Boris Johnson: wrong on ‘sloth’, right about management

It's interesting that, in his column for today's Telegraph, Boris Johnson has cited the German economy as the measuring stick against which Britain should compare itself.

It’s interesting that, in his column for today’s Telegraph, Boris Johnson has cited the German economy as the measuring stick against which Britain should compare itself.

In his article Boris riffles through the pros and cons of EU membership and ends on the point that one of the consequences of Britain leaving the EU would be our recognising that “most of our problems are not caused by ‘Bwussels’, but by chronic British short-termism, inadequate management, sloth, low skills, a culture of easy gratification and under-investment in both human and physical capital and infrastructure”.

The implication appears to be a familiar one: British workers are lazier than their German counterparts. A similar thesis was put about by Tory MPs last year. British workers were “among the worst idlers in the world”, the group of five Conservative MPs claimed, adding that “many people in Britain prefer a lie-in to hard work”.

Productivity is of course important. As the old adage goes: productivity isn’t everything, but in the long run it’s almost everything. Britain has also historically been less productive than its Western counterparts, although that did improve in the first decade of the 21st century (ironically when New Labour was accused by the right of “burdening” business with regulation).

However the attempt by Boris to blame “sloth” for Britain falling behind Germany, while gratifying to a certain sort of person, is inaccurate.

The Organisation for Economic Co-operation and Development produced a dataset in 2011 called ‘How Labour markets perform‘, in which it compared the UK’s economic performance with three other economies – Germany, the Netherlands and Sweden. It reached a number of conclusions:

  • The UK provides far less employment protection than other relatively successful European economies (the UK is next to bottom of the OECD league table)
  • Britons work longer hours
  • UK is in the middle of the pack in terms of part-time employment, but well above OECD average
  • UK labour taxes are lower than the other European countries
  • The UK ration of unemployment benefits as % of previous earnings is the lowest in the OECD by a huge margin

Looking at the figures, there appears to be a correlation between low employment protection and the UK’s relatively poor economic performance.

It is highly unlikely that Boris Johnson will follow his comparison of Britain and Germany to its logical conclusion, however, and reject the default rhetoric of the right that it is “regulation” that’s stifling British dynamism (for regulation read workers’ rights).

Of course, were he looking for the UK to emulate Germany he would do the opposite, for Germany has some of the strongest workers’ rights in the world.

Employment protection

There is one point on which Boris is correct, however. In his article he singles out the problem of “inadequate management”. The evidence appears to support him on this point. A 2007 study (p 3) by Bloom and Van Reenen found that UK firms were significantly worse managed then French, German and US firms, even when differences in industry and firm size were considered.

This was linked to the preponderance of family firms – an ownership structure which it said was encouraged by the UK’s inheritance tax system.

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