Sunday, 6 May 2012

Ad Astra

"Too much recent debate has focused on tax and spend rather than on supply-side reform. This is particularly true in the area of labour market regulation."

The joke that is Dr Fox (the Tory not the DJ) is at it again calling for labour market reform i.e. trashing more employment rights, because ….. because …. am no sure really (1). What I am more sure about is that there’s all sorts of reasons why doing so is a bad thing with the biggie right now involving the Vauxhall Astra.

As is periodically the case a multinational car company, in this instance General Motors, has realised its got excess productive capacity. To address this it’s planning to permanently close down some factories. Unfortunately, according to one industry commentator; “(t)he over-capacity is in Germany but I don't think they will get two closures past the board without a fight from IG Metall … (i)f they do go for two plant closures in Germany I think there will be an industrial relations war. They might be able to manage one [closure] without a massive strike. So they need another elsewhere and that is where Ellesmere Port – the home of the Astra - comes in."

Now just chew on that for a bit; the Vauxhall plant at Ellesmere Port is at risk of closure some time during the next few years not because of productivity or any shit like that, but because its easier and cheaper to close factories here than in Germany i.e. British workers could well lose their jobs because industrial relations and employment laws are already significantly more “employer friendly” here than they are in Germany. So dull stuff like reality indicates more labour market “reforms” i.e. the destruction of even more employment rights, is a bad thing.

But, as a mate immediately responded when we were discussing this, Britain is a more attractive destination for new foreign direct investment (FDI) as a result, which is true I guess, ish, give or take some caveats like (1) a race to the bottom in labour costs is something Britain can never win (2) any FDI gained would have to outweigh what is lost to be worth a damn, with this taking into account, in the case of Ellesmere Port, all the surrounding supply-chain companies that also go under as wella s the increase in benefit costs, (3) expensive labour that’s hard to make redundant isn’t necessarily a bad thing because it creates an incentive to make creative and profitable use of it e.g. hire and fire is about doing the same only cheaper, hire and not being able to fire is an incentive to innovate and (4) there is the fuck-up that was Silicon Glen where the FDI seen as a panacea to all our post-industrial ills, instead turned out to be the usual crock of footloose multinationals travelling the globe looking for sucker governments/government agencies dumb enough to waste the taxpayer fivers needed to justify setting up some substandard plant only ever intended to run as long as it took to find the next mark.

Given these dull points drawn mostly from reality, you could still try and debate whether more labour market reforms would have a net positive effect on FDI. Or you could stop being a dick and spell out the impact they definitely would have, which is they’d fuck over the existing working poor. You see the “irony” in Britain is that the poorest paid jobs with the worst employment conditions are actually those most at a remove from and immune to global competition. To give some examples, you can’t outsource cleaners to an Indian call centre nor, unless the minimum wage really, really, REALLY gets ramped up, will we see robots stacking shelves in Tesco any time soon.

Rather, fucking over employment rights is essentially about fucking over the already low paid. Morally, this is a very bad thing. Economically, given tax credits and all that, in practice introducing any measures that would give the already low paid yet another fucking other would primarily increase the benefits and subsidies taxpayers already give employers i.e. the main beneficiaries here would be company owners.

Speaking of which a private equity boy who funds the Tories also argued for more labour market reforms. Funny dat. In the meantime, in-between the chuckles, Ellesmere Port provides a litmus test for assessing the economic benefits British employment law and industrial relations already convey. If Ellesmere Port does get closed it’ll also be interesting to see how this is reported e.g. will the fact it was because it was easier to close it than its German counterpart dominate the headlines I wonder?

The other thing about Dr Fox is that his intervention is apparently supported by the lovely chancellor. There’s lovely, i.e. in the aftermath of a financial crisis what the fuck is the economic benefit of drawing attention away from things other than finance (1)?

(1) Apologies, these were both rhetorical questions. Labour market reform is nothing more than bigoted Tory dogma. There is no meaningful economic argument for it in a British context right now, which in turn calls into question the technical as well as moral competency of those supporting it.

A quick P.S. so there's two articles on Ellesmere Port on the BBC website. Neither mention the disadvantage its at compared to the German alternatives.

A May 17th P.S. That was excellent news about Ellesmere Port getting the work, totally excellent news. A quick digression - given the chat about a new drachma being worth half a Euro, if the Euro broke up, and the Franc, DM etc., reappeared, the strength of the DM would render German exports wholly uncompetitive - digression over. So was the Ellesmere Port decision a victory for flexible working? Am sure that was certainly a factor, however, I reckon the decider was the fact making things here rather than in Germany functions as a dirty, great big strategic currency hedge.