day than their British equivalent, and still produce more for the country’s GDP figures. Dutch productivity per working hour is nearly 30% higher than in Britain (thanks to the TUC’s Paul Sellers for digging these facts out of the OECD statistics.)

It isn’t the Working Time Directive that is holding Britain’s workers back (it’s actually very flexible, as my former boss Lord Monks pointed out yesterday), it’s the lack of training, infrastructure and investment.

And indeed it may even be the long working hours themselves that are the problem. Investment can be a bit expensive, especially up front, so if your workforce is low paid and insecure, it may pay to just make them work longer hours. But insist those hours come down without loss of pay, and suddenly that investment looks more attractive.

One economist recently argued that it was comparatively higher pay in the UK that led to the industrial revolution happening here first, where mechanisation was the cheaper option, rather than in poverty-stricken China where working the population harder was the cheap option.

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About the author
Owen Tudor is an occasional contributor to LC. He is head of the TUC’s European Union and International Relations Department and blogs more regularly at the Touchstone blog.
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Reader comments


1. So Much for Subtlety

One economist recently argued that it was comparatively higher pay in the UK that led to the industrial revolution happening here first, where mechanisation was the cheaper option, rather than in poverty-stricken China where working the population harder was the cheap option.

So no doubt you will be opposing any more immigration to these not-so-united kingdoms? As that prevents productivity increases through investment in new technology, right?

2. Chaise Guevara

“We wanted to draw attention to the irony of delivering that speech in the country which more than any other demonstrates that cutting working hours doesn’t make a country uncompetitive. Indeed, the Netherlands suggests that the opposite is the case.

The average Dutch worker can knock off an hour earlier every day than their British equivalent, and still produce more for the country’s GDP figures. Dutch productivity per working hour is nearly 30% higher than in Britain (thanks to the TUC’s Paul Sellers for digging these facts out of the OECD statistics.)”

It’s a hell of a leap to suggest that the Netherlands’ high GDP results from its short working hours. The two things may be coincidental, or it might have a high GDP despite its working hours.

Despite the europhobe hysteria EU regulation doesn’t hinder (useful) business (but if the EU imposes FTTs on financial services then so much the better).

It provides one system of rules across 27 formerly separate jurisdictions.

EU regulation therefore is a benefit.

It highlights just how distorting British europhobe propaganda is that British europhobes constantly whine about EU regulation stifling this or that when that just is not the case.

One economist recently argued that it was comparatively higher pay in the UK that led to the industrial revolution happening here first, where mechanisation was the cheaper option, rather than in poverty-stricken China where working the population harder was the cheap option.

Quite. High wages lead to increased mechanisation (the replacement of labour with capital), which can increase productivity but obviously leads to a decline in employment. If one machine can do the work of ten men, you don’t need the ten men any more.

Thing is, though, I thought the TUC didn’t approve of this? Manufacturing production has risen pretty much seamlessly for the last 50 years to the point that we are now producing double what we were in 1958 (http://www.pwc.co.uk/assets/pdf/ukmanufacturing-300309.pdf). In the 10 years to 2007, UK manufacturing achieved a 50% increase in labour productivity.

And the response of the TUC has consistently been to frame manufacturing as “ailing” and “in decline” precisely because employment in the sector has been steadily falling, and to call for Government intervention to prop up the jobs that innovation have made obsolete (http://www.tuc.org.uk/industrial/tuc-4026-f0.cfm).

A Damascene conversion?

“Despite the europhobe hysteria EU regulation doesn’t hinder (useful) business (but if the EU imposes FTTs on financial services then so much the better)”

You can tell this socialist fool has no business experience and only gives unconditional backing to the EU because of his desire to take from that he does not understand and lacks the ability to take part in, EI any form of productive business, no doubt anything beyond state hand outs.

@ #4 Pipe

Well done. You’ve succinctly crammed every brainless Tory cliche about the left into just one paragraph.

Congrats.

There are many things wrong about this article, but lets consider a few.

“And indeed it may even be the long working hours themselves that are the problem.”

That is simply incorrect. The average UK worker works far less hours than the Eastern economies such as Hong Kong and Singapore that are working well over 2000 hours a year. The UK even works less than the EU average of 39 hours, the UK manages 35.
http://www.guardian.co.uk/money/2009/mar/31/uk-long-working-hours

“it was comparatively higher pay in the UK that led to the industrial revolution happening here first, where mechanisation was the cheaper option, rather than in poverty-stricken China where working the population harder was the cheap option”

Owen I thought you were a Unionite. I am surprised that you would go near this economic principle, most work of which was done by Hayek. A very Austrian of Austrian school economists, but it’s correct so thank you for recognising the fact. Unions are often to blame. Their collective action to drive up the rate of salaries has seen labour increasingly replaced by capital. Just consider the current circumstances with driverless tube trains. The comparison with China is rather silly as we have already moved through our industrial revolution, whereas you fail to point out that places like Sweden, Germany and Austria all don’t even have minimum wages.

As for the remained of the article on points of investment, I would agree except for one crucial point. It is not public investment that is needed, as the allocation of resources efficiently by govt. has shown itself to be a disaster.

“Well done. You’ve succinctly crammed every brainless Tory cliche about the left into just one paragraph.”

Really? Lets have a think about what he just said, despite the hysteria EU regulation does not hinder useful business, however as HE does not consider financial services to be useful it is for the better that the EU impose taxation that does hinder that industry, as well as every user of that industry.

Apparently its ok for even the industry’s he considers useful to be hindered as a result of this, as long as something he considers bad is impacted in a negative way.

He then goes on to say EU regulation is good because it forces one system across a number of separate country’s, I note he calls them “jurisdictions”.

Sounds like leftist spite, of industry and free nations to me, what does one do when they are incapable of doing anything off there own backs?

They stand on the side lines and moan, latch on to politics, it is so much easier to pull down than build things up in this world, hence that is what they gain their satisfaction from because it is all they are capable of.

I hope the TUC also recognises that:

1. the higher a company’s profits the higher the wages the workers receive

2. in the long-run, 92% of any rise in corporation tax falls upon wages.

See:

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2010/04/corporate-tax-incidence-some-evidence.html

On EU regulation, consider that it currently takes 18 months to do an environmental impact assessment on any new industrial project. That must slow economic growth and productivity increases. Worse, the effect is higher on new market entrants than it is on established players – and it is the former that are the long term drivers of economic growth.

So opting out of EU law on EIA’s and introducing our own streamlined version is one of many areas where we could increase economic growth relative to the rest of the EU.

It’s a hell of a leap to suggest that the Netherlands’ high GDP results from its short working hours. The two things may be coincidental, or it might have a high GDP despite its working hours.

It isn’t a hell of a leap to suggest this. If you go back to Edward Heath’s infamous 3 day week, the GDP went down by 20% when in fact it should have gone down by 40%. In fact people were more productive with their reduced hours. There’s countless other studies too that show reducing working hours makes workers more productive.

As any marathon runner can tell you, you just can’t run the full 26.2 miles at the same pace you can run one mile at top speed at, and if you try you will find yourself slowing down dramatically. If we could all work at the same level for all hours, why not dispense with sleep and work 168 hour weeks eh?


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