chapter  7
26 Pages

Labour regulation and SMEs: A challenge to competitiveness and employability?


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Since the adoption of the Single European Act, European Community priorities have shifted from the task of harmonisation to the definition and implementation of minimum requirements in the area of working conditions. The encouragement of high labour standards, through legislation, as part of a competitive Europe is a central objective of the priorities in the social field of European Union policy. At the centre of the argument is the belief that the labour market is just as much a social institution as an economic one (Solow, 1990) and that ideas of fairness, motivation and morale imbue the labour market. However, without regulation such principles rarely emerge, and the result is a set of labour standards erroneously designed to serve the economic imperatives of growth. All forms of regulation, therefore, must be resisted in order to pursue greater levels of economic prosperity. Companies can more profitably respond to signals from the market place if they can reduce their core workforce and ‘hire and fire’ contract and/or part-time workers with the minimum of contractual complication. Such is the thinking of the economics of the new right which came to dominate much of the rationale behind labour market policy in the US and the UK.