2.7 Labour market regulation

Why is it significant?

Labour market regulation is a necessary and important component of the institutional framework. It affects the ability of employers to offer a diverse range of employment opportunities to meet their needs and those of their employees.� It also influences the ability of the unemployed or inactive to find suitable employment.

How does the UK perform?

A survey in the International Institute for Management Development�s (IMD) World Competitiveness Yearbook suggests that the UK labour market has a regulatory environment perceived as significantly better than other major European countries, and only slightly behind the US (Chart 2.7.1).

The mark-up on wage costs faced by employers (eg social security charges) is another measure of the burden of government intervention.� US figures show that the UK compares very favourably with other G7 countries on this measure, with non-wage labour costs just under 13 per cent of total labour costs, compared with roughly 15-30 per cent for the other G7 and EU countries (Chart 2.7.2).