By Francesca James

Government talk of deregulating to make ‘hiring and firing’ easier for small businesses will not get the economy growing again and will not tackle long-term unemployment, according to the think tank IPPR. The new unemployment figures are published yesterday and are expected to show little change since last month.

The latest figures showed long-term unemployment, the number of people out of work for more than a year, was still rising, to 882,000. IPPR recommends the Government provides a job guarantee for everyone out of work for more than a year.

OECD analysis shows the UK already has the third lightest regulated labour market in the world (after the US and Canada). Despite the low level of regulation in the US, the labour market there has performed poorly, although the economy is recovering mush faster than the UK economy. Meanwhile, Germany — which still has a relatively heavily regulated labour market — now has a lower level of unemployment than before the global recession began.

The World Economic Forum recently ranked the UK economy as the 33rd out of 144 countries in which to hire and fire. In an international survey of executives, Switzerland, Denmark and Iceland were the only western European countries which out-ranked the UK for hiring and firing flexibility. IPPR analysis suggests that while the UK has structural economic problems, the labour market is not one of them.

Tony Dolphin, IPPR Chief Economist, said:

“Recent economic data shows that the UK labour market is already very flexible. The private sector has created 600,000 jobs since the Coalition was formed, despite the economy recording no output growth.

“Rather than worrying about labour market regulation, the Government should do more to increase demand in the economy. This is the best way to ensure output growth picks up in 2013, and that unemployment continues to fall.

“The number of people long-term unemployed is still rising, with more people out of work for more than a year than at any time since the mid-1990s. Long-term unemployment can result in a ‘scarring’ effect, with people out of work for more than a year unable to secure future employment. The Youth Contract job guarantee scheme is beginning to have an impact but the Government needs to go further and guarantee a job to everyone out of work for more than a year.”