Excessive labour market regulation will not help combat inequality

Using the wrong tools to address inequality does more harm than good

By Giovanni Caccavello

On 28 September 2017, the European Parliament Employment and Social Affairs Committee (EMPL) will vote on an initiative by Spanish MEP Javi Lopez (S&D) on combating inequalities as a lever to boost job creation and growth. Contrary to what this initiative assumes, income inequality has remained stable in the EU since the 2008-2009 Great Recession. In several Member States, such as Austria, Belgium, France, Latvia, Poland, Portugal, the Netherlands and the UK, the Gini coefficient of disposable income decreased between 2008 and 2015. The idea that mandatory minimum wage floors can help foster cohesion and reduce poverty is also unsupported by evidence. Increasing labour market regulation tends to act as a barrier to entry, worsens jobs prospects for the young and discourages entrepreneurship.

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