49's the sticking point for French firms

Quantifying regulatory burden.

A group of LSE economists have published a paper which makes a strong effort to actually work out the damage regulations do to economic efficiency. Luis Garicano, Claire Lelarge, and John Van Reenen hit upon the method of looking to France, where there are sharp increases in the regulatory burden when firms employ 50 or more workers.

Seemingly as a result of those burdens, a noticeable number of firms appear to "stick" at 49 employees even when they may hire that extra marginal person. The piece's key chart is a killer:

Notice how the number of companies with 49 employees is actually higher than the number with 45 – and also that there's a precipitous drop between the number with 49 and the number with 50.

The paper tries to estimate, to a preliminary level, the regulatory cost of this burden. They estimate that 0.05 per cent of firms are distorted, and that the total output lost by those distorted firms is about 35 per cent – meaning that GDP is lowered by 0.5 per cent.

As the New York Times' Casey Mulligan writes, however, we shouldn't confuse the direct cost with the total cost of the regulations:

This is not to say that the regulations imposed on 50-employee companies are necessarily excessive, because they can create public benefits that more than justify their net costs for an employer and his employees, just as taxes and government spending can. For example, an air-pollution regulation might kick in at 50 employees that creates a significant cost for the employer and little aggregate benefit for his employees but creates a significant benefit for the people of France.

The employers also miss another transfer of wealth that might be just as important. Matt Yglesias covered it in another context last week:

One very plausible consequence of this would simply be to strongly discourage the owners of small firms from pursuing growth. And the big winners from that kind of disincentive to firm growth will be the owners of other small firms that simply aren't as lucky or well-managed as the growing ones.

In other words, it's a transfer of wealth from a company which may expand by a few employees to the companies which aren't going to have their lunch eating by a growing competitor. In the French context at least, that transfer will be relatively small. While companies are disinclined to grow from 49 to 50 employees, they may well be happy to leapfrog from 49 to 51 or higher; and the impact on creation of massive companies will be small indeed. But it will have an impact.

Fundamentally, it's an example of why it's best, where-ever possible, to target margins rather than absolutes. In taxation, for example, there's rarely this sort of adverse incentive, because there are few margins where earning more affects the taxes you pay on money already earned (where that does happen – between £100,000 and £150,000 of income, for instance – it is still carefully planned so that there is a positive value for every extra pound earned).

The problem is that that's harder to do for regulation. You can't really tell a company that they have to provide health insurance for the 50th employee but not the first 49, for instance. It would be unfair, not to mention probably even more impractical.

Better answers may be to more gradually phase in the burdens, so that at no point is there a leap in regulation big enough to dissuade too many companies from expanding; to stop fetishising small businesses, and make them subject to the same regulations as every other company (which would also force regulations to be easy to comply with, of course); or to make such regulations more explicitly support entrepreneurship rather than merely being small by imposing them a set period after a company has been founded, rather than basing them on growth.

More research, please!

An employer works on pullover sleeves for one of the luxury French brands who outsource work to these small specialist artisan factories on December 10, 2009 in Port-Brillet. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Our trade unions are doing more for women than ever before

You don’t have to look far to find examples of unions not just “noisily fighting for”, but actually winning better pay, terms and conditions for women.

Reading Carole Easton’s article on women and unions was puzzling and disappointing in equal measure. Puzzling because it paints a picture of trade unions which bears little resemblance to the movement I know and love. Disappointing because it presents a false image of trade unions to women readers just at a time when women need strong trade unions more than ever.

While it is right to say that too little progress has been made in closing the gender pay gap or tackling the scourge of zero hour contracts, it is wrong to suggest that trade unions have been twiddling their thumbs.

Like our friends at the Young Women’s Trust, equality is at the heart of what unions do. This work isn’t measured in the number of high-profile women we have at the forefront of our movement – although we’re not doing too badly there, as anyone will attest who has seen Frances O’Grady, the first female general secretary of the TUC, speaking out for ordinary women workers.  

Trade unions contribute to equality for our 3 million women members every day. For us, that’s about the thousands of workplace reps supporting individual women facing discrimination or harassment. It’s about health and safety reps negotiating for protective clothing and better workplace policies on the menopause, terminal illness and many more issues. Our work is unions taking employment tribunal cases on behalf of women who could never afford the tribunal fees without us. And always, at the heart of everything, our work is about the collective power of workers joining together to bargain for fair pay and decent work.

You don’t have to look far to find examples of unions not just “noisily fighting for”, but actually winning better pay, terms and conditions for women. Several unions have successfully organised cleaners, supported them to take strike action for better pay, and won. The RMT is just one example of many. Unite is busy organising London’s low-paid and often exploited hotel workers. Unison organises teaching assistants, fights for better pay and conditions, and even runs a Skills for Schools project to help TAs develop in their careers. Unison and the National Union of Teachers – both unions with over 75% female membership – organise childcare workers and fight not just for better pay but also for training and development opportunities. Over in the retail sector, Usdaw and GMB are fighting the good fight for their women members in supermarkets and shops, not just on pay but on pensions, health and safety, carers’ leave and protection from violence at work.

Women have much to gain from trade union membership. Male union members are paid 7.8 per cent more than men who aren’t in a union – but women union members are paid 30 per cent more than non-members. A recent EHRC report on pregnancy discrimination found that employers who recognised unions were less likely to discriminate against their pregnant employees.

Yes, it’s true that too few young women are union members. This summer, the TUC and our member unions will launch a new organising and campaigning effort to spread the benefits of union membership and attract a new generation of women (and men).

But starting new women-only unions is no form of progress. That’s where we started out over 100 years ago. Now women workers are at the heart of all our unions, across all sectors. Women’s concerns at work are trade union concerns. And every day we make practical progress towards women’s equality at work through patient representation and negotiation and active campaigning to challenge bad bosses. Young Women’s Trust should work with us to get more women the benefit of union membership.  

Scarlet Harris is women's equality policy officer at the TUC