UK To Make It Easier To Hire, Fire Workers

Posted by Walter Olson

In Britain, the coalition government of David Cameron hopes to stimulate much-needed hiring by reducing state interference with private employers’ right to choose their own workforces. Per the Telegraph, Cameron “hopes that relaxed employment laws will help to boost the private sector and encourage firms to take on thousands of new workers.”

For all the high hopes, the changes are in fact quite modest. Newly hired workers will wait two years, rather than one, before obtaining the power to challenge later firings before official tribunals. To discourage doomed or trivial claims, disgruntled workers will be charged a fee for resorting to a tribunal. The smallest employers will be exempted from some portions of the law, and so forth.

Judged by the “employment at will” principle that best exemplifies liberty of individual contract, Britain’s job market will remain far too highly regulated. But the direction of change is interesting. Despite the frequent impression that “Eurosclerosis” (and its equivalents elsewhere) puts the patient on a one-way course of decline, nations around the globe have repeatedly sought to shake off economic malaise by pulling back from labor regulation toward liberty of contract. Often these steps have stimulated exactly the economic expansions hoped for, as with Margaret Thatcher’s reforms in Britain in the 1980s and with New Zealand’s less famous yet more radical 1991 reforms. Alas, in both Britain and New Zealand, later Labour governments reimposed some (not all) of the previous types of regulation in deference to their union and Left constituencies.

What of the United States? For the most part, we’ve resisted the worst Euro labor-market practices — which has required us to ignore prevailing opinion among labor and employment specialists in our law schools, most of whom (as I’ve argued at book length in the past, and mention again in my forthcoming book on the influence of law schools) tend to support a great many bad proposals to restrict private employers’ liberty to hire and fire. Yet in our own distinctive way — which owes more to lawsuits and less to administrative tribunals — we keep edging toward European-style notions of workplace tenure. Newly released numbers show that federal complaints of employment bias surged to record levels last year, up 7 percent, led by a 17 percent spike in disability-discrimination claims, which now represent one-quarter of the nearly 100,000 total.

The newly activist posture of the Obama Equal Employment Opportunity Commission may have contributed to the trend a bit, and so may the state of the economy: laid-off workers may be more willing to pursue lawsuits when job prospects are bleak. But the main responsibility goes to the ADA Amendments Act passed by Congress in 2008 and signed by none other than Republican President George W. Bush, in this respect continuing his father’s tradition of uncritically endorsing almost any measure labeled as a matter of disabled rights. Among its other provisions, the 2008 ADA Amendments Act reversed a series of U.S. Supreme Court decisions that had tended to limit the scope of coverage of the ADA to persons with more severe disabilities. It also bestowed new rights to sue on persons “regarded as” disabled whether or not their actual medical condition so qualifies. The overall effect of the changes is to make it hard if not impossible to argue that a disability is too minor to deserve accommodation: “Challenging the employee’s ‘disability’ status is a waste of time with the new expanded definition of ‘disability’,” per one employer advisor. Karen Harned and Katelynn McBride have much more on the amendments in a new article in the Federalist Society publication “Engage.”

Once again, both major political parties pave the way to excessive regulation. And that makes it harder politically for an equivalent of Cameron’s reforms to come along here.

Week in Review: ‘Saving’ the World, Government Control and Drug Decriminalization

Posted by Chris Moody

G-20 Summit Agrees to International Spending Plan

g-2The Washington Post reports, “Leaders from more than 20 major nations including the United States decided Thursday to make available an additional $1 trillion for the world economy through the International Monetary Fund and other institutions as part of a broad package of measures to overcome the global financial crisis.”

Cato scholars Richard W. Rahn, Daniel J. Ikenson and Ian Vásquez commented on the London-based meeting:

Rahn: “President Obama of the U.S. and Prime Minister Brown of the U.K. will be pressing for more so-called stimulus spending by other nations, despite the fact that the historical evidence shows that big increases in government spending are more likely to be damaging and slow down recovery than they are to promote vigorous economic expansion and job creation.”

Vásquez: “The push by some countries for massive increases in spending to address the global financial crisis smacks of political and bureaucratic opportunism. A prime example is Washington’s call to substantially increase the resources of the International Financial Institutions… There is no reason to think that massive increases of the IFIs’ funds will not worsen, rather than improve, their record or the accountability of the aid agencies and borrower governments.”

Ikenson: “Certainly it is crucial to avoid protectionist policies that clog the arteries of economic recovery and help nobody but politicians. But it is also important to keep things in perspective: the world is not on the brink of a global trade war, as some have suggested.”

Ikenson appeared on CNBC this week to push for a reduction of trade barriers in international markets.

With fears mounting over a global shift toward protectionism, Cato senior fellow Tom Palmer and the Atlas Economic Research Foundation are circulating a petition against restrictive trade measures.

Obama Administration Forces Out GM CEO

rick-wagonerPresident Obama took an unprecedented step toward greater control of a private corporation after forcing General Motors CEO  Rick Wagoner to leave the company. The New York Post reports “the administration threatened to withhold bailout money from the company if he didn’t.”

Writing for the Washington Post, trade analyst Dan Ikenson explained why the government is responsible for any GM failure from now on:

President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.

Wagoner’s replacement, Fritz Henderson, said Tuesday that after receiving billions of taxpayer dollars, the company is considering bankruptcy as an option. Cato scholars recommended bankruptcy months ago:

Dan Ikenson, November 21, 2008: “Bailing out Detroit is unnecessary. After all, this is why we have the bankruptcy process. If companies in Chapter 11 can be salvaged, a bankruptcy judge will help them find the way. In the case of the Big Three, a bankruptcy process would almost certainly require them to dissolve their current union contracts. Revamping their labor structures is the single most important change that GM, Ford, and Chrysler could make — and yet it is the one change that many pro-bailout Democrats wish to ignore.”

Daniel J. Mitchell, November 13, 2008:  ”Advocates oftentimes admit that bailouts are not good policy, but they invariably argue that short-term considerations should trump long-term sensible policy. Their biggest assertion is that a bailout is necessary to prevent bankruptcy, and that avoiding this result is critical to prevent catastrophe. But Chapter 11 protection may be precisely what is needed to put American auto companies back on the path to profitability. Bankruptcy laws specifically are designed to give companies an opportunity — under court supervision — to reduce costs and streamline operations.”

Dan Ikenson, December 5, 2008: “The best solution is to allow the bankruptcy process to work. It will be needed. There are going to be jobs lost, but there is really nothing policymakers can do about that without exacerbating problems elsewhere. The numbers won’t be as dire as the Big Three have been projecting.”

Cato Links

  • As the North Atlantic Treaty Organization celebrates its 60th birthday, there are signs of mounting trouble within the alliance and increasing reasons to doubt the organization’s relevance regarding the foreign policy challenges of the 21st century. In a new study, Cato scholar Ted Galen Carpenter argues that NATO’s time is up.
  • Should immigration agents target businesses knowingly hiring illegal immigrants? Cato scholar Jim Harper weighs in on a Fox News debate.

Amusing, but Tragically Accurate, Video on Ag Subsidies from the U.K.’s Taxpayers Alliance

Posted by Daniel J. Mitchell

It is unclear whether European Union agriculture policy is more absurd or less absurd than American agriculture policy. Both systems reward special interests. Both systems distort markets. Both systems deprive people in the developing world. Both systems are bad news for taxpayers. The real issue is whether it is possible to reverse these terrible policies. Maybe a bit of satire will do the trick. Our friends at the Taxpayers Alliance in England have put together a video which uses humor to explain the absurdity of Europe’s so-called common agricultural policy.

After watching this video, I’m feeling a bit envious. My mini-documentaries on economic issues (see examples here, here, and here) have received some good feedback, but perhaps we could change more minds in America by using mockery instead of wonkery.