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Ed Miliband must get serious about labour market reform

Ten years ago Germany’s left-leaning Social Democratic Party introduced bold labour market reforms that created 2.5 million new jobs and revived the ailing economy.  In the UK however, the Labour party appears unwilling to follow the example of their German counterparts.

 Ignoring the SPD’s success, Ed Miliband has instead proposed an eclectic mix of misguided labour market policies: 

  • Labour has pledged to force businesses which hire non-EU workers to also hire an apprentice. This will do little to boost employment or skills whilst adding new costs on business;
  • Labour’s Job Guarantee proposals are complicated and expensive. The policy is simply a wage subsidy – which cannot be the source of sustainable job creation.

In a new report The Hartz Reforms …and their lessons for the UK, published by the Centre for Policy Studies on Friday 31 October, author Glyn Gaskarth warns that if UK employment success is to continue politicians must learn from the SPD’s example and get serious about labour market reform:

  • A decade ago the German economy was close to stagnation. Over-generous welfare entitlements and onerous employment regulation had resulted in chronic unemployment.

  • Introducing bold reforms in 2003, the SPD-led Government revived the economy: streamlining the welfare system, improving employment access and encouraging new business start-ups.

Tim Knox, Director of the Centre for Policy Studies comments:

The importance of the Hartz Reforms cannot be underestimated. Germany has since reversed some of the reforms and its economy is suffering. British politicians of all stripes must heed the warning and ensure that effective long-term labour market reform is a priority.

Glyn Gaskarth - Friday 31st October 2014